STRYKER CORP (SYK)

CIK: 0000310764. SIC: 3841 Surgical & Medical Instruments & Apparatus. Latest 10-K as of: 2026-02-11.

SIC breadcrumb: Manufacturing > SIC Major Group 38 > SIC 3841 Surgical & Medical Instruments & Apparatus

SEC company page: https://www.sec.gov/edgar/browse/?CIK=310764. Latest filing source: 0000310764-26-000010.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-11. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000310764.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

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Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2026-02-11. Report date: 2025-12-31.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

About Stryker

Stryker is a global leader in medical technologies and, together

with our customers, we are driven to make healthcare better. We

offer innovative products and services in MedSurg,

Neurotechnology, and Orthopaedics that help improve patient

and healthcare outcomes. Alongside our customers around the

world, we impact more than 150 million patients annually. Our

goal is to achieve sales growth at the high-end of the medical

technology (MedTech) industry and maintain our long-term capital

allocation strategy that prioritizes: (1) Acquisitions, (2) Dividends

and (3) Share repurchases.

We segregate our operations into two reportable business

segments: (i) MedSurg and Neurotechnology and (ii)

Orthopaedics. 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 and

venous thromboembolism (Vascular), 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). Orthopaedics products consist primarily of

implants used in hip and knee joint replacements and trauma and

extremity surgeries.

Macroeconomic Environment

In 2025 the United States government has announced new tariffs

on goods imported into the United States from dozens of

countries, including China and the European Union member

states. In response, governments have threatened or imposed

reciprocal tariffs or taken other measures, and the United States

is in the process of negotiating with certain governments. We

continue to monitor and evaluate the situation. Tariffs are

expected to continue to result in an increase in certain product

costs or have adverse impacts on, among other things, demand

for our products and supply chains. The overall macroeconomic

and geopolitical environment, including tariffs or changes in trade

policies, slower economic growth or recession, market volatility

and inflation, and uncertainty regarding all of the foregoing, pose

risks that could impact our business and results of operations.

For more information about these risks, see Item 1A. "Risk

Factors."

Overview of 2025

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

Excluding the impact of acquisitions and divestitures, sales grew

10.3% in constant currency. We reported net earnings of $3,246

and net earnings per diluted share of $8.40. Excluding the impact

of certain items, we achieved adjusted net earnings(1) of $5,267

and adjusted net earnings per diluted share(1) of $13.63

representing growth of 11.8%.

We continued our capital allocation strategy by investing $4,960

in acquisitions and paying $1,284 in dividends to our

shareholders.

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.

In February 2025 we entered into a new revolving credit

agreement that replaces our previous agreement dated October

2021. The primary changes included increasing the aggregate

principal amount of the facility by $750 to $3,000 and extending

the maturity date to February 25, 2030. On December 31, 2025

there were no borrowings outstanding under our revolving credit

facility or our commercial paper program which allows for

maturities up to 397 days from the date of issuance. The

maximum amount of our commercial paper that can be

outstanding at any time is $3,000.

In February 2025 we issued $500 of 4.550% senior unsecured

notes due February 10, 2027, $700 of 4.700% senior unsecured

notes due February 10, 2028, $800 of 4.850% senior unsecured

notes due February 10, 2030 and $1,000 of 5.200% senior

unsecured notes due February 10, 2035. In the second quarter 

2025 we repaid $650 of 1.150% senior unsecured notes and in

the fourth quarter 2025 we repaid $750 of 3.375% senior

unsecured notes.

(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.

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

16

STRYKER CORPORATION

2025 FORM 10-K

CONSOLIDATED RESULTS OF OPERATIONS

Percent Net Sales

Percentage Change

2025

2024

2023

2025

2024

2023

2025 vs. 2024

2024 vs. 2023

Net sales

$25,116

$22,595

$20,498

100.0%

100.0%

100.0%

11.2%

10.2%

Gross profit

16,065

14,440

13,058

64.0

63.9

63.7

11.3

10.6

Research, development and engineering expenses

1,623

1,466

1,388

6.5

6.5

6.8

10.7

5.6

Selling, general and administrative expenses

8,651

7,685

7,111

34.4

34.0

34.7

12.6

8.1

Amortization of intangible assets

732

623

635

2.9

2.8

3.1

17.5

(1.9)

Goodwill and other impairments

170

977

36

0.7

4.3

0.2

nm

nm

Interest expense

(607)

(409)

(363)

(2.4)

(1.8)

(1.8)

48.4

12.7

Other income

232

212

148

0.9

0.9

0.8

9.4

43.2

Income taxes

1,268

499

508

nm

nm

nm

154.1

(1.8)

Net earnings

$3,246

$2,993

$3,165

12.9%

13.2%

15.4%

8.5%

(5.4)%

Net earnings per diluted share

$8.40

$7.76

$8.25

8.2%

(5.9)%

Adjusted net earnings per diluted share(1)

$13.63

$12.19

$10.60

11.8%

15.0%

nm - not meaningful

Geographic and Segment Net Sales

Percentage Change

2025 vs. 2024

2024 vs. 2023

2025

2024

2023

As

Reported

Constant

Currency

As

Reported

Constant

Currency

Geographic:

