United States securities and exchange commission logo
March 16, 2023
Glenn Boehnlein
Vice President, Chief Financial Officer
STRYKER CORP
2825 Airview Boulevard
Kalamazoo, Michigan 49002
Re: STRYKER CORP
Form 10-K for
Fiscal Year December 31, 2022
Filed February 10,
2023
Form 8-K Filed
January 31, 2023
File No. 001-13149
Dear Glenn Boehnlein:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for Fiscal Year December 31, 2022
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Consolidated Results of Operations, page 13
1. Regarding your
discussion and analysis of gross profit, research, development and
engineering expenses,
selling, general and administrative expenses, operating income, and
net earnings, please
revise to provide a full discussion and analysis for the US GAAP
amounts with any
additional necessary discussion and analysis for the non-GAAP
measures to avoid
giving any undue prominence to your non-GAAP results. Refer to Item
10(e)(1)(i)(a) of
Regulation S-K and Question 102.10(a) of the Non-GAAP Financial
Measures Compliance and
Disclosure Interpretations for guidance.
2. Please expand your
analyses to quantify the impact of the factors impacting the line items
when multiple factors
contribute positively and/or negatively to the change or amounts
Glenn Boehnlein
FirstName
STRYKERLastNameGlenn Boehnlein
CORP
Comapany
March NameSTRYKER CORP
16, 2023
March2 16, 2023 Page 2
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being discussed. Refer to Item 303(b)(2) of Regulation S-K and Section
501.12.b. of the
Financial Reporting Codification for guidance. One example is your
analysis of adjusted
gross profit as a percentage of net sales in which you attribute the
decline to (a) increased
costs from purchases of electronic components at premium process on
the spot market; (b)
inflationary pressures related to labor, steel and transportation, (c)
inefficiencies from
supply chain disruptions, and (d) unfavorable product mix that does
not quantify each of
these factors. Further, ensure that you are quantifying the impact of
new products to net
sales at the consolidated and segment levels in accordance with Item
303(b)(2)(iii) of
Regulation S-K.
3. Please expand your disclosures of the material factors impacting the
line items to provide
an analysis of the underlying facts and circumstances. Refer to Item
303(b)(2) of
Regulation S-K and Section 501.12.b.4. of the Financial Reporting
Codification for
guidance. One example is your reference to a change in product mix
negatively impacting
adjusted gross profit as a percentage of net sales without a
discussion of what the change
in product mix was and whether management expects this change in
product mix to
continue.
4. Please tell us why you have not provide a discussion and analysis of
operating income at
the segment level. In this regard, we note that MedSurg and
Neurotechnology s operating
income as a percentage of net sales declined to 25.8% for fiscal year
2022 from 29.4% for
fiscal year 2021 without an explanation as to why. Refer to Item
303(b) of Regulation S-
K for guidance.
Non-GAAP Financial Measures, page 15
5. We note you have included adjustments for other acquisition and
integration-related
charges and also restructuring-related and other charges in your
reconciliations for the
adjusted, non-GAAP measures. Please provide us with an explanation of
what
specifically each of these adjustments represent and quantify the
components of each of
these adjustments for each period presented. Confirm to us that you
will provide a more
detailed discussion of these adjustments along with quantifying the
components of these
adjustments for each period presented and that you will also address
this comment in your
earnings press releases furnished pursuant to Item 2.02 of Form 8-K.
6. Please revise your reconciliation for adjusted net earnings to present
the income tax effect
of the other adjustments as a separate adjustment with clear
explanations of how the
income taxes adjustment was calculated. Further, provide a detailed
discussion of the tax
matters adjustments for adjusted other income (expense), net and
adjusted net earnings.
As part of your response, tell us your consideration of reflecting the
reversal of the tax
related to repatriation of foreign earnings and United States federal
audit settlement that
benefited net earnings for fiscal year 2022 as adjustments to arrive
at adjusted net
earnings. Refer to Questions 100.03 and 102.11 of the Non-GAAP
Financial Measures
Compliance and Disclosure Interpretations for guidance. Please address
this comment in
your earnings press releases furnished pursuant to Item 2.02 of Form
8-K.
