Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Stryker Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Stryker Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of earnings and comprehensive income, shareholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements“). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 11, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

			Product Liabilities
Description of the Matter			As described in Note 7 to the consolidated financial statements, the Company recognized $385 million of liabilities at December 31, 2021 for product liability matters relating to claims for certain products. The Company establishes liabilities for product claims to the extent probable future losses are estimable based on quantitative and qualitative information from various sources. Auditing management’s estimate of product liabilities was especially challenging due to the significant measurement uncertainty associated with the product liabilities estimate that involved management’s significant judgment and analysis. Further, the product liability is sensitive to significant management assumptions, including average costs per claim and the number of future claims, including those resulting in revision surgery.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated management’s design and tested the operating effectiveness of the controls over the Company’s product liability estimation process, including management's assessment of the assumptions, and the completeness and accuracy of the data underlying the product liabilities. To evaluate the liabilities for product claims, we performed audit procedures that included, among others, testing the completeness and accuracy of the underlying claims and average cost per claim data and obtaining legal confirmation letters to evaluate the liabilities recognized. We involved our actuarial specialists in the evaluation of the methodologies and significant assumptions applied by management in estimating the product liabilities and range of probable losses. We also evaluated the adequacy of the Company’s disclosures included in Note 7 related to these liabilities.

Dollar amounts in millions except per share amounts or as otherwise specified.			20

STRYKER CORPORATION 2021 FORM 10-K

			Uncertain Tax Positions
Description of the Matter			As described in Note 11 to the consolidated financial statements, the Company operates in multiple jurisdictions with complex tax policy and regulatory environments and establishes reserves for uncertain tax positions in accordance with the accounting guidance governing uncertainty in income taxes. Uncertainty in a tax position may arise because tax laws are subject to interpretation. The Company uses significant judgment to (1) determine whether, based on the technical merits, a tax position is more likely than not to be sustained and (2) measure the amount of tax benefit that qualifies for recognition. At December 31, 2021, the Company had accrued liabilities of $444 million relating to uncertain tax positions. Auditing management’s analysis of the Company’s uncertain tax positions and the related unrecognized tax benefits was especially challenging as the analysis involved significant auditor judgment due to complex interpretations of tax laws, legal rulings and determination of arm’s length pricing for intercompany transactions.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting process for uncertain tax positions. For example, we tested controls over management’s identification of uncertain tax positions and its application of the recognition and measurement principles, including management’s review of the inputs and calculations of unrecognized income tax benefits. Our audit procedures included, among others, evaluating the assumptions the Company used to develop its uncertain tax positions and related unrecognized income tax benefit amounts by jurisdiction. We also tested the completeness and accuracy of the underlying data used by the Company to calculate its uncertain tax positions. For example, we involved our tax professionals to evaluate tax technical merits, which included, for certain intercompany transactions, assessing the Company’s assumptions and pricing methodology to determine they were arm’s length and complied with local jurisdictional laws and regulations. We also evaluated the estimated liabilities for unrecognized income tax benefits in consideration of current tax controversy and litigation trends in similar positions challenged by tax authorities. We also evaluated the adequacy of the Company’s disclosures included in Note 11 related to these tax matters.

/s/ ERNST & YOUNG LLP

We have served as the Company's auditor since 1974

Grand Rapids, Michigan

February 11, 2022

Dollar amounts in millions except per share amounts or as otherwise specified.			21

STRYKER CORPORATION 2021 FORM 10-K

Stryker Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

			2021						2020						2019
Net sales			$	17,108					$	14,351					$	14,884
Cost of sales			6,140						5,294						5,188
Gross profit			$	10,968					$	9,057					$	9,696
Research, development and engineering expenses			1,235						984						971
Selling, general and administrative expenses			6,427						5,361						5,356
Recall charges			103						17						192
Amortization of intangible assets			619						472						464
Total operating expenses			$	8,384					$	6,834					$	6,983
Operating income			$	2,584					$	2,223					$	2,713
Other income (expense), net			(303)						(269)						(151)
Earnings before income taxes			$	2,281					$	1,954					$	2,562
Income taxes			287						355						479
Net earnings			$	1,994					$	1,599					$	2,083
Net earnings per share of common stock:
Basic			$	5.29					$	4.26					$	5.57
Diluted			$	5.21					$	4.20					$	5.48
Weighted-average shares outstanding (in millions):
Basic			377.0						375.5						374.0
Effect of dilutive employee stock compensation			5.3						4.8						5.9
Diluted			382.3						380.3						379.9

Anti-dilutive shares excluded from the calculation of dilutive employee stock compensation were de minimis in all periods.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

			2021						2020						2019
Net earnings			$	1,994					$	1,599					$	2,083
Other comprehensive income (loss), net of tax
Marketable securities			3						—						1
Pension plans			104						(80)						(42)
Unrealized gains (losses) on designated hedges			50						(57)						(3)
Financial statement translation			469						(414)						69
Total other comprehensive income (loss), net of tax			$	626					$	(551)					$	25
Comprehensive income			$	2,620					$	1,048					$	2,108

See accompanying notes to Consolidated Financial Statements.

Dollar amounts in millions except per share amounts or as otherwise specified.			22

STRYKER CORPORATION 2021 FORM 10-K

Stryker Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

			2021						2020
Assets
Current assets
Cash and cash equivalents			$	2,944					$	2,943
Marketable securities			75						81
Accounts receivable, less allowance of $167 ($131 in 2020)			3,022						2,701
Inventories:
Materials and supplies			691						678
Work in process			264						251
Finished goods			2,359						2,565
Total inventories			$	3,314					$	3,494
Prepaid expenses and other current assets			662						488
Total current assets			$	10,017					$	9,707
Property, plant and equipment:
Land, buildings and improvements			1,656						1,546
Machinery and equipment			3,842						3,636
Total property, plant and equipment			5,498						5,182
Less allowance for depreciation			2,665						2,430
Property, plant and equipment, net			$	2,833					$	2,752
Goodwill			12,918						12,778
Other intangibles, net			4,840						5,554
Noncurrent deferred income tax assets			1,760						1,530
Other noncurrent assets			2,263						2,009
Total assets			$	34,631					$	34,330
Liabilities and shareholders' equity
Current liabilities
Accounts payable			$	1,129					$	810
Accrued compensation			1,092						925
Income taxes			192						207
Dividend payable			263						237
Accrued product liabilities			401						515
Accrued expenses and other liabilities			1,465						1,586
Current maturities of debt			7						761
Total current liabilities			$	4,549					$	5,041
Long-term debt, excluding current maturities			12,472						13,230
Income taxes			913						990
Other noncurrent liabilities			1,820						1,985
Total liabilities			$	19,754					$	21,246
Shareholders' equity
Common stock, $0.10 par value			38						38
Additional paid-in capital			1,890						1,741
Retained earnings			13,480						12,462
Accumulated other comprehensive loss			(531)						(1,157)
Total shareholders' equity			$	14,877					$	13,084
Total liabilities & shareholders' equity			$	34,631					$	34,330

See accompanying notes to Consolidated Financial Statements.

Dollar amounts in millions except per share amounts or as otherwise specified.			23

STRYKER CORPORATION 2021 FORM 10-K

Stryker Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

			2021									2020									2019
			Shares			Amount						Shares			Amount						Shares			Amount
Common stock
Beginning			376.1			$	38					374.5			$	37					374.4			$	37
Issuance of common stock under stock compensation and benefit plans			1.4			—						1.6			1						2.0			—
Repurchase of common stock			—			—						—			—						(1.9)			—
Ending			377.5			$	38					376.1			$	38					374.5			$	37
Additional paid-in capital
Beginning						$	1,741								$	1,628								$	1,559
Issuance of common stock under stock compensation and benefit plans						(22)									(29)									(50)
Repurchase of common stock						—									—									(8)
Share-based compensation						171									142									127
Ending						$	1,890								$	1,741								$	1,628
Retained earnings
Beginning						$	12,462								$	11,748								$	10,765
Net earnings						1,994									1,599									2,083
Repurchase of common stock						—									—									(299)
Cash dividends declared						(976)									(885)									(801)
Ending						$	13,480								$	12,462								$	11,748
Accumulated other comprehensive (loss) income
Beginning						$	(1,157)								$	(606)								$	(631)
Other comprehensive income (loss)						626									(551)									25
Ending						$	(531)								$	(1,157)								$	(606)
Total shareholders' equity						$	14,877								$	13,084								$	12,807

See accompanying notes to Consolidated Financial Statements.