United States

$19,006

$16,943

$15,257

12.2%

12.2%

11.0%

11.0%

International

6,110

5,652

5,241

8.1

6.4

7.9

9.8

Total

$25,116

$22,595

$20,498

11.2%

10.7%

10.2%

10.7%

Segment:

MedSurg and Neurotechnology

$15,647

$13,518

$12,163

15.7%

15.4%

11.1%

11.6%

Orthopaedics

9,469

9,077

8,335

4.3

3.8

8.9

9.4

Total

$25,116

$22,595

$20,498

11.2%

10.7%

10.2%

10.7%

Supplemental Net Sales Growth Information

Percentage Change

2025 vs. 2024

2024 vs. 2023

United

States

International

United

States

International

2025

2024

2023

As

Reported

Constant

Currency

As

Reported

As

Reported

Constant

Currency

As

Reported

Constant

Currency

As

Reported

As

Reported

Constant

Currency

MedSurg and

Neurotechnology:

Instruments

$3,183

$2,834

$2,534

12.3%

11.9%

13.0%

9.5%

7.5%

11.9%

12.1%

12.5%

9.5%

10.6%

Endoscopy

3,807

3,389

3,068

12.3

12.3

12.2

12.8

12.4

10.5

11.0

11.1

7.7

10.7

Medical

4,204

3,852

3,459

9.1

8.8

10.0

4.8

2.8

11.4

11.7

14.6

(2.0)

(0.3)

Vascular

1,968

1,307

1,226

50.6

50.0

107.5

14.8

13.4

6.6

8.2

4.7

7.9

10.5

Neuro Cranial

2,485

2,136

1,876

16.3

15.9

16.5

15.5

13.1

13.9

14.1

15.0

8.7

10.2

$15,647

$13,518

$12,163

15.7%

15.4%

17.0%

11.3%

9.7%

11.1%

11.6%

12.7%

5.9%

7.9%

Orthopaedics:

Knees

$2,656

$2,447

$2,273

8.5%

8.2%

7.6%

11.0%

9.7%

7.6%

8.2%

6.7%

10.4%

12.2%

Hips

1,865

1,704

1,544

9.5

8.9

7.4

12.9

11.2

10.3

11.3

7.2

15.9

18.4

Trauma and Extremities

3,948

3,507

3,147

12.6

11.8

13.1

11.0

8.2

11.4

11.6

12.6

8.3

9.1

Other

815

712

658

14.5

14.0

18.2

5.3

3.6

8.1

9.6

7.3

10.1

15.4

9,284

8,370

7,622

10.9%

10.3%

10.9%

11.0%

9.0%

9.8%

10.4%

9.3%

10.9%

12.8%

Spinal Implants

185

707

713

(73.9)

(73.9)

(76.0)

(69.3)

(69.2)

(0.7)

(0.3)

(2.1)

2.5

3.8

$9,469

$9,077

$8,335

4.3%

3.8%

4.3%

4.4%

2.6%

8.9%

9.4%

8.4%

10.2%

12.0%

Total

$25,116

$22,595

$20,498

11.2%

10.7%

12.2%

8.1%

6.4%

10.2%

10.7%

11.0%

7.9%

9.8%

Consolidated Net Sales

Consolidated net sales in 2025 increased 11.2% as reported and

10.7% in constant currency, as foreign currency exchange rates

positively impacted net sales by 0.5%. Excluding the 0.4% impact

of acquisitions and divestitures, net sales in constant currency

increased by 9.9% from increased unit volume and 0.4% due to

higher prices. The unit volume increase was primarily due to

higher shipments across all businesses.

Consolidated net sales in 2024 increased 10.2% as reported and

10.7% in constant currency, as foreign currency exchange rates

negatively impacted net sales by 0.5%. Excluding the 0.5%

impact of acquisitions and divestitures, net sales in constant

currency increased by 9.1% from increased unit volume and

1.1% due to higher prices. The unit volume increase was due to

higher shipments across all MedSurg and Neurotechnology

businesses and most Orthopaedics businesses.

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

17

STRYKER CORPORATION

2025 FORM 10-K

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%.

Excluding the 4.7% impact of acquisitions and divestitures, net

sales in constant currency increased by 10.0% from increased

unit volume and 0.7% due to higher prices. The unit volume

increase was due to higher shipments across all MedSurg and

Neurotechnology businesses.

MedSurg and Neurotechnology net sales in 2024 increased

11.1% as reported and 11.6% in constant currency, as foreign

currency exchange rates negatively impacted net sales by 0.5%.

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.

Orthopaedics Net Sales

Orthopaedics net sales in 2025 increased 4.3% as reported and

3.8% in constant currency, as foreign currency exchange rates

positively impacted net sales by 0.5%. Excluding the 5.7% impact

of acquisitions and divestitures, net sales in constant currency

increased by 9.6% from increased unit volume partially offset by

0.1% due to lower prices. The unit volume increase was due to

higher shipments across most Orthopaedics businesses.

Orthopaedics net sales in 2024 increased 8.9% as reported and

9.4% in constant currency, as foreign currency exchange rates

negatively impacted net sales by 0.5%. Excluding the 0.7%

impact of acquisitions and divestitures, net sales in constant

currency increased by 8.7% from increased unit volume. The unit

volume increase was due to higher shipments across all

Orthopaedics businesses.