Glenn Boehnlein
FirstName
STRYKERLastNameGlenn Boehnlein
CORP
Comapany
March NameSTRYKER CORP
16, 2023
March3 16, 2023 Page 3
Page
FirstName LastName
Critical Accounting Policies and Estimates
Acquisitions, Goodwill and Intangible Assets, and Long-Lived Assets, page 18
7. You recognized a $216 million goodwill impairment charge, or 7.6% of
fiscal year 2022
operating income, for your Spine reporting unit, resulting in
remaining goodwill of $1,002
million. You state the impairment charge was primarily due to slower
than anticipated
recovery of surgery volumes as you emerge from the pandemic,
competitive pressures,
and rising interest rates. The analysis of Orthopaedics and Spine net
sales on page 14
describes unit volume increases in both fiscal years 2022 and 2021 for
most and all
Orthopaedics and Spine products, respectively. Finally, we note that
net sales for Spine
was $1,146M for fiscal year 2022; $1,167 for fiscal year 2021; $1,047
for fiscal year
2020; and $1,157 for fiscal year 2019. As such, there is a concern it
may not be clear to
investors what specific facts and circumstances occurred in your Spine
reporting unit
subsequent to your 2021 goodwill impairment assessment in which you
had concluded
that the reporting unit s fair value substantially exceeded the
respective recorded value.
Please expand your disclosures to provide Spine reporting unit
specifics of the facts and
circumstances that led to the quantitative assessment and material
impairment charge. In
this regard, we also did not note any disclosures in your interim
reports regarding a
material uncertainty with Spine s goodwill. Please also address the
following:
A discussion of the degree of uncertainty associated with all of
the key assumptions
in the discounted cash flow analysis along with the potential
impact changes in the
key assumptions would have on your impairment analysis. For
example, you state
that a 1% increase in the discount rate would result in an
additional impairment
charge but do not mention assumptions for future revenue growth,
operating margin,
and the weighted average cost of capital.
A discussion of the potential events and/or changes in
circumstances that could
reasonably be expected to occur and negatively affect the key
assumptions and result
in a material impairment charge.
Refer to Item 303(b)(3) of Regulation S-K and Section 501.14 of the
Financial Reporting
Codification for guidance.
Notes to Consolidated Financial Statements, page 27
8. We note that you have recognized restructuring-related and other
charges of $349 million
for fiscal year 2022, $386 million for fiscal year 2021, and $458
million for fiscal year
2020, representing 12.3%, 14.9% and 20.6% of operating income,
respectively. Please
tell us why you have not provided your accounting policy for
recognizing restructuring
charges and the disclosures required by ASC 420-10-50-1 and also SAB
Topic 5:P.4 in
your footnote and MD&A disclosures.
Note 11 - Income Taxes, page 35
9. Please expand your disclosures to explain why you reversed a portion
of your deferred tax
liabilities for undistributed earnings during fiscal year 2022,
providing the specific facts
Glenn Boehnlein
STRYKER CORP
March 16, 2023
Page 4
and circumstances that led you to conclude that those earnings are now
indefinitely
reinvested; and to include the aggregate amount of undistributed
earnings from your
foreign subsidiaries that you have concluded are indefinitely
reinvested in accordance
with ASC 740-30-50-2.b.
Form 8-K Filed January 31, 2023
Exhibit 99.1
10. Please revise the title of the measure you refer to as free cash flow,
as the measure is not
calculated in the typical manner. Refer to Question 102.07 of the
Non-GAAP Financial
Measures Compliance and Disclosure Interpretations for guidance. Also
provide an
explanation to investors why management believes that excluding recall
payments
provides useful information regarding your liquidity and how
management uses this
liquidity measure. Refer to Items 10(e)(1)(i)(c) and 10(e)(1)(i)(d) of
Regulation S-K for
guidance.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact Tracey Houser at 202-551-3736 or Jeanne Baker at
202-551-3691 with
any questions.
Sincerely,
FirstName LastNameGlenn Boehnlein
Division of
Corporation Finance
Comapany NameSTRYKER CORP
Office of
Industrial Applications and
March 16, 2023 Page 4 Services
FirstName LastName