Dollar amounts in millions except per share amounts or as otherwise specified.			24

STRYKER CORPORATION 2021 FORM 10-K

Stryker Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

			2021						2020						2019
Operating activities
Net earnings			$	1,994					$	1,599					$	2,083
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation			371						340						314
Amortization of intangible assets			619						472						464
Asset impairments			264						215						16
Share-based compensation			171						142						127
Recall charges			103						17						192
Sale of inventory stepped up to fair value at acquisition			266						48						67
Deferred income tax (benefit) expense			(237)						48						126
Changes in operating assets and liabilities:
Accounts receivable			(377)						354						(563)
Inventories			(189)						27						(400)
Accounts payable			329						100						63
Accrued expenses and other liabilities			315						(54)						113
Recall-related payments			(221)						(17)						(177)
Income taxes			(98)						(16)						(105)
Other, net			(47)						2						(129)
Net cash provided by operating activities			$	3,263					$	3,277					$	2,191
Investing activities
Acquisitions, net of cash acquired			(339)						(4,222)						(802)
Purchases of marketable securities			(49)						(54)						(74)
Proceeds from sales of marketable securities			55						61						69
Purchases of property, plant and equipment			(525)						(487)						(649)
Other investing, net			(1)						1						1
Net cash used in investing activities			$	(859)					$	(4,701)					$	(1,455)
Financing activities
Proceeds and payments on short-term borrowings, net			(7)						(6)						(7)
Proceeds from issuance of long-term debt			5						3,292						2,642
Payments on long-term debt			(1,151)						(2,297)						(1,342)
Payments of dividends			(950)						(863)						(778)
Repurchases of common stock			—						—						(307)
Cash paid for taxes from withheld shares			(114)						(110)						(136)
Other financing, net			(148)						(27)						(69)
Net cash provided by (used in) financing activities			$	(2,365)					$	(11)					$	3
Effect of exchange rate changes on cash and cash equivalents			(38)						41						(18)
Change in cash and cash equivalents			$	1					$	(1,394)					$	721
Cash and cash equivalents at beginning of year			2,943						4,337						3,616
Cash and cash equivalents at end of year			$	2,944					$	2,943					$	4,337
Supplemental cash flow disclosure:
Cash paid for income taxes, net of refunds			$	622					$	323					$	457
Cash paid for interest on debt			$	325					$	304					$	286

See accompanying notes to Consolidated Financial Statements.

Dollar amounts in millions except per share amounts or as otherwise specified.			25

STRYKER CORPORATION 2021 FORM 10-K

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations: Stryker (the "Company," "we," "us," or "our") is one of the world's leading medical technology companies and, together with its customers, is driven to make healthcare better. The Company offers innovative products and services in Medical and Surgical, Neurotechnology, Orthopaedics and Spine that help improve patient and hospital outcomes. Our products include surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling, emergency medical equipment and intensive care disposable products; neurosurgical and neurovascular devices; implants used in joint replacement and trauma surgeries; Mako Robotic-Arm Assisted technology; spinal devices; as well as other products used in a variety of medical specialties.

Basis of Presentation and Consolidation: The Consolidated Financial Statements include the Company and its subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. We have no material interests in variable interest entities and none that require consolidation. Prior years' segment results have been reclassified to conform with current year presentation in our Consolidated Financial Statements.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of net sales and expenses in the reporting period. Actual results could differ from those estimates.

Revenue Recognition: Sales are recognized as the performance obligations to deliver products or services are satisfied and are recorded based on the amount of consideration we expect to receive in exchange for satisfying the performance obligations. Our sales are recognized primarily when we transfer control to the customer, which can be on the date of shipment, the date of receipt by the customer or, for most Orthopaedics products, when we have received a purchase order and appropriate notification the product has been used or implanted. Products and services are primarily transferred to customers at a point in time, with some transfers of services taking place over time.

Sales represent the amount of consideration we expect to receive from customers in exchange for transferring products and services. Net sales exclude sales, value added and other taxes we collect from customers. Other costs to obtain and fulfill contracts are generally expensed as incurred due to the short-term nature of most of our sales. We extend terms of payment to our customers based on commercially reasonable terms for the markets of our customers, while also considering their credit quality.

A provision for estimated sales returns, discounts and rebates is recognized as a reduction of sales in the same period that the sales are recognized. Our estimate of the provision for sales returns has been established based on contract terms with our customers and historical business practices and current trends. Shipping and handling costs charged to customers are included in net sales.

Cost of Sales: Cost of sales is primarily comprised of direct materials and supplies consumed in the manufacture of product, as well as manufacturing labor, depreciation expense and direct

overhead expense necessary to acquire and convert the purchased materials and supplies into finished product. Cost of sales also includes the cost to distribute products to customers, inbound freight costs, warehousing costs and other shipping and handling activity.

Research, Development and Engineering Expenses: Research, development and engineering costs are charged to expense as incurred. Costs include research, development and engineering activities relating to the development of new products, improvement of existing products, technical support of products and compliance with governmental regulations for the protection of customers and patients. Costs primarily consist of salaries, wages, consulting and depreciation and maintenance of research facilities and equipment.

Selling, General and Administrative Expenses: Selling, general and administrative expense is primarily comprised of selling expenses, marketing expenses, administrative and other indirect overhead costs, amortization of loaner instrumentation, depreciation and amortization expense of non-manufacturing assets and other miscellaneous operating items.

Currency Translation: Financial statements of subsidiaries outside the United States generally are measured using the local currency as the functional currency. Adjustments to translate those statements into United States Dollars are recorded in other comprehensive income (OCI). Transactional exchange gains and losses are included in other income (expense), net.

Cash Equivalents: Highly liquid investments with remaining stated maturities of three months or less when purchased or other money market instruments that are redeemable upon demand are considered cash equivalents and recorded at cost.

Marketable Securities: Marketable securities consist of marketable debt securities, certificates of deposit and mutual funds. Mutual funds are acquired to offset changes in certain liabilities related to deferred compensation arrangements and are expected to be used to settle these liabilities and are recognized in other noncurrent assets. Pursuant to our investment policy, all individual marketable security investments must have a minimum credit quality of single A (Standard & Poor’s and Fitch) and A2 (Moody’s Corporation) at the time of acquisition, while the overall portfolio of marketable securities must maintain a minimum average credit quality of double A (Standard & Poor’s and Fitch) or Aa (Moody’s Corporation). In the event of a rating downgrade below the minimum credit quality subsequent to purchase, the marketable security investment is evaluated to determine the appropriate action to take to minimize the overall risk to our marketable security investment portfolio. Our marketable securities are classified as available-for-sale and trading securities. Investments in trading securities represent participant-directed investments of deferred employee compensation.

Accounts Receivable: Accounts receivable consists of trade and other miscellaneous receivables. An allowance is maintained for doubtful accounts for estimated losses in the collection of accounts receivable. Estimates are made regarding the ability of customers to make required payments based on historical credit experience, current market conditions and expected credit losses. Accounts receivable are written off when all reasonable collection efforts are exhausted.

Inventories: Inventories are stated at the lower of cost or net realizable value, with cost generally determined using the first-in, first-out (FIFO) cost method. For excess and obsolete inventory resulting from the potential inability to sell specific products at prices in excess of current carrying costs, reserves are maintained to reduce current carrying cost to net realizable value.

Dollar amounts in millions except per share amounts or as otherwise specified.			26

STRYKER CORPORATION 2021 FORM 10-K

Financial Instruments: Our financial instruments consist of cash, cash equivalents, marketable securities, accounts receivable, other investments, accounts payable, debt and foreign currency exchange contracts. The carrying value of our financial instruments, with the exception of our senior unsecured notes, approximates fair value on December 31, 2021 and 2020. Refer to Notes 3 and 10 for further details.