Gross Profit

Gross profit was $16,065, $14,440 and $13,058 in 2025, 2024,

and 2023. The key components of the change were:

Gross Profit

Percent Net Sales

2023

63.7%

Sales pricing

40 bps

Volume and mix

60 bps

Manufacturing and supply chain costs

(40) bps

Inventory stepped up to fair value

(20) bps

Structural optimization and other special charges

(20) bps

2024

63.9%

Sales pricing

10 bps

Volume and mix

70 bps

Manufacturing and supply chain costs

0 bps

Inventory stepped up to fair value

(60) bps

Structural optimization and other special charges

(10) bps

2025

64.0%

Gross profit as a percentage of net sales increased to 64.0% in

2025 from 63.9% in 2024 primarily due to higher sales pricing

and favorable volume partially offset by higher amortization of

inventory stepped up to fair value.

Gross profit as a percentage of net sales increased to 63.9% in

2024 from 63.7% in 2023 due to higher sales pricing and

favorable volume offset by higher manufacturing and supply

chain costs primarily due to inflationary pressures impacting fixed

and variable manufacturing costs as well as higher amortization

of inventory stepped up to fair value.

While segment mix was not a significant driver of the change in

gross profit as a percent of net sales between 2025, 2024 and

2023, we generally expect segment mix to have an unfavorable

impact for the foreseeable future as we anticipate more rapid

sales growth in our lower gross margin MedSurg and

Neurotechnology segment than our Orthopaedics segment.

Research, Development and Engineering Expenses

Research, development and engineering expenses as a

percentage of net sales in 2025 of 6.5% remained flat with 2024.

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.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of

net sales in 2025 increased to 34.4% from 34.0% in 2024

primarily due to higher acquisition-related costs and continued

investments to support our growth. A charge of $139 for share-

based awards for Inari employees that vested upon our

acquisition is included in 2025.

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.

Amortization of Intangible Assets

Amortization of intangible assets was $732, $623 and $635 in

2025, 2024 and 2023. These amounts include amortization

related to intangible assets acquired in 2025 from Inari, 2024

from various acquisitions and 2023 from Cerus Endovascular

Limited (Cerus). Refer to Notes 6 and 8 to our Consolidated

Financial Statements for further information.

Goodwill and Other Impairments

Goodwill and other impairments of $170, $977 and $36 were

recorded in 2025, 2024 and 2023.

In 2024 we recorded goodwill impairment charges of $456 related

to our Spine business and recognized an estimated loss of $362

as a result of classifying certain assets in our Spinal Implants

business as held for sale. Refer to Notes 8 and 16 to our

Consolidated Financial Statements for further information.

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.

Operating Income

Operating income was $4,889, $3,689 and $3,888 in 2025, 2024

and 2023. Operating income increased as a percentage of sales

to 19.5% in 2025 from 16.3% in 2024 and increased from 19.0%

in 2023. Refer to the comments above for discussion of the

primary drivers of the change.

MedSurg and Neurotechnology operating income as a

percentage of net sales increased to 29.9% in 2025 from 29.6%

in 2024. MedSurg and Neurotechnology operating income as a

percentage of net sales increased to 29.6% in 2024 from 28.5%

in 2023. Orthopaedics operating income as a percentage of net

sales increased to 29.8% in 2025 from 28.5% in 2024.

Orthopaedics operating income as a percentage of net sales

increased to 28.5% in 2024 from 27.2% in 2023. The key

components of the change were:

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

18

STRYKER CORPORATION

2025 FORM 10-K

Operating Income

Percent Net Sales

MedSurg and

Neurotechnology

Orthopaedics

2023

28.5%

27.2%

Sales pricing

70 bps

0 bps

Volume

40 bps

70 bps

Manufacturing and supply chain costs

(40) bps

(20) bps

Research, development and

engineering expenses

0 bps

10 bps

Selling, general and administrative

expenses

40 bps

70 bps

2024

29.6%

28.5%

Sales pricing

30 bps

0 bps

Volume

90 bps

30 bps

Manufacturing and supply chain costs

80 bps

(90) bps

Research, development and

engineering expenses

(30) bps

50 bps

Selling, general and administrative

expenses

(140) bps

140 bps

2025

29.9%

29.8%

The increase in MedSurg and Neurotechnology operating income

as a percentage of net sales in 2025 from 2024 was primarily

driven by higher unit volumes and prices, and lower

manufacturing and supply chain costs partially offset by higher

selling, general and administrative expenses due to the

acquisition of Inari.

The increase in MedSurg and Neurotechnology operating income

as a percentage of net sales in 2024 from 2023 was primarily

driven by higher unit volumes, higher prices and a decrease in

selling, general and administrative expenses as a percentage of

sales partially offset by higher manufacturing and supply chain

costs.

The increase in Orthopaedics operating income as a percentage

of net sales for 2025 from 2024 was primarily by driven lower

selling, general and administrative expenses and higher unit

volumes partially offset by higher manufacturing and supply chain

costs.

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.

