Stryker (SYK) risk factors, FY2025 10-K

What changed since the prior 10-K

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  Overview of 2025 In 2025 we achieved reported net sales growth of 11.2%

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  In 2025 we completed various acquisitions for total consideration of $4,960, net of cash acquired. Refer to Note 6 to our Consolidated Financial Statements for further information

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  (1)Refer to "Non-GAAP Financial Measures" for a discussion of non-GAAP financial measures used in this report and a reconciliation to the most directly comparable GAAP financial measure

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  MedSurg and Neurotechnology Net Sales MedSurg and Neurotechnology net sales in 2025 increased 15.7% as reported and 15.4% in constant currency, as foreign currency exchange rates positively impacted net sales by 0.3%

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  Excluding the 0.4% impact of acquisitions and divestitures, net sales in constant currency increased by 9.5% from increased unit volume and 1.7% due to higher prices. The unit volume increase was due to higher shipments across all MedSurg and Neurotechnology businesses

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  Research, development and engineering expenses as a percentage of net sales in 2024 decreased to 6.5% from 6.8% in 2023 primarily due to lower spend on medical device regulations in the European Union

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  Selling, general and administrative expenses as a percentage of net sales in 2024 decreased to 34.0% from 34.7% in 2023 primarily due to continued spend discipline and lower charges for structural optimization and certain legal matters partially offset by higher acquisition-related costs

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  Goodwill and Other Impairments Goodwill and other impairments of $170, $977 and $36 were recorded in 2025, 2024 and 2023

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  In 2025, 2024 and 2023 we recorded other impairments of $109, $159 and $36. Refer to Note 15 to our Consolidated Financial Statements for further information

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  The increase in Orthopaedics operating income as a percentage of net sales for 2024 from 2023 was primarily driven by higher sales volumes and a decrease in selling, general and administrative expenses as a percentage of sales partially offset by higher manufacturing and supply chain costs

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  The increase in 2025 from 2024 was primarily due to higher interest income in 2025. The increase in 2024 from 2023 was primarily due to higher interest income

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  Net Earnings Net earnings for 2025 increased to $3,246 or $8.40 per diluted share from $2,993 or $7.76 per diluted share in 2024 and $3,165 or $8.25 per diluted share in 2023. Refer to the comments above for discussion of the primary drivers of the change

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  2.Amortization of purchased intangible assets. Periodic amortization expense related to purchased intangible assets

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  5.Recall-related matters. Changes in our best estimate of the probable loss, or the minimum of the range of probable losses when a best estimate within a range is not known, to resolve the Rejuvenate, LFIT V40, Wright legacy hip products and other product recalls

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  7.Tax matters. Impact of accounting for certain significant and discrete tax items

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  The weighted-average diluted shares outstanding used in the calculation of adjusted net earnings per diluted share are the same as those used in the calculation of reported net earnings per diluted share for the respective period

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  (f) Charges represent changes in our best estimate of the probable loss, or the minimum of the range of probable losses when a best estimate within a range is not known, to resolve certain regulatory or other legal matters and the amount of favorable awards from settlements

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  Financing Activities Cash provided by financing activities in 2025 was $113 and used in financing activities in 2024 and 2023 was $525 and $1,594

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  Our cash, cash equivalents and marketable securities held in locations outside the United States was approximately 20% on December 31, 2025 and 2024

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  CONTRACTUAL OBLIGATIONS AND FORWARD-LOOKING CASH REQUIREMENTS In 2025 we recorded charges for various legal matters as further described in Note 7 to our Consolidated Financial Statements

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  Significant judgment is required in estimating the fair value of intangible assets and in assigning their respective useful lives

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  Determining the useful life of an intangible asset also requires judgment. With the exception of certain trade names, the majority of our acquired intangible assets (e.g., certain trademarks or brands, customer and distributor relationships, patents and technologies) are expected to have determinable useful lives

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  For asset acquisitions, IPRD is expensed immediately unless there is an alternative future use

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  The impairment charge for the Spine reporting unit was driven by a decrease in future product demand due to the competitive environment and an increase in the Spine reporting unit’s weighted average cost of capital

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  Finally we compared the carrying amount of the disposal group to the fair value less cost to sell. As a result, we recognized an estimated loss of $362 to record the disposal group at its fair value less cost to sell in goodwill and other impairments in our Consolidated Statements of Earnings

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  We are currently self-insured for certain claims and expenses

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  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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  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

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  Auditing management’s evaluation of the uncertain tax positions associated with the FCTO tax assessments was especially challenging due to the level of subjectivity and significant judgment associated with the recognition and measurement of the tax positions