All marketable securities are recognized at fair value. Adjustments to the fair value of marketable securities that are classified as available-for-sale are recognized as increases or decreases, net of income taxes, within accumulated other comprehensive income (AOCI) in shareholders’ equity and adjustments to the fair value of marketable securities that are classified as trading are recognized in earnings. The amortized cost of marketable debt securities is adjusted for amortization of premiums and discounts to maturity computed under the effective interest method. Such amortization and interest and realized gains and losses are included in other income (expense), net. The cost of securities sold is determined by the specific identification method.

We review declines in the fair value of our investments classified as available-for-sale to determine whether the decline in fair value is a result of credit loss or other factors. Impairments of available-for-sale marketable debt securities related to credit loss are included in earnings and impairments related to other factors are recognized within AOCI.

Derivatives: All derivatives are recognized at fair value and reported on a gross basis. We enter into forward currency exchange contracts to mitigate the impact of currency fluctuations on transactions denominated in nonfunctional currencies, thereby limiting our risk that would otherwise result from changes in exchange rates. The periods of the forward currency exchange contracts correspond to the periods of the exposed transactions, with realized gains and losses included in the measurement and recording of transactions denominated in the nonfunctional currencies. All forward currency exchange contracts are recorded at their fair value each period.

Forward currency exchange contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions denominated in a foreign currency that will take place in the future. These nonfunctional currency exposures principally relate to forecasted intercompany sales and purchases of manufactured products and generally have maturities up to eighteen months. Changes in value of derivatives designated as cash flow hedges are recorded in AOCI on the Consolidated Balance Sheets until earnings are affected by the variability of the underlying cash flows. At that time, the applicable amount of gain or loss from the derivative instrument that is deferred in shareholders’ equity is reclassified into earnings and is included in cost of goods sold in the Consolidated Statements of Earnings. Cash flows associated with these hedges are included in cash from operations in the same category as the cash flows from the items being hedged.

Forward currency exchange contracts are used to offset our exposure to the change in value of specific foreign currency denominated assets and liabilities, primarily intercompany payables and receivables. These derivatives are not designated as hedges and, therefore, changes in the value of these forward contracts are recognized in earnings, thereby offsetting the current earnings effect of the related changes in value of foreign currency denominated assets and liabilities. The estimated fair value of our forward currency exchange contracts represents the

measurement of the contracts at month-end spot rates as adjusted by current forward points.

From time to time, we designate derivative and non-derivative financial instruments as net investment hedges of our investments in certain international subsidiaries. For derivative instruments that are designated and qualify as a net investment hedge, the effective portion of the derivative's gain or loss is recognized in OCI and reported as a component of AOCI. We have elected to use the spot method to assess effectiveness for our derivatives designated as net investment hedges. Accordingly, the change in fair value attributable to changes in the spot rate is recorded in AOCI. We exclude the spot-forward difference from the assessment of hedge effectiveness and amortize this amount separately on a straight-line basis over the term of the forward contracts. This amortization is recognized in other income (expense), net.

From time to time, we designate forward starting interest rate derivative instruments as cash flow hedges to manage the exposure to interest rate volatility with regard to future issuance and refinancing of debt. Changes in value of derivatives designated as cash flow hedges are recorded in AOCI on the Consolidated Balance Sheets until earnings are affected by the variability of the underlying cash flows. At that time, the applicable amount of gain or loss from the derivative instrument that is deferred in shareholders’ equity is reclassified into earnings and is included in interest expense in the Consolidated Statements of Earnings.

Interest rate derivative instruments designated as fair value hedges have been used in the past to manage the exposure to interest rate movements and to reduce borrowing costs by converting fixed-rate debt into floating-rate debt. Under these agreements, we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount.

Property, Plant and Equipment: Property, plant and equipment is stated at cost. Depreciation is generally computed by the straight-line method over the estimated useful lives of three to 30 years for buildings and improvements and three to 15 years for machinery and equipment.

Goodwill and Other Intangible Assets: Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses at the acquisition date, after amounts allocated to other identifiable intangible assets. Factors that contribute to the recognition of goodwill include synergies that are specific to our business and not available to other market participants and are expected to increase net sales and profits; acquisition of a talented workforce; cost savings opportunities; the strategic benefit of expanding our presence in core and adjacent markets; and diversifying our product portfolio.

The fair values of other identifiable intangible assets acquired in a business combination are primarily determined using the income approach. Other intangible assets include, but are not limited to, developed technology, customer and distributor relationships (which reflect expected continued customer or distributor patronage) and trademarks and patents. Intangible assets with determinable useful lives are amortized on a straight-line basis over their estimated useful lives of four to 40 years. Certain acquired trade names are considered to have indefinite lives and are not amortized, but are assessed annually for potential impairment as described below.

In some of our acquisitions, we acquire in-process research and development (IPRD) intangible assets. For acquisitions accounted for as business combinations IPRD is considered to

Dollar amounts in millions except per share amounts or as otherwise specified.			27

STRYKER CORPORATION 2021 FORM 10-K

be an indefinite-lived intangible asset until the research is completed (then it becomes a determinable-lived intangible asset) or determined to have no future use (then it is impaired). For asset acquisitions IPRD is expensed immediately unless there is an alternative future use.

Goodwill, Intangibles and Long-Lived Asset Impairment Tests: We perform our annual impairment test for goodwill in the fourth quarter of each year. We consider qualitative indicators of the fair value of a reporting unit when it is unlikely that a reporting unit has impaired goodwill and periodically corroborate that assessment with quantitative information. In certain circumstances, we may also utilize a discounted cash flow analysis that requires certain assumptions and estimates be made regarding market conditions and our future profitability. Indefinite-lived intangible assets are also tested at least annually for impairment by comparing the individual carrying values to the fair value.

We review long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows. Undiscounted cash flows expected to be generated by the related assets are estimated over the asset's useful life based on updated projections. If the evaluation indicates that the carrying amount of the asset may not be recoverable, any potential impairment is measured based upon the fair value of the related asset or asset group as determined by an appropriate market appraisal or other valuation technique. Assets classified as held for sale are recorded at the lower of carrying amount or fair value less costs to sell.

Share-Based Compensation: Share-based compensation is in the form of stock options, restricted stock units (RSUs) and performance stock units (PSUs). Stock options are granted under long-term incentive plans to certain key employees and non-employee directors at an exercise price not less than the fair market value of the underlying common stock, which is the quoted closing price of our common stock on the day prior to the date of grant. The options are granted for periods of up to 10 years and become exercisable in varying installments.

We grant RSUs to key employees and non-employee directors and PSUs to certain key employees under our long-term incentive plans. The fair value of RSUs is determined based on the number of shares granted and the quoted closing price of our common stock on the date of grant, adjusted for the fact that RSUs do not include anticipated dividends. RSUs generally vest in one-third increments over a three-year period and are settled in stock. PSUs are earned over a three-year performance cycle and vest in March of the year following the end of that performance cycle. The number of PSUs that will ultimately be earned is based on our performance relative to pre-established goals in that three-year performance cycle. The fair value of PSUs is determined based on the quoted closing price of our common stock on the day of grant.

Compensation expense is recognized in the Consolidated Statements of Earnings based on the estimated fair value of the awards on the grant date. Compensation expense recognized reflects an estimate of the number of awards expected to vest after taking into consideration an estimate of award forfeitures based on actual experience and is recognized on a straight-line basis over the requisite service period, which is generally the period required to obtain full vesting. Management expectations related to the achievement of performance goals associated with PSU grants is assessed regularly and that assessment is used to

determine whether PSU grants are expected to vest. If performance-based milestones related to PSU grants are not met or not expected to be met, any compensation expense recognized associated with such grants will be reversed.

Income Taxes: Deferred income tax assets and liabilities are determined based on differences between financial reporting and income tax bases of assets and liabilities and are measured using the enacted income tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax benefits generally represent the change in net deferred income tax assets and liabilities in the year. Other amounts result from adjustments related to acquisitions and foreign currency as appropriate.

We operate in multiple income tax jurisdictions both within the United States and internationally. Accordingly, management must determine the appropriate allocation of income to each of these jurisdictions based on current interpretations of complex income tax regulations. Income tax authorities in these jurisdictions regularly perform audits of our income tax filings. Income tax audits associated with the allocation of this income and other complex issues, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements, may require an extended period of time to resolve and may result in significant income tax adjustments if changes to the income allocation are required between jurisdictions with different income tax rates.