Interest Expense

Interest expense was $607, $409 and $363 in 2025, 2024 and

2023. The increase in 2025 from 2024 was due to increased

interest expense from our 2025 debt issuances. The increase in

2024 from 2023 was primarily due to the impact of additional

interest expense from our 2024 debt issuances.

Other Income

Other income was $232, $212 and $148 in 2025, 2024 and 2023.

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.

Income Taxes

Our effective tax rate was 28.1%, 14.3% and 13.8% for 2025,

2024 and 2023. The effective income tax rate for 2025 increased

from 2024 due to the 2025 tax effect of transfers of intellectual

property between tax jurisdictions and the 2024 tax effect of the

sale of the Spinal Implants business. The effective income tax

rate for 2024 increased from 2023 due to the 2023 tax effect of

transfers of intellectual property between tax jurisdictions offset

by the 2024 tax effect of the sale of the Spinal Implants business.

Our future results of operations could be affected by changes in

the effective tax rate as a result of changes in tax laws,

regulations and judicial rulings. We are continuing to evaluate the

impact of tax reform in the countries in which we operate as new

guidance is published and new regulations are adopted. In

addition, further changes in the tax laws could arise, including as

a result of the base erosion and profit shifting project undertaken

by the Organisation for Economic Cooperation and Development

(OECD). The OECD, which represents a coalition of member

countries, has put forth two proposed frameworks that revise the

existing profit allocation and nexus rules (Pillar 1) and ensure a

minimal level of taxation (Pillar 2), respectively, and several

countries enacted tax legislation based on these frameworks. In

January 2026, the OECD released Administrative Guidance

containing the SbS System and introduced two new Pillar 2 safe

harbors for multinationals headquartered in jurisdictions including

the United States with eligible tax systems. The safe harbors

must now be legislated domestically by each country with

enacted Pillar 2 legislation impacted by the new OECD

Administrative Guidance. These tax law changes and any

additional contemplated tax law changes, could impact tax

expense in future periods.

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.

Non-GAAP Financial Measures

We supplement the reporting of our financial information

determined under accounting principles generally accepted in the

United States (GAAP) with certain non-GAAP financial measures,

including percentage sales growth in constant currency;

percentage organic sales growth; adjusted gross profit; adjusted

selling, general and administrative expenses; adjusted research,

development and engineering expenses; adjusted operating

income; adjusted other income (expense), net; adjusted income

taxes; adjusted effective income tax rate; adjusted net earnings;

and adjusted net earnings per diluted share (Diluted EPS). We

believe these non-GAAP financial measures provide meaningful

information to assist investors and shareholders in understanding

our financial results and assessing our prospects for future

performance. Management believes percentage sales growth in

constant currency and the other adjusted measures described

above are important indicators of our operations because they

exclude items that may not be indicative of or are unrelated to our

core operating results and provide a baseline for analyzing trends

in our underlying businesses. Management uses these non-

GAAP financial measures for reviewing the operating results of

reportable business segments and analyzing potential future

business trends in connection with our budget process and bases

certain management incentive compensation on these non-GAAP

financial measures. To measure percentage sales growth in

constant currency, we remove the impact of changes in foreign

currency exchange rates that affect the comparability and trend

of sales. Percentage sales growth in constant currency is

calculated by translating current and prior year results at the

same foreign currency exchange rate. To measure percentage

organic sales growth, we remove the impact of changes in

foreign currency exchange rates, acquisitions and divestitures,

which affect the comparability and trend of sales. Percentage

organic sales growth is calculated by translating current year and

prior year results at the same foreign currency exchange rates

excluding the impact of acquisitions and divestitures. To measure

earnings performance on a consistent and comparable basis, we

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

19

STRYKER CORPORATION

2025 FORM 10-K

exclude certain items that affect the comparability of operating

results and the trend of earnings. The income tax effect of each

adjustment was determined based on the tax effect of the

jurisdiction in which the related pre-tax adjustment was recorded.

These adjustments are irregular in timing and may not be

indicative of our past and future performance. The following are

examples of the types of adjustments that may be included in a

period:

1.Acquisition and integration-related costs. Costs related to

integrating recently acquired businesses (e.g., costs

associated with the termination of sales relationships,

employee retention and workforce reductions, manufacturing

integration costs and other integration-related activities),

changes in the fair value of contingent consideration,

amortization of inventory stepped-up to fair value, specific

costs (e.g., deal costs and costs associated with legal entity

rationalization) related to the consummation of the

acquisition process and legal entity rationalization and

acquisition-related tax items.

2.Amortization of purchased intangible assets. Periodic

amortization expense related to purchased intangible assets.

3.Structural optimization and other special charges. Costs

associated with employee retention and workforce

reductions, the closure or transfer of manufacturing and

other facilities (e.g., site closure costs, contract termination

costs and redundant employee costs during the work

transfers), product line exits (primarily inventory, long-lived

asset and specifically-identified intangible asset write-offs),

certain long-lived and intangible asset write-offs and

impairments and other charges.

4.Medical device regulations. Costs specific to updating our

quality system, product labeling, asset write-offs and product

remanufacturing to comply with the new medical device

reporting regulations and other requirements of the

European Union.

5.Recall-related matters. 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.