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  /s/ Ernst & Young LLP We have served as the Company's auditor since 1974

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  Basis of Presentation and Consolidation

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  Use of Estimates

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  Revenue Recognition

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  Products and services are primarily transferred to customers at a point in time, with some transfers of services taking place over time

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  Cost of Sales

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  Selling, General and Administrative Expenses

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  Currency Translation

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  Cash Equivalents

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  Short-term Investments

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  Marketable Securities

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  Accounts Receivable

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  Inventories

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  Financial Instruments

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  All marketable securities are recognized at fair value

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  Derivatives

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  Property, Plant and Equipment

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  Goodwill and Other Intangible Assets

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  Goodwill, Intangibles and Long-Lived Asset Impairment Tests

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  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

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  Assets and Liabilities Held for Sale

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  Share-Based Compensation

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  Income Taxes

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  New Accounting Pronouncements Not Yet Adopted In December 2025 the Financial Accounting Standards Board (FASB) issued ASU 2025-10 (Topic 832)

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  In September 2025 the FASB issued ASU 2025-07 (Topics 815 and 606)

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  Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract

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  In September 2025 the FASB issued ASU 2025-06 (Subtopic 350-40)

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  Financial Instruments - Credit Losses

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  In November 2024 the FASB issued ASU 2024-03 (Subtopic 220-40)

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  We evaluate all ASUs issued by the FASB for consideration of their applicability. ASUs not included in our disclosures were assessed and determined to be either not applicable or are not expected to have a material impact on our Consolidated Financial Statements

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  NOTE 2 - REVENUE RECOGNITION We disaggregate our net sales by business and geographic location for each of our segments as we believe it best depicts how the nature, amount, timing and certainty of our net sales and cash flows are affected by economic factors

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  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

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  Performance obligations are generally satisfied within one year

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  Contract Assets and Liabilities Our contract assets primarily relate to conditional rights to consideration for work completed but not billed at the reporting date. On December 31, 2025 and 2024 contract assets recorded in our Consolidated Balance Sheets were not significant

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  Unobservable inputs reflecting our assumptions or external inputs from active markets

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  There were no significant transfers into or out of any level of the fair value hierarchy in 2025

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  The total after-tax gain (loss) recognized in OCI related to designated net investment hedges was ($715) in 2025

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  Interest Rate Hedges Pretax gains of $5 recorded in AOCI related to interest rate hedges closed in conjunction with debt issuances are expected to be reclassified to interest expense in earnings within 12 months of December 31, 2025. The cash flow effect of interest rate hedges is recorded in cash flow from operations

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  Net OCI $(471) $(394) $(799) $(687) NOTE 6 - ACQUISITIONS We acquire stock in companies and various assets that continue to support our capital deployment and product development strategies. Cash paid for acquisitions, net of cash acquired was $4,960 and $1,628 in 2025 and 2024

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  Share-based awards for Inari employees vested upon our acquisition and a charge of $139 was recorded in selling, general and administrative expenses in 2025

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  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

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  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

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  Future Obligations 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

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  For our other reporting units, we considered qualitative indicators of impairment as it was considered more likely than not that the fair values of those reporting units exceeded their respective carrying values. No impairment was identified for those reporting units in 2025 or 2024

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  In 2024 goodwill of $117 previously reported within Orthopaedics was reclassified to MedSurg and Neurotechnology to reflect the reclassification of the Interventional Spine reporting unit from Orthopaedics to MedSurg and Neurotechnology to align with certain updates in our internal reporting structure

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  We made no repurchases of shares in 2025. 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

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  Shares reserved for future compensation grants of our common stock were 31 million and 18 million on December 31, 2025 and 2024

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  Interest expense on outstanding debt and credit facilities, including required fees incurred totaled $582, $396 and $356 in 2025, 2024 and 2023

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  The amount of undistributed earnings of foreign subsidiaries determined to be indefinitely reinvested at December 31, 2025 was approximately $11.7 billion. Determination of the total amount of unrecognized deferred income tax on undistributed earnings of foreign subsidiaries is not practicable

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  Income tax years are open from 2019 through 2025 for the United States federal jurisdiction and are open for other major jurisdictions from 2010 through 2025

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  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

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  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

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  Consideration could increase by up to $57 or decrease by up to $245 based on the amount received

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  Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting during the fourth quarter of 2025 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting

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  The Company's management assessed the effectiveness of our internal control over financial reporting on December 31, 2025. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013)

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  Stryker’s independent registered public accounting firm has issued an audit report on their assessment of the effectiveness of the Company’s internal control over financial reporting