New Accounting Pronouncements Not Yet Adopted

In October 2021 the Financial Accounting Standards Board issued Accounting Standards Update 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. We are evaluating the impact this update will have on our Consolidated Financial Statements.

Accounting Pronouncements Recently Adopted

No new accounting pronouncements were issued or became effective in the period that had, or are expected to have, a material impact on our Consolidated Financial Statements.

NOTE 2 - REVENUE RECOGNITION

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.

Products and services are primarily transferred to customers at a point in time, with some transfers of services taking place over time. In 2021 less than 10% of our sales were recognized as services transferred over time. Refer to Note 1 for further discussion on our revenue recognition policies.

Dollar amounts in millions except per share amounts or as otherwise specified.			28

STRYKER CORPORATION 2021 FORM 10-K

Segment Net Sales
MedSurg and Neurotechnology:			2021						2020						2019
Instruments			$	2,111					$	1,863					$	1,959
Endoscopy			2,141						1,763						1,983
Medical			2,607						2,524						2,264
Neurovascular			1,188						973						924
Neuro Cranial			1,214						972						1,059
Other			277						250						286
			$	9,538					$	8,345					$	8,475
Orthopaedics and Spine:
Knees			$	1,848					$	1,567					$	1,815
Hips			1,342						1,206						1,383
Trauma and Extremities			2,664						1,722						1,639
Spine			1,167						1,047						1,157
Other			549						464						415
			$	7,570					$	6,006					$	6,409
Total			$	17,108					$	14,351					$	14,884

United States Net Sales
MedSurg and Neurotechnology:			2021						2020						2019
Instruments			$	1,637					$	1,471					$	1,542
Endoscopy			1,670						1,408						1,577
Medical			2,007						1,910						1,787
Neurovascular			451						381						391
Neuro Cranial			988						801						890
Other			273						247						283
			$	7,026					$	6,218					$	6,470
Orthopaedics and Spine:
Knees			$	1,351					$	1,170					$	1,347
Hips			822						777						882
Trauma and Extremities			1,866						1,139						1,051
Spine			831						764						873
Other			425						387						334
			$	5,295					$	4,237					$	4,487
Total			$	12,321					$	10,455					$	10,957

International Net Sales
MedSurg and Neurotechnology:			2021						2020						2019
Instruments			$	474					$	392					$	417
Endoscopy			471						355						406
Medical			600						614						477
Neurovascular			737						592						533
Neuro Cranial			226						171						169
Other			4						3						3
			$	2,512					$	2,127					$	2,005
Orthopaedics and Spine:
Knees			$	497					$	397					$	468
Hips			520						429						501
Trauma and Extremities			798						583						588
Spine			336						283						284
Other			124						77						81
			$	2,275					$	1,769					$	1,922
Total			$	4,787					$	3,896					$	3,927

MedSurg and Neurotechnology

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. Substantially all MedSurg and Neurotechnology sales are recognized when a purchase order has been received and control has transferred. For certain Endoscopy, Instruments and Medical services, we may recognize sales over time as we satisfy performance obligations that may include an obligation to complete installation, provide training and perform ongoing services, generally performed within one year.

Orthopaedics and Spine

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. Substantially all Orthopaedics sales are recognized when we have received a purchase order and appropriate notification the product has been used or implanted. Substantially all Spine sales are recognized when a purchase order has been received and control has transferred. For certain Orthopaedic products in the "other" category, we recognize sales at a point in time, as well as over time for performance obligations that may include an obligation to complete installation and provide training and ongoing services. Performance obligations are generally satisfied within one year.

Contract Assets and Liabilities

The nature of our products and services do not generally give rise to contract assets as we typically do not incur costs to fulfill a contract before a product or service is provided to a customer. Our costs to obtain contracts are typically in the form of sales commissions paid to employees or third-party agents. Certain sales commissions paid to employees prior to recognition of sales are recorded as contract assets. We expense sales commissions associated with obtaining a contract at the time of the sale or as incurred as the amortization period is generally less than one year. These costs have been presented within selling, general and administrative expenses. On 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 $529 and $416 on December 31, 2021 and December 31, 2020.

NOTE 3 - FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are classified in their entirety based on the lowest level of input and disclosed in one of the following three categories:

Level 1			Quoted market prices in active markets for identical assets or liabilities.
Level 2			Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3			Unobservable inputs reflecting our assumptions or external inputs from active markets.

Use of observable market data, when available, is required in making fair value measurements. When inputs used fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. We

Dollar amounts in millions except per share amounts or as otherwise specified.			29

STRYKER CORPORATION 2021 FORM 10-K

determine fair value for Level 1 instruments using exchange-traded prices for identical instruments. We determine fair value of Level 2 instruments using exchange-traded prices of similar instruments, where available, or utilizing other observable inputs that take into account our credit risk and that of our counterparties. Foreign currency exchange contracts and interest rate hedges are included in Level 2 and we use inputs other than quoted prices that are observable for the asset or liability. The Level 2 derivative instruments are primarily valued using standard calculations and models that use readily observable market data as their basis. Our Level 3 liabilities are comprised of contingent consideration arising from recently completed acquisitions. We determine fair value of these Level 3 liabilities using a discounted cash flow technique. Significant unobservable inputs were used in our assessment of fair value, including assumptions regarding future business results, discount rates, discount periods and probability assessments based on the likelihood of reaching various targets. We remeasure the fair value of our assets and liabilities each reporting period. We record the changes in fair value within selling, general and administrative expense and the changes in the time value of money within other income (expense), net.

Assets Measured at Fair Value
			2021			2020
Cash and cash equivalents			$	2,944		$	2,943
Trading marketable securities			193			171
Level 1 - Assets			$	3,137		$	3,114
Available-for-sale marketable securities:
Corporate and asset-backed debt securities			$	48		$	38
Foreign government debt securities			2			—
United States agency debt securities			5			5
United States treasury debt securities			19			36
Certificates of deposit			1			2
Total available-for-sale marketable securities			$	75		$	81
Foreign currency exchange forward contracts			212			20
Level 2 - Assets			$	287		$	101
Total assets measured at fair value			$	3,424		$	3,215

Liabilities Measured at Fair Value
			2021			2020
Deferred compensation arrangements			$	193		$	171
Level 1 - Liabilities			$	193		$	171
Foreign currency exchange forward contracts			$	17		$	160
Interest rate swap liability			—			53
Level 2 - Liabilities			$	17		$	213
Contingent consideration:
Beginning			$	393		$	306
Additions			62			108
Change in estimate			(1)			9
Settlements			(148)			(30)
Ending			$	306		$	393
Level 3 - Liabilities			$	306		$	393
Total liabilities measured at fair value			$	516		$	777

Fair Value of Available for Sale Securities by Maturity
			2021			2020
Due in one year or less			$	36		$	42
Due after one year through three years			$	39		$	39

On 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 $68, $102 and $155 in 2021, 2020 and 2019, 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 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.

Foreign Currency Hedges

2021			Cash Flow			Net Investment			Non-Designated			Total
Gross notional amount			$	973		$	2,266		$	5,512		$	8,751
Maximum term in years												4.9
Fair value:
Other current assets			$	15		$	39		$	92		$	146
Other noncurrent assets			1			65			—			66
Other current liabilities			(7)			—			(10)			(17)
Total fair value			$	9		$	104		$	82		$	195
2020
Gross notional amount			$	949		$	1,828		$	5,382		$	8,159
Maximum term in years												4.9
Fair value:
Other current assets			$	9		$	—		$	7		$	16
Other noncurrent assets			—			4			—			4
Other current liabilities			(12)			—			(121)			(133)
Other noncurrent liabilities			(1)			(26)			—			(27)
Total fair value			$	(4)		$	(22)		$	(114)		$	(140)

We had €2.0 billion and €1.5 billion at December 31, 2021 and 2020 in certain forward currency contracts designated as net investment hedges to hedge a portion of our investments in certain of our entities with functional currencies denominated in Euros. In addition to these derivative financial instruments designated as net investment hedges, we had €4.4 billion at December 31, 2021 and 2020 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.

On December 31, 2021 the total after-tax gain (loss) in AOCI related to designated net investment hedges was ($34).