6.Regulatory and legal 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 certain regulatory or other legal matters

and the amount of favorable awards from settlements.

7.Tax matters. Impact of accounting for certain significant and

discrete tax items.

Because non-GAAP financial measures are not standardized, it

may not be possible to compare these financial measures with

other companies' non-GAAP financial measures having the same

or similar names. These adjusted financial measures should not

be considered in isolation or as a substitute for reported sales

growth, gross profit, selling, general and administrative expenses,

research, development and engineering expenses, operating

income, other income (expense), net, income taxes, effective

income tax rate, net earnings and net earnings per diluted share,

the most directly comparable GAAP financial measures. These

non-GAAP financial measures are an additional way of viewing

aspects of our operations when viewed with our GAAP results

and the reconciliations to corresponding GAAP financial

measures at the end of the discussion of Consolidated Results of

Operations below. We strongly encourage investors and

shareholders to review our financial statements and publicly-filed

reports in their entirety and not to rely on any single financial

measure.

The weighted-average diluted shares outstanding used in the

calculation of 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.

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

20

STRYKER CORPORATION

2025 FORM 10-K

Reconciliation of the Most Directly Comparable GAAP Financial Measure to Non-GAAP Financial Measure

2025

Gross

Profit

Selling,

General &

Administrative

Expenses

Research,

Development &

Engineering

Expenses

Operating

Income

Other

Income

(Expense),

Net

Income

Taxes

Net

Earnings

Effective

Tax Rate

Diluted

EPS

Reported

$16,065

$8,651

$1,623

$4,889

$(375)

$1,268

$3,246

28.1%

$8.40

Acquisition and integration-related costs:

Inventory stepped-up to fair value

173

—

—

173

—

42

131

0.3

0.34

Other acquisition and integration-related (a)

24

(296)

(15)

335

—

36

299

(0.3)

0.78

Amortization of purchased intangible assets

—

—

—

732

—

151

581

0.9

1.49

Structural optimization and other special charges (b)

74

(113)

(4)

191

(27)

24

140

—

0.37

Goodwill and other impairments (c)

—

—

—

170

—

50

120

0.5

0.31

Medical device regulations (d)

1

—

(37)

38

—

8

30

0.1

0.08

Recall-related matters (e)

54

(4)

—

58

—

10

48

—

0.12

Regulatory and legal matters (f)

—

(17)

—

17

—

5

12

—

0.03

Tax matters (g)

—

—

—

—

—

(660)

660

(14.5)

1.71

Adjusted

$16,391

$8,221

$1,567

$6,603

$(402)

$934

$5,267

15.1%

$13.63

2024

Gross

Profit

Selling,

General &

Administrative

Expenses

Research,

Development &

Engineering

Expenses

Operating

Income

Other

Income

(Expense),

Net

Income

Taxes

Net

Earnings

Effective

Tax Rate

Diluted

EPS

Reported

$14,440

$7,685

$1,466

$3,689

$(197)

$499

$2,993

14.3%

$7.76

Acquisition and integration-related costs:

Inventory stepped-up to fair value

46

—

—

46

—

12

34

0.2

0.09

Other acquisition and integration-related (a)

—

(107)

(1)

108

—

23

85

0.2

0.22

Amortization of purchased intangible assets

—

—

—

623

—

128

495

1.0

1.28

Structural optimization and other special charges (b)

59

(77)

(2)

138

1

29

110

0.3

0.29

Goodwill and other impairments (c)

—

—

—

977

—

125

852

(0.6)

2.21

Medical device regulations (d)

9

—

(49)

58

—

14

44

0.1

0.11

Recall-related matters (e)

11

(29)

—

40

—

10

30

0.1

0.08

Regulatory and legal matters (f)

—

(36)

—

36

—

7

29

0.1

0.08

Tax matters (g)

—

—

—

—

—

(28)

28

(0.9)

0.07

Adjusted

$14,565

$7,436

$1,414

$5,715

$(196)

$819

$4,700

14.8%

$12.19

2023

Gross

Profit

Selling,

General &

Administrative

Expenses

Research,

Development &

Engineering

Expenses

Operating

Income

Other

Income

(Expense),

Net

Income

Taxes

Net

Earnings

Effective

Tax Rate

Diluted

EPS

Reported

$13,058

$7,111

$1,388

$3,888

$(215)

$508

$3,165

13.8%

$8.25

Acquisition and integration-related costs:

Inventory stepped-up to fair value

—

—

—

—

—

—

—

—

—

Other acquisition and integration-related (a)

—

(20)

—

20

—

(25)

45

(0.8)

0.12

Amortization of purchased intangible assets

—

—

—

635

—

132

503

1.2

1.31

Structural optimization and other special charges (b)

39

(130)

(1)

170

—

38

132

0.4

0.34

Goodwill and other impairments (c)

—

—

—

36

—

9

27

0.1

0.08

Medical device regulations (d)

2

—

(94)

96

—

22

74

0.2

0.19

Recall-related matters (e)

—

(18)

—

18

—

4

14

—

0.04

Regulatory and legal matters (f)

—

(92)

—

92

—

29

63

0.4

0.16

Tax matters (g)

—

—

—

—

(8)