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  We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2025 consolidated financial statements of the Company and our report dated February 11, 2026 expressed an unqualified opinion thereon

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  We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects

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  Information regarding our directors and certain corporate governance and other matters appearing under the captions "Proposal 1—Election of Directors," "Corporate Governance," and "Additional Information—Delinquent Section 16(a) Reports" in the 2026 proxy statement is incorporated herein by reference

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  The information under the caption "Stock Ownership" in the 2026 proxy statement is incorporated herein by reference

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  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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  Financial Statements The following Consolidated Financial Statements are set forth in Part II, Item 8 of this report

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  Amended and Restated Bylaws - Incorporated by reference to Exhibit 3(ii) to the Company's Form 10-K for the year ended December 31, 2022 (Commission File No. 001-13149)

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  Indenture, dated January 15, 2010, between Stryker Corporation and U.S. Bank National Association.— Incorporated by reference to Exhibit 4.1 to the Company's Form 8-K dated January 15, 2010 (Commission File No. 000-09165)

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  Bank National association.— Incorporated by reference to Exhibit 4.2 to the Company's Form 8-K dated October 29, 2015 (Commission File No. 000-09165)

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  (xii) Twenty-Second Supplemental Indenture (including the form of the 2025 note), dated June 4, 2020, between Stryker Corporation and U.S. Bank National Association, as trustee - Incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K dated June 4, 2020 (Commission File No. 001-13149)

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  (xxi) Thirty-Second Supplemental Indenture (including the form of 2027 note), dated February 10, 2025, between Stryker Corporation and U.S. Bank Trust Company, National Association, as trustee — Incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K dated February 10, 2025 (Commission File No. 001-13149)

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  (iv)* Form of grant notice and terms and conditions for restricted stock units with no retirement provisions granted in 2026 under the 2011 Long-Term Incentive Plan

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  Form of grant notice and terms and conditions for restricted stock units granted in 2024 under the 2011 Long-Term Incentive Plan to non-employee directors — Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended June 30, 2024 (Commission File No. 001-13149)

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  (xxix) Form of Indemnification Agreement for Certain Officers—Incorporated by reference to Exhibit 10 (xv) to the Company's Form 10-K for the year ended December 31, 2008 (Commission File No. 000-09165).

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  (xxxiii)* Letter Agreement, dated December 2, 2025, between Stryker Corporation and Spencer Stiles — Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K dated December 4, 2025 (Commission File No. 001-13149)

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  Exhibit 97— Policy Relating to Recovery of Erroneously Awarded Compensation Stryker Corporation Mandatory Clawback Policy — Incorporated by reference to Exhibit 97(i) to the Company's Form 10-K for the year ended December 31, 2023 (Commission File No. 001-13149)

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  /s/ PRESTON W. WELLS Preston W. Wells Vice President, Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on the date indicated above on behalf of the registrant and in the capacities indicated

Dropped

• DroppedBUSINESS AND OPERATIONAL RISKS

  We may be unable to maintain adequate working relationships with healthcare professionals

  Reliance on healthcare professionals for product research, development and improvement.

• DroppedBUSINESS AND OPERATIONAL RISKS

  We rely on indirect distribution channels and major distributors that are independent of Stryker

  Dependence on independent distributors and indirect sales channels.

• DroppedBUSINESS AND OPERATIONAL RISKS

  We are subject to risks associated with our extensive global operations

  Risks and costs arising from extensive global operations.

• DroppedBUSINESS AND OPERATIONAL RISKS

  We may be unable to capitalize on previous or future acquisitions

  Failure to realize expected benefits from acquisitions.

• DroppedBUSINESS AND OPERATIONAL RISKS

  We may be unable to attract, develop and retain executives and key employees

  Difficulty attracting, developing and retaining executives and key employees.

• DroppedBUSINESS AND OPERATIONAL RISKS

  Interruption of manufacturing operations could adversely affect our business

  Manufacturing interruptions at Stryker or supplier facilities.

• DroppedBUSINESS AND OPERATIONAL RISKS

  Our insurance program may not be adequate to cover future losses

  Insurance and self-insurance may not cover future losses.

• DroppedLEGAL AND REGULATORY RISKS

  The impact of healthcare reform legislation on our business remains uncertain

  Healthcare reform could reduce medical-technology access or increase business pressure.

• DroppedENVIRONMENTAL, SOCIAL AND GOVERNANCE RISKS

  We could be negatively impacted by corporate responsibility and sustainability-related matters

  Corporate responsibility and sustainability expectations could harm the business.

All 103 risk factors

Headings as the filing states them, in filing order.

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.