Net Currency Exchange Rate Gains (Losses)
Derivative Instrument			Recorded in:			2021			2020			2019
Cash Flow			Cost of sales			$	(12)		$	5		$	2
Net Investment			Other income (expense), net			35			28			14
Non-Designated			Other income (expense), net			(10)			(13)			(7)
			Total			$	13		$	20		$	9

Pretax gains (losses) on derivatives designated as cash flow hedges of $9 and net investment hedges of $37 recorded in AOCI are expected to be reclassified to cost of sales and other income (expense), net in earnings within 12 months as of December 31, 2021. 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

Dollar amounts in millions except per share amounts or as otherwise specified.			30

STRYKER CORPORATION 2021 FORM 10-K

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

In 2021 a loss of $11 was reclassified from AOCI to other income (expense), net in earnings relating to the termination of forward starting interest rate swaps with notional amounts of $750 designated as cash flow hedges as we now consider it probable that the original forecasted debt issuances will not occur. 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 December 31, 2021. The cash flow effect of interest rate hedges is recorded in cash flow from operations.

NOTE 5 - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (AOCI)

			Marketable Securities			Pension Plans			Hedges			Financial Statement Translation			Total
2019			$	(3)		$	(179)		$	47		$	(471)		$	(606)
OCI			—			(117)			(64)			(459)			(640)
Income taxes			—			28			17			66			111
Reclassifications to:
Cost of Sales			—			—			(5)			—			(5)
Other (income) expense, net			—			12			(6)			(28)			(22)
Income taxes			—			(3)			1			7			5
Net OCI			—			(80)			(57)			(414)			(551)
2020			$	(3)		$	(259)		$	(10)		$	(885)		$	(1,157)
OCI			4			123			46			551			724
Income taxes			—			(32)			(15)			(54)			(101)
Reclassifications to:
Cost of Sales			—			—			12			—			12
Other (income) expense, net			—			15			6			(35)			(14)
Income taxes			(1)			(2)			1			7			5
Net OCI			3			104			50			469			626
2021			$	—		$	(155)		$	40		$	(416)		$	(531)

NOTE 6 - 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 $393 and $4,304 in 2021 and 2020.

In September 2021 we completed the acquisition of Gauss Surgical, Inc. (Gauss) for $120 in cash and up to $40 in future milestone payments. Gauss is a medical device company that has developed Triton, an artificial intelligence-enabled platform for real-time monitoring of blood loss during surgery. Gauss is part of our Instruments business within MedSurg and Neurotechnology. Goodwill attributable to the acquisition is not deductible for tax purposes.

In November 2020 we completed the acquisition of Wright Medical Group N.V. (Wright) for $30.75 per share, or an aggregate purchase price of $4.1 billion ($5.6 billion including convertible notes). Wright is a global medical device company focused on extremities and biologics. Wright is part of our Trauma and Extremities business within Orthopaedics and Spine. Goodwill attributable to the acquisition is not deductible for tax purposes.

In November and December 2020 note holders elected to redeem the 1.625% and 2.25% convertible notes assumed in the Wright acquisition for $864 and $576. These repayments are classified as financing activities.

In December 2020 we completed the acquisition of OrthoSensor, Inc. (OrthoSensor). OrthoSensor is a leader in the digital evolution of musculoskeletal care and sensor technology for total joint replacement. OrthoSensor is part of our Joint Replacement business within Orthopaedics and Spine. Goodwill attributable to the acquisition is not deductible for tax purposes.

Had the above acquisitions taken place as of the beginning of the comparable prior year, our consolidated financial results of operations in the aggregate would not have been materially different. Accordingly, we have not disclosed pro forma financial information.

Purchase price allocations for our significant acquisitions are:

Purchase Price Allocation of Acquired Net Assets
2020						Wright
Tangible assets acquired:
Accounts receivable						$	127
Deferred income tax assets						491
Inventory						440
Other assets						343
Debt						(1,446)
Deferred income tax liabilities						(503)
Product liabilities						(218)
Other liabilities						(296)
Intangible assets:
Customer and distributor relationships						182
Developed technology and patents						1,506
Trade name						58
Goodwill						3,397
Purchase price, net of cash acquired						$	4,081
Weighted average life of intangible assets						12

Purchase price allocations for 2021 acquisitions were based on preliminary valuations, primarily related to intangible assets, product liabilities and deferred income taxes. Our estimates and assumptions are subject to change within the measurement period. The purchase price allocations for Wright, OrthoSensor and other 2020 acquisitions were finalized in 2021 without material adjustments.

In January 2022 we announced a definitive merger agreement to acquire all of the issued and outstanding common shares of Vocera Communications, Inc. (Vocera) for $79.25 per share, or an aggregate purchase price of approximately $3.1 billion (including convertible notes). Pursuant to the agreement we commenced a tender offer to purchase all of the outstanding shares of common stock of Vocera for $79.25 per share in cash. The boards of directors of both Stryker and Vocera have unanimously approved the transaction. We expect the acquisition to close in the first quarter of 2022, subject to completion of the tender offer and other customary conditions. Vocera has emerged as a leading platform in the digital care coordination and communication category. Following closing, we plan to integrate Vocera into our Medical business within MedSurg and Neurotechnology.

NOTE 7 - 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

Dollar amounts in millions except per share amounts or as otherwise specified.			31

STRYKER CORPORATION 2021 FORM 10-K

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.

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. We continue to offer support for recall-related care and reimburse patients who are not eligible to enroll in the settlement program for testing and treatment services, including any necessary revision surgeries. In addition, 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 December 2021, we reached a second agreement to resolve a significant number of claims and lawsuits related to the recalls. The specific terms of the settlement agreements, including the financial terms, are confidential.

With the acquisition of Wright as more fully described in Note 6, 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. In 2021, we recorded charges of $103 and made payments of $221, 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 $385 to $520. 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

We lease various manufacturing, warehousing and distribution facilities, administrative and sales offices as well as equipment under operating leases. We evaluate our contracts to identify leases, which is generally if there is an identified asset and we

have the right to direct the use of and obtain substantially all of the economic benefit from the use of the identified asset. Certain of our lease agreements contain rent escalation clauses (including index-based escalations), rent holidays, capital improvement funding or other lease incentives. We recognize our minimum rental expense on a straight-line basis over the term of the lease beginning with the date of initial control of the asset. Right-of-use assets are recorded in Other noncurrent assets on our Consolidated Balance Sheets. Current and noncurrent lease liabilities are recorded in Accrued expenses and other liabilities and Other noncurrent liabilities, respectively.

We have made certain significant assumptions and judgments when recording leases. For all asset classes, we elected to not recognize a right-of-use asset and lease liability for short-term leases and not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component. The determination of the discount rate used in a lease is our incremental borrowing rate which is based on what we would normally pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments.

			2021						2020
Right-of-use assets			$	419					$	423
Lease liabilities, current			$	112					$	109
Lease liabilities, noncurrent			$	310					$	325
Other information:
Weighted-average remaining lease term			5.4 years						5.6 years
Weighted-average discount rate			2.86		%				2.57		%

Operating lease expense totaled $133, $130, and $133 in 2021, 2020 and 2019.

Future Obligations

We have purchase commitments for materials, supplies, services and property, plant and equipment as part of the normal course of business. In addition, we lease various manufacturing, warehousing and distribution facilities, administrative and sales offices as well as equipment under operating leases. Refer to Note 10 for more information on the debt obligations.

			2022			2023			2024			2025			2026			Thereafter
Debt repayments			$	7		$	1,226		$	1,564		$	1,400		$	1,000		$	7,392
Purchase obligations			$	1,889		$	69		$	54		$	46		$	49		$	—
Minimum lease payments			$	112		$	86		$	60		$	38		$	34		$	72

NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS

We completed our annual impairment tests of goodwill in 2021 and 2020 and concluded in each year that no impairments exist.