(51)

43

(1.2)

0.11

Adjusted

$13,099

$6,851

$1,293

$4,955

$(223)

$666

$4,066

14.1%

$10.60

(a) Charges represent certain acquisition and integration-related costs associated with acquisitions, including:

2025

2024

2023

Termination of sales relationships

$—

$4

$5

Employee retention and workforce reductions

60

22

6

Changes in the fair value of contingent consideration

21

8

(1)

Manufacturing integration costs

19

3

2

Stock compensation payments upon a change in control

140

22

—

Other integration-related activities

95

49

8

Adjustments to Operating Income

$335

$108

$20

Charges for acquisition-related tax provisions

—

—

—

Other income taxes related to acquisition and integration-related costs

36

23

(25)

Adjustments to Income Taxes

$36

$23

$(25)

Adjustments to Net Earnings

$299

$85

$45

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

21

STRYKER CORPORATION

2025 FORM 10-K

(b) Structural optimization and other special charges represent the costs associated with:

2025

2024

2023

Employee retention and workforce reductions

$55

$23

$69

Closure/transfer of manufacturing and other facilities

31

31

50

Product line exits

13

37

22

Termination of sales relationships

7

8

—

Other charges

85

39

29

Adjustments to Operating Income

$191

$138

$170

Adjustments to Other Income (Expense), Net

$(27)

$1

$—

Adjustments to Income Taxes

$24

$29

$38

Adjustments to Net Earnings

$140

$110

$132

(c) Goodwill and other impairments represent the costs associated with:

2025

2024

2023

Goodwill impairments

$—

$456

$—

Certain long-lived and intangible asset write-offs and impairments

114

466

26

Product line exits (e.g., long-lived asset and specifically-identified intangible asset write-offs)

56

55

10

Adjustments to Operating Income

$170

$977

$36

Adjustments to Income Taxes

$50

$125

$9

Adjustments to Net Earnings

$120

$852

$27

(d)  Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with the medical device

reporting regulations and other requirements of the new medical device regulations in the European Union.

(e)  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 recall-related matters.

(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.

(g)  Benefits / (charges) represent the accounting impact of certain significant and discrete tax items, including:

2025

2024

2023

Adjustments related to the transfer of certain intellectual properties between tax jurisdictions

$(718)

$(185)

$(89)

Certain tax audit settlements

—

(1)

24

Deferred tax benefit on outside basis related to the anticipated sale of the Spinal Implants business

—

170

—

Other tax matters

58

(12)

14

Adjustments to Income Taxes

$(660)

$(28)

$(51)

Benefits for certain tax audit settlements

—

—

(9)

Other tax related adjustments

—

—

1

Adjustments to Other Income (Expense), Net

$—

$—

$(8)

Adjustments to Net Earnings

$660

$28

$43

FINANCIAL CONDITION AND LIQUIDITY

Net cash provided by (used in):

2025

2024

2023

Operating activities

$5,044

$4,242

$3,711

Investing activities

(4,866)

(3,000)

(962)

Financing activities

113

(525)

(1,594)

Effect of exchange rate changes

68

(36)

(28)

Change in cash and cash equivalents

$359

$681

$1,127

We believe our financial condition continues to be of high quality,

as evidenced by our ability to generate substantial cash from

operations and to readily access capital markets at competitive

rates despite the current macroeconomic environment. Operating

cash flow provides the primary source of cash to fund operating

needs and capital expenditures. Excess operating cash is used

first to fund acquisitions to complement our portfolio of

businesses. Other discretionary uses include dividends and

potentially share repurchases. We supplement operating cash

flow with debt to fund our activities as necessary. Our overall

cash position reflects our business results and a global cash

management strategy that takes into account liquidity

management, economic factors and tax considerations.

Operating Activities

Cash provided by operating activities was $5,044, $4,242 and

$3,711 in 2025, 2024 and 2023. The increase in 2025 was

primarily due to higher cash earnings and working capital

improvements. The increase in 2024 from 2023 was primarily due

to higher cash earnings partially offset by changes in working

capital.

Investing Activities

Cash used in investing activities was $4,866, $3,000 and $962 in

2025, 2024 and 2023. Cash used in 2025 included cash paid for

the acquisition of Inari, purchases of property, plant and

equipment, partially offset by proceeds from the sale of short

term investments and our Spinal Implants business. Cash used in

2024 included cash paid for various acquisitions and purchases

of short-term investments partially offset by proceeds from other

investing activities.

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.

Cash provided by 2025 was primarily driven by dividend

payments of $1,284 and repayments of $1,400 to pay off

maturing senior unsecured notes. These repayments were offset

by net proceeds of $2,979 from the issuance of senior unsecured

notes as described in Note 10 to our Consolidated Financial

statements.  Cash used in 2024 was primarily driven by dividend

payments of $1,219 and repayments of $2,039 to pay off

maturing senior unsecured notes. These repayments were offset

by net proceeds of $3,011 from issuance of senior unsecured

notes.

We maintain debt levels that we consider appropriate after

evaluating a number of factors including cash requirements for

ongoing operations, investment and financing plans (including

acquisitions and share repurchase activities) and overall cost of

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

22

STRYKER CORPORATION

2025 FORM 10-K

capital. Refer to Note 10 to our Consolidated Financial

Statements for further information.