Changes in the Net Carrying Value of Goodwill by Segment
			MedSurg and Neurotechnology			Orthopaedics and Spine			Total
2019			$	5,377		$	3,692		$	9,069
Additions and adjustments			1			3,558			3,559
Foreign exchange			81			69			150
2020			$	5,459		$	7,319		$	12,778
Additions and adjustments			223			59			282
Foreign exchange			(13)			(129)			(142)
2021			$	5,669		$	7,249		$	12,918

Dollar amounts in millions except per share amounts or as otherwise specified.			32

STRYKER CORPORATION 2021 FORM 10-K

Summary of Other Intangible Assets
			Weighted Average Amortization Period (Years)			Gross Carrying Amount			Less Accumulated Amortization			Net Carrying Amount
Developed technologies
2021			13			$	5,326		$	1,956		$	3,370
2020			13			5,305			1,573			3,732
Customer relationships
2021			15			$	2,324		$	1,174		$	1,150
2020			15			2,352			988			1,364
Patents
2021			12			$	343		$	286		$	57
2020			12			346			278			68
Trademarks
2021			16			$	415		$	199		$	216
2020			17			428			162			266
In-process research and development
2021			N/A			$	29		$	—		$	29
2020			N/A			97			—			97
Other
2021			9			$	105		$	87		$	18
2020			8			128			101			27
Total
2021			14			$	8,542		$	3,702		$	4,840
2020			14			8,656			3,102			5,554

Estimated Amortization Expense
2022			2023			2024			2025			2026
$	581		$	558		$	528		$	506		$	447

NOTE 9 - CAPITAL STOCK

The aggregate number of shares of all classes of stock which we are authorized to issue is up to 1,000,500,000, divided into two classes consisting of 500,000 shares of $1 par value preferred stock and 1,000,000,000 shares of common stock with a par value of $0.10. No shares of preferred stock were outstanding on December 31, 2021.

We made no repurchases of shares in 2021. 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. On December 31, 2021 the total dollar value of shares that could be purchased under our authorized repurchase program was $1,033.

Shares reserved for future compensation grants of our common stock were 25 million and 28 million on December 31, 2021 and 2020.

Stock Options

We measure the cost of employee stock options based on the grant-date fair value and recognize that cost using the straight-line method over the period in which a recipient is required to provide services in exchange for the options, typically the vesting period. The weighted-average fair value per share of options is estimated on the date of grant using the Black-Scholes option pricing model.

Option Value and Assumptions
			2021						2020						2019
Weighted-average fair value per share			$	53.35					$	39.34					$	36.30
Assumptions:
Risk-free interest rate			0.8		%				1.4		%				2.6		%
Expected dividend yield			1.2		%				1.0		%				1.1		%
Expected stock price volatility			26.9		%				18.9		%				18.3		%
Expected option life (years)			5.9						5.8						5.9

The risk-free interest rate for periods within the expected life of options granted is based on the United States Treasury yield

curve in effect at the time of grant. Expected stock price volatility is based on the historical volatility of our stock. The expected option life, representing the period of time that options granted are expected to be outstanding, is based on historical option exercise and employee termination data.

2021 Stock Option Activity
			Shares (in millions)						Weighted Average Exercise Price						Weighted-Average Remaining Term (in years)						Aggregate Intrinsic Value
Outstanding January 1			12.2						$	131.72
Granted			1.8						235.35
Exercised			(1.6)						96.41
Canceled or forfeited			(0.3)						192.60
Outstanding December 31			12.1						$	150.17					5.7						$	1,424.2
Exercisable December 31			7.1						$	113.56					4.2						$	1,086.3
Options expected to vest			4.6						$	199.41					7.7						$	313.3

The aggregate intrinsic value of options, which represents the cumulative difference between the fair market value of the underlying common stock and the option exercise prices, exercised was $253, $258, and $294 in 2021, 2020 and 2019. Exercise prices for options outstanding ranged from $53.60 to $270.94 on December 31, 2021. On December 31, 2021 there was $101 of unrecognized compensation cost related to nonvested stock options granted under the long-term incentive plans; that cost is expected to be recognized over the weighted-average period of approximately 1.5 years.

Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) Activity
			Shares (in millions)												Weighted Average Grant Date Fair Value
			RSUs						PSUs						RSUs						PSUs
Nonvested on January 1			0.8						0.2						$	187.72					$	185.46
Granted			0.4						0.1						230.61						233.95
Vested			(0.4)						(0.1)						179.15						153.67
Canceled or forfeited			(0.1)						—						187.38						160.11
Nonvested on December 31			0.7						0.2						$	213.16					$	210.73

On December 31, 2021 there was $71 of unrecognized compensation cost related to nonvested RSUs. That cost is expected to be recognized as expense over the weighted-average period of approximately one year. The weighted-average grant date fair value per share of RSUs granted was $230.61 and $208.96 in 2021 and 2020. The fair value of RSUs and PSUs vested in 2021 was $63 and $5. On December 31, 2021 there was $18 of unrecognized compensation cost related to nonvested PSUs; the cost is expected to be recognized as expense over the weighted-average period of approximately one year.

Employee Stock Purchase Plans (ESPP)

Employees may participate in our ESPP provided they meet certain eligibility requirements. The purchase price for our common stock under the terms of the ESPP is defined as 95% of the closing stock price on the last trading day of a purchase period. We issued 183,964 and 209,837 shares under the ESPP in 2021 and 2020.

NOTE 10 - 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 December 31, 2021.

Dollar amounts in millions except per share amounts or as otherwise specified.			33

STRYKER CORPORATION 2021 FORM 10-K

In October 2021 we entered into a new revolving credit agreement that replaces our previous agreement dated August 19, 2016. The primary changes were to increase the aggregate principal amount of the facility by $750 to $2,250, extend the maturity date to October 26, 2026, increase the leverage ratio to 3.75 and provide LIBOR replacement language.

In the first quarter of 2022, our Board of Directors approved an increase to the maximum amount of commercial paper that can be outstanding under our commercial paper program from $1,500 to $2,250, with maturities up to 397 days from the date of issuance. On December 31, 2021 there were no borrowings outstanding under our credit facility or commercial paper program.

Summary of Total Debt
Senior unsecured notes:
			Rate						Due						2021						2020
			2.625%						March 15, 2021						$	—					$	750
			1.125%						November 30, 2023						622						668
			0.600%						December 1, 2023						598						597
			3.375%						May 15, 2024						593						590
			0.250%						December 3, 2024						958						1,030
			1.150%						June 15, 2025						645						644
			3.375%						November 1, 2025						748						747
			3.500%						March 15, 2026						994						992
			2.125%						November 30, 2027						845						909
			3.650%						March 7, 2028						597						596
			0.750%						March 1, 2029						901						969
			1.950%						June 15, 2030						990						989
			2.625%						November 30, 2030						727						782
			1.000%						December 3, 2031						840						903
			4.100%						April 1, 2043						392						392
			4.375%						May 15, 2044						395						395
			4.625%						March 15, 2046						982						981
			2.900%						June 15, 2050						642						641
Term loan															—						400
Other															10						16
Total debt															$	12,479					$	13,991
Less current maturities															7						761
Total long-term debt															$	12,472					$	13,230
Unamortized debt issuance costs															$	62					$	71
Borrowing capacity on existing facilities															$	2,162					$	2,903
Fair value of senior unsecured notes															$	13,391					$	15,022

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.

In March 2021 we repaid $750 of senior unsecured notes with a coupon of 2.625% that were due on March 15, 2021.

In June 2021 we repaid the $400 term loan that was due on November 10, 2023.

Interest expense, including required fees incurred on outstanding debt and credit facilities that were included in other income (expense), net, totaled $337, $315, and $287 in 2021, 2020 and 2019.

NOTE 11 - INCOME TAXES

Our effective tax rate was 12.6%, 18.2% and 18.7% for 2021, 2020 and 2019. The effective income tax rate for 2021 reflects the continued lower effective income tax rates as a result of our European operations, certain discrete tax benefits, the tax effect related to the transfer of intellectual property between tax jurisdictions and the tax effect of future remittances of the undistributed earnings of foreign subsidiaries. The effective

income tax rate for 2020 and 2019 reflects the tax effect related to the transfer of intellectual properties between tax jurisdictions, the effective income tax rates as a result of our European operations and the tax effect of future remittances of the undistributed earnings of foreign subsidiaries.