2025

2024

2023

Dividends paid per common share

$3.36

$3.20

$3.00

Total dividends paid to common shareholders

$1,284

$1,219

$1,139

Liquidity

Cash, cash equivalents and marketable securities were $4,100

and $3,743, and our current assets exceeded current liabilities by

$6,961 and $7,231 on December 31, 2025 and 2024. We

anticipate being able to support our short-term liquidity and

operating needs from a variety of sources including cash from

operations, commercial paper and existing credit lines. We also

have a revolving credit agreement maturing in February 2030

with an aggregate principal amount of $3,000.

We raised funds in the capital markets in the past and may

continue to do so from time-to-time. We continue to have strong

investment-grade short-term and long-term debt ratings that we

believe should enable us to refinance our debt as needed.

Our cash, cash equivalents and marketable securities held in

locations outside the United States was approximately 20% on

December 31, 2025 and 2024.

Guarantees and Other Off-Balance Sheet Arrangements

We do not have guarantees or other off-balance sheet financing

arrangements, including variable interest entities, of a magnitude

that we believe could have a material impact on our financial

condition or liquidity.

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.

Recorded reserves represent the 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. The final outcome of

these matters is dependent on many variables that are difficult to

predict. The ultimate cost to entirely resolve these matters may

be materially different from the amount of the current estimates

and could have a material adverse effect on our financial

position, results of operations and cash flows. We are not able to

reasonably estimate the future periods in which payments will be

made.

As further described in Note 11 to our Consolidated Financial

Statements, on December 31, 2025 we had a reserve for

uncertain income tax positions of $403. Due to uncertainties

regarding the ultimate resolution of income tax audits, we are not

able to reasonably estimate the future periods in which any

income tax payments to settle these uncertain income tax

positions will be made.

As further described in Note 12 to our Consolidated Financial

Statements, on December 31, 2025 our defined benefit pension

plans were underfunded by $269, of which approximately $268

related to plans outside the United States. Due to the rules

affecting tax-deductible contributions in the jurisdictions in which

the plans are offered and the impact of future plan asset

performance, changes in interest rates and potential changes in

legislation in the United States and other foreign jurisdictions, we

are not able to reasonably estimate the amounts that may be

required to fund defined benefit pension plans.

Contractual Obligations

Total

2026

2027-

2028

2029-

2030

After

2030

Debt repayments

$15,973

$1,000

$3,988

$4,256

$6,729

Interest payments

4,287

536

957

670

2,124

Minimum lease payments

524

164

212

93

55

Other

85

6

28

27

24

Total

$20,869

$1,706

$5,185

$5,046

$8,932

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In preparing our financial statements in accordance with

generally accepted accounting principles, there are certain

accounting policies, which may require substantial judgment or

estimation in their application. We believe these accounting

policies and the others set forth in Note 1 to our Consolidated

Financial Statements are critical to understanding our results of

operations and financial condition. Actual results could differ from

our estimates and assumptions, and any such differences could

be material to our results of operations and financial condition.

Income Taxes

Our annual tax rate is determined based on our income, statutory

tax rates and the tax impacts of items treated differently for tax

purposes than for financial reporting purposes. Tax law requires

certain items be included in the tax return at different times than

the items are reflected in the financial statements. Some of these

differences are permanent, such as expenses that are not

deductible in our tax return, and some differences are temporary

and reverse over time, such as depreciation expense. These

temporary differences create deferred tax assets and liabilities.

Deferred tax assets generally represent the tax effect of items

that can be used as a tax deduction or credit in future years for

which we have already recorded the tax benefit in our income

statement. Deferred tax liabilities generally represent tax expense

recognized in our financial statements for which payment was

deferred, the tax effect of expenditures for which a deduction was

taken in our tax return but has not yet been recognized in our

financial statements or assets recorded at fair value in business

combinations for which there was no corresponding tax basis

adjustment.

Inherent in determining our annual tax rate are judgments

regarding business plans, tax planning opportunities and

expectations about future outcomes. Realization of certain

deferred tax assets is dependent upon generating sufficient

taxable income in the appropriate jurisdiction prior to the

expiration of the carryforward periods. Although realization is not

assured, management believes it is more likely than not that our

deferred tax assets, net of valuation allowances, will be realized.

We operate in multiple jurisdictions with complex tax policy and

regulatory environments. In certain of these jurisdictions, we may

take tax positions that management believes are supportable but

are potentially subject to successful challenge by the applicable

taxing authority. These differences of interpretation with the

respective governmental taxing authorities can be impacted by

the local economic and fiscal environment. We evaluate our tax

positions and establish liabilities in accordance with the

applicable accounting guidance on uncertainty in income taxes.

We review these tax uncertainties in light of changing facts and

circumstances, such as the progress of tax audits, and adjust

them accordingly. We have a number of audits in process in

various jurisdictions. Although the resolution of these tax

positions is uncertain, based on currently available information,

we believe that it is more likely than not that the ultimate

outcomes will not have a material adverse effect on our financial

position, results of operations or cash flows.

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

23

STRYKER CORPORATION

2025 FORM 10-K

Due to the number of estimates and assumptions inherent in

calculating the various components of our tax provision, certain

changes or future events, such as changes in tax legislation,

geographic mix of earnings, completion of tax audits or earnings

repatriation plans, could have an impact on those estimates and

our effective tax rate.

We received a final audit report and assessments from the

German Federal Central Tax Office (FCTO) related to the years

2010 through 2017 of $754 and expect to receive additional

assessments of $11 based on the final audit report.  We intend to

defend our filing positions through the FCTO independent

appeals process and/or litigation as necessary. If the resolution of

this matter results in additional German income taxes, we expect

to pursue a claim for associated foreign tax credits. Our

unrecognized tax benefits associated with this matter remain

unchanged from 2024. Refer to Note 11 to our Consolidated

Financial Statements for further discussion.

Acquisitions, Goodwill and Intangibles, and Long-Lived

Assets

Our financial statements include the operations of an acquired

business starting from the completion of the acquisition. In

addition, the assets acquired and liabilities assumed are recorded

on the date of acquisition at their respective estimated fair values,

with any excess of the purchase price over the estimated fair

values of the net assets acquired recorded as goodwill.

Significant judgment is required in estimating the fair value of

intangible assets and in assigning their respective useful lives.

Accordingly, we typically obtain the assistance of third-party

valuation specialists for significant items. The fair value estimates

are based on available historical information and on future

expectations and assumptions deemed reasonable by

management but are inherently uncertain. We typically use an

income method to estimate the fair value of intangible assets,

which is based on forecasts of the expected future cash flows

attributable to the respective assets. Significant estimates and

assumptions inherent in the valuations reflect a consideration of

other marketplace participants and include the amount and timing

of future cash flows (including expected growth rates and

profitability), the underlying product or technology life cycles, the

economic barriers to entry and the discount rate applied to the

cash flows. Unanticipated market or macroeconomic events and

circumstances may occur that could affect the accuracy or

validity of the estimates and assumptions.

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.

Our assessment as to the useful lives of these intangible assets

is based on a number of factors including competitive

environment, market share, trademark, brand history, underlying

product life cycles, operating plans and the macroeconomic

environment of the countries in which the trademarked or

branded products are sold. Our estimates of the useful lives of

determinable-lived intangibles are primarily based on these same

factors. Determinable-lived intangible assets are amortized to

expense over their estimated useful life.

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

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.

Indefinite-lived intangible assets and goodwill are not amortized

but are tested annually for impairment or whenever events or

circumstances indicate such assets may be impaired. Our annual

impairment testing date is October 31. When it is unlikely that an

indefinite-lived intangible asset or goodwill of a reporting unit is

impaired, we perform a qualitative assessment. For goodwill, that

qualitative assessment may be periodically supplemented with a

corroborative quantitative analysis.

When necessary, we perform a quantitative impairment test and

determine the fair value of the indefinite-lived intangible asset or

reporting unit using an income approach. For the quantitative

impairment test of goodwill, when appropriate, we corroborate

our concluded value under the income approach using a market

approach that utilizes trading multiples derived from a peer set of

similar companies. The income approach calculates the present

value of estimated future cash flows and requires certain

assumptions and estimates be made regarding market conditions

and our future profitability. Considerable management judgment

is necessary to evaluate the impact of operating and

macroeconomic changes and to estimate future cash flows used

to measure fair value. Assumptions used in our impairment

evaluations, such as forecasted growth rates and cost of capital,

are consistent with internal business plans. We believe such

assumptions and estimates are also comparable to those that

would be used by other marketplace participants.

We review our other 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, which is

at the individual asset level or the asset group level. The

undiscounted cash flows expected to be generated by the related

assets are estimated over their useful life based on updated

projections. If the evaluation indicates that the carrying amount of

the assets may not be recoverable, any potential impairment is

measured based upon the fair value of the related assets or

asset group as determined by an appropriate market appraisal or

other valuation technique. Assets classified as held for sale, if

any, are recorded at the lower of carrying amount or fair value

less costs to sell.

In our annual impairment test of goodwill as of October 31, 2024

we performed a quantitative assessment of the Spine reporting

unit using a discounted cash flow analysis to estimate the fair

value. The carrying value of the Spine reporting unit exceeded its

fair value and a charge of $273 was recognized in goodwill and

other impairments in our Consolidated Statements of Earnings.

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.

During the fourth quarter 2024 management committed to a plan

to sell certain assets associated with the Spinal Implants

business (disposal group) and such assets were classified as

held for sale beginning November 2024. We tested the net

carrying amounts of other assets, such as working capital

accounts, and determined that there was no impairment as the

fair values of these assets approximated their carrying values.

Goodwill was allocated to the disposal group and the retained

portion of the Spine reporting unit based on the relative fair

values. Goodwill allocated to the disposal group was tested for

impairment which resulted in an impairment charge of $183. As of

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

24

STRYKER CORPORATION

2025 FORM 10-K

December 31, 2024, there was no goodwill remaining attributable

to the Spinal Implants disposal group.

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.

In April 2025 we completed the sale of the disposal group to the

Viscogliosi Brothers, LLC as further discussed in Note 16. In the