Effective Income Tax Rate Reconciliation
			2021						2020						2019
United States federal statutory rate			21.0		%				21.0		%				21.0		%
United States state and local income taxes, less federal deduction			2.7						0.1						1.7
Foreign income tax at rates other than 21%			(6.9)						(3.3)						(4.6)
Tax related to repatriation of foreign earnings			1.4						3.0						(0.5)
Intellectual property transfer			(2.3)						(1.4)						3.5
Other			(3.3)						(1.2)						(2.4)
Effective income tax rate			12.6		%				18.2		%				18.7		%

Earnings Before Income Taxes
			2021						2020						2019
United States			$	433					$	239					$	366
International			1,848						1,715						2,196
Total			$	2,281					$	1,954					$	2,562

Components of Income Tax Expense (Benefit)
Current income tax expense:			2021						2020						2019
United States federal			$	155					$	80					$	(17)
United States state and local			97						20						46
International			272						207						324
Total current income tax expense			$	524					$	307					$	353
Deferred income tax (benefit) expense:
United States federal			$	(82)					$	1					$	10
United States state and local			(23)						(25)						(1)
International			(132)						72						117
Total deferred income tax (benefit) expense			$	(237)					$	48					$	126
Total income tax expense			$	287					$	355					$	479

Interest and penalties included in other income (expense), net were expense of ($23), ($35) and ($9) in 2021, 2020 and 2019. The United States federal deferred income tax benefit (expense) includes the utilization of net operating loss carryforwards of $283, $41 and $50 in 2021, 2020 and 2019.

Deferred Income Tax Assets and Liabilities
Deferred income tax assets:			2021						2020
Inventories			$	513					$	434
Product-related liabilities			39						48
Other accrued expenses			501						512
Depreciation and amortization			1,194						1,269
State income taxes			128						108
Share-based compensation			63						56
Net operating loss and other credit carryforwards			232						470
Other			191						166
Total deferred income tax assets			$	2,861					$	3,063
Less valuation allowances			(164)						(203)
Net deferred income tax assets			$	2,697					$	2,860
Deferred income tax liabilities:			2021						2020
Depreciation and amortization			$	(891)					$	(1,286)
Undistributed earnings			(114)						(161)
Total deferred income tax liabilities			$	(1,005)					$	(1,447)
Net deferred income tax assets			$	1,692					$	1,413
Reported as:
Noncurrent deferred income tax assets			$	1,760					$	1,530
Noncurrent liabilities—Other liabilities			(68)						(117)
Total			$	1,692					$	1,413

Accrued interest and penalties were $150 and $133 on December 31, 2021 and 2020 which were reported in current and noncurrent accrued expenses and other liabilities.

Net operating loss carryforwards totaling $602 with $192 being subject to a full valuation allowance ($183 and $106 related to the Wright acquisition) on December 31, 2021 are available to reduce future taxable earnings of certain domestic and foreign

Dollar amounts in millions except per share amounts or as otherwise specified.			34

STRYKER CORPORATION 2021 FORM 10-K

subsidiaries. United States loss carryforwards of $403 expire through 2045. International loss carryforwards of $198 begin to expire in 2022; however, some have no expiration. We also have tax credit carryforwards of $104 with $83 being subject to a full valuation allowance. The credits with a full valuation allowance begin to expire in 2022; however, some have no expiration. We do not anticipate generating income tax in excess of the non-expiring credits in the foreseeable future.

The Tax Cuts and Jobs Act ("the Act") was enacted in 2017 in the United States. We recorded a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred. The Act also subjects a United States shareholder to tax on Global Intangible Low-Taxed Income (GILTI) earned by certain foreign subsidiaries. We have elected to account for GILTI tax in the year the tax is incurred.

We recorded deferred income tax on undistributed earnings of foreign subsidiaries not determined to be indefinitely reinvested. Determination of the total amount of unrecognized deferred income tax on undistributed earnings of foreign subsidiaries is not practicable.

Uncertain Income Tax Positions
			2021						2020
Beginning uncertain tax positions			$	457					$	472
Increases related to current year income tax positions			13						12
Increases related to prior year income tax positions			4						5
Decreases related to prior year income tax positions:
Settlements and resolutions of income tax audits			(18)						(41)
Statute of limitations expirations and other			—						(7)
Foreign currency translation			(12)						16
Ending uncertain tax positions			$	444					$	457
Reported as:
Noncurrent liabilities—Income taxes			$	444					$	457

Our income tax expense would have been reduced by $445 and $456 in 2021 and 2020 had these uncertain income tax positions been favorably resolved. It is reasonably possible that the amount of unrecognized tax benefits will significantly change due to one or more of the following events in the next 12 months: expiring statutes, audit activity, tax payments, competent authority proceedings related to transfer pricing or final decisions in matters that are the subject of controversy in various taxing jurisdictions in which we operate, including inventory transfer pricing, cost sharing, product royalty and foreign branch arrangements. We are not able to reasonably estimate the amount or the future periods in which changes in unrecognized tax benefits may be resolved. Interest and penalties incurred associated with uncertain tax positions are included in other income (expense), net.

In the normal course of business, income tax authorities in various income tax jurisdictions both within the United States and internationally conduct routine audits of our income tax returns filed in prior years. These audits are generally designed to determine if individual income tax authorities are in agreement with our interpretations of complex income tax regulations regarding the allocation of income to the various income tax jurisdictions. Income tax years are open from 2014 through the current year for the United States federal jurisdiction. Income tax years open for our other major jurisdictions range from 2006 through the current year.

NOTE 12 - RETIREMENT PLANS

Defined Contribution Plans

We provide certain employees with defined contribution plans and other types of retirement plans. A portion of our retirement plan expense under the defined contribution plans is funded with Stryker common stock. The use of Stryker common stock

represents a non-cash operating activity that is not reflected in our Consolidated Statements of Cash Flows.

			2021						2020						2019
Plan expense			$	259					$	235					$	205
Expense funded with Stryker common stock			37						34						31
Stryker common stock held by plan:
Dollar amount			582						542						470
Shares (in millions)			2.2						2.2						2.2
Value as a percentage of total plan assets			10		%				11		%				12		%

Defined Benefit Plans

Certain of our subsidiaries have both funded and unfunded defined benefit pension plans covering some or all of their employees. Substantially all of the defined benefit pension plans have projected benefit obligations in excess of plan assets.

Discount Rate

The discount rates were selected using a hypothetical portfolio of high quality bonds on December 31 that would provide the necessary cash flows to match our projected benefit payments.

Expected Return on Plan Assets

The expected return on plan assets is determined by applying the target allocation in each asset category of plan investments to the anticipated return for each asset category based on historical and projected returns.

Components of Net Periodic Pension Cost
Net periodic benefit cost:			2021						2020						2019
Service cost			$	(72)					$	(63)					$	(41)
Interest cost			(7)						(8)						(12)
Expected return on plan assets			11						13						12
Amortization of prior service credit			1						1						1
Recognized actuarial loss			(16)						(13)						(9)
Curtailment gain			9						—						—
Net periodic benefit cost			$	(74)					$	(70)					$	(49)
Changes in assets and benefit obligations recognized in OCI:
Net actuarial gain (loss)			$	132					$	(117)					$	(74)
Recognized net actuarial loss			16						13						9
Prior service credit and transition amount			(1)						(1)						(1)
Curtailment gain			(9)						—						—
Total recognized in other comprehensive income (loss)			$	138					$	(105)					$	(66)
Total recognized in net periodic benefit cost and OCI			$	64					$	(175)					$	(115)
Weighted-average rates used to determine net periodic benefit cost:
Discount rate			0.8		%				1.0		%				1.9		%
Expected return on plan assets			2.5		%				2.9		%				3.5		%
Rate of compensation increase			2.6		%				2.9		%				2.9		%
Weighted-average discount rate used to determine projected benefit obligations			1.1		%				0.8		%				1.0		%

The actuarial gain (loss) for all pension plans was primarily related to a change in the discount rate used to measure the benefit obligations of those plans.

Investment Strategy

The investment strategy for our defined benefit pension plans is to meet the liabilities of the plans as they fall due and to maximize the return on invested assets within appropriate risk tolerances.

Dollar amounts in millions except per share amounts or as otherwise specified.			35

STRYKER CORPORATION 2021 FORM 10-K

			2021						2020
Fair value of plan assets			$	543					$	522
Benefit obligations			(1,036)						(1,118)
Funded status			$	(493)					$	(596)
Reported as:
Current liabilities—accrued compensation			$	(2)					$	(2)
Noncurrent liabilities—other liabilities			(491)						(594)
Pre-tax amounts recognized in AOCI:
Unrecognized net actuarial loss			(215)						(354)
Unrecognized prior service credit			7						8
Total			$	(208)					$	(346)

Change in Benefit Obligations
			2021						2020
Beginning projected benefit obligations			$	1,118					$	869
Service cost			72						63
Interest cost			7						8
Foreign exchange impact			(70)						80
Employee contributions			8						8
Actuarial (gains) losses			(71)						110
Curtailment gain			(23)						—
Benefits paid			(5)						(20)
Ending projected benefit obligations			$	1,036					$	1,118
Ending accumulated benefit obligations			$	987					$	1,056

Change in Plan Assets
			2021						2020
Beginning fair value of plan assets			$	522					$	428
Actual return			17						30
Employer contributions			33						33
Employee contributions			8						8
Foreign exchange impact			(29)						37
Benefits paid			(8)						(14)
Ending fair value of plan assets			$	543					$	522

Allocation of Plan Assets
			2022 Target						2021 Actual						2020 Actual
Equity securities			23		%				23		%				23		%
Debt securities			39						41						44
Other			38						36						33
Total			100		%				100		%				100		%

Valuation of Plan Assets
2021			Level 1			Level 2			Level 3			Total
Cash and cash equivalents			$	21		$	—		$	—		$	21
Equity securities			28			119			—			147
Corporate debt securities			2			202			—			204
Other			4			68			99			171
Total			$	55		$	389		$	99		$	543
2020
Cash and cash equivalents			$	14		$	—		$	—		$	14
Equity securities			23			108			—			131
Corporate debt securities			2			201			—			203
Other			7			63			104			174
Total			$	46		$	372		$	104		$	522

Our Level 3 pension plan assets consist primarily of guaranteed investment contracts with insurance companies. The insurance contracts guarantee us principal repayment and a fixed rate of return. The $5 decrease in Level 3 pension plan assets is primarily driven by the change in the corresponding pension liability. We expect to contribute $21 to our defined benefit pension plans in 2022.

Estimated Future Benefit Payments
2022			2023			2024			2025			2026			2027-2031
$	21		$	21		$	27		$	22		$	23		$	138

NOTE 13 - SUMMARY OF QUARTERLY DATA (UNAUDITED)

2021 Quarters			Mar 31			Jun 30			Sep 30			Dec 31
Net sales			$	3,953		$	4,294		$	4,160		$	4,701
Gross profit			2,509			2,772			2,642			3,045
Earnings (loss) before income taxes			367			662			495			757
Net earnings (loss)			302			592			438			662
Net earnings (loss) per share of common stock:
Basic			$	0.80		$	1.57		$	1.17		$	1.75
Diluted			$	0.79		$	1.55		$	1.14		$	1.73
Dividends declared per share of common stock			$	0.630		$	0.630		$	0.630		$	0.695
2020 Quarters			Mar 31			Jun 30			Sep 30			Dec 31
Net sales			$	3,588		$	2,764		$	3,737		$	4,262
Gross profit			2,331			1,548			2,461			2,717
Earnings before income taxes			590			(87)			780			671
Net earnings			493			(83)			621			568
Net earnings per share of common stock:
Basic			$	1.32		$	(0.22)		$	1.66		$	1.51
Diluted			$	1.30		$	(0.22)		$	1.63		$	1.49
Dividends declared per share of common stock			$	0.575		$	0.575		$	0.575		$	0.630

NOTE 14 - SEGMENT AND GEOGRAPHIC DATA

Effective December 31, 2021 we segregate our operations into two reportable business segments: (i) MedSurg and Neurotechnology and (ii) Orthopaedics and Spine. This change realigns the Company's reportable business segments to its new internal reporting structure and how the Company manages its businesses as a result of the transition of responsibilities of our President and Chief Operating Officer, and the division of responsibilities between Group President, MedSurg and Neurotechnology, and Group President, Orthopaedics and Spine, in the fourth quarter of 2021. We have reflected these changes in all historical periods presented.

The Corporate and Other category shown in the table below includes corporate and administration, corporate initiatives and share-based compensation, which includes compensation related to employee stock options, restricted stock units and performance stock unit grants and director stock options and restricted stock unit grants.

Segment Results			2021			2020			2019
MedSurg and Neurotechnology			$	9,538		$	8,345		$	8,475
Orthopaedics and Spine			7,570			6,006			6,409
Net sales			$	17,108		$	14,351		$	14,884
MedSurg and Neurotechnology			$	518		$	496		$	488
Orthopaedics and Spine			629			458			457
Segment depreciation and amortization			$	1,147		$	954		$	945
Corporate and Other			125			122			99
Total depreciation and amortization			$	1,272		$	1,076		$	1,044
MedSurg and Neurotechnology			$	2,807		$	2,414		$	2,304
Orthopaedics and Spine			2,180			1,588			2,084
Segment operating income			$	4,987		$	4,002		$	4,388
Items not allocated to segments:
Corporate and Other			$	(605)		$	(503)		$	(480)
Acquisition and integration-related charges			(585)			(242)			(275)
Amortization of intangible assets			(619)			(472)			(464)
Restructuring-related and other charges			(386)			(458)			(226)
Medical device regulations			(107)			(81)			(62)
Recall-related matters			(103)			(17)			(192)
Regulatory and legal matters			2			(6)			24
Consolidated operating income			$	2,584		$	2,223		$	2,713

Dollar amounts in millions except per share amounts or as otherwise specified.			36

STRYKER CORPORATION 2021 FORM 10-K

Segment Assets and Capital Spending
Assets:			2021			2020			2019
MedSurg and Neurotechnology			$	15,218		$	15,250		$	16,270
Orthopaedics and Spine			18,149			18,090			12,527
Total segment assets			$	33,367		$	33,340		$	28,797
Corporate and Other			1,264			990			1,370
Total assets			$	34,631		$	34,330		$	30,167
Purchases of property, plant and equipment:
MedSurg and Neurotechnology			$	197		$	192		$	281
Orthopaedics and Spine			165			150			138
Total segment purchases of property, plant and equipment			$	362		$	342		$	419
Corporate and Other			163			145			230
Total purchases of property, plant and equipment			$	525		$	487		$	649

We measure the financial results of our reportable segments using an internal performance measure that excludes acquisition and integration-related charges, restructuring-related charges, reserves for certain product recall matters and reserves for certain legal and regulatory matters. Identifiable assets are those assets used exclusively in the operations of each business segment or allocated when used jointly. Corporate assets are principally property, plant and equipment and noncurrent assets.

The countries in which we have local revenue generating operations have been combined into the following geographic areas: the United States (including Puerto Rico); Europe, Middle East, Africa; Asia Pacific; and other foreign countries, which include Canada and countries in the Latin American region. Net sales are reported based on the geographic area of the Stryker location where the sales to the customer originated.

Geographic Information
			Net Sales												Net Property, Plant and Equipment
			2021			2020			2019						2021			2020
United States			$	12,321		$	10,455		$	10,957					$	1,717		$	1,645
Europe, Middle East, Africa			2,299			1,818			1,888						941			938
Asia Pacific			1,973			1,630			1,617						76			91
Other countries			515			448			422						99			78
Total			$	17,108		$	14,351		$	14,884					$	2,833		$	2,752

NOTE 15 - 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. We expect that the prices required for a successful bid will, nevertheless, negatively impact 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. Spine products are part of the VBP program in one province and it is not clear to what extent spine products will be included in further provincial or national VBP programs. We do not expect any significant impairments related to the potential Spine VBP programs. Our business in China represented approximately 2.5% of our revenues for the year ended December 31, 2021.

Aside from the impairments from the VBP programs, we recorded asset impairments of $159 in 2021 consisting primarily of in-

process research and development, other intangible assets and property, plant and equipment as a result of COVID-19-related demand impacts on in-process product development and certain other divestiture and restructuring activities.

In 2020 we suspended certain in-process investments resulting in charges of $195 to impair certain long-lived assets (primarily the portion of our investment in a new global ERP system that was in-process of being developed for future deployment) and product line and other exit costs. These charges were included in cost of sales and selling, general and administrative expenses.

Dollar amounts in millions except per share amounts or as otherwise specified.			37

STRYKER CORPORATION 2021 FORM 10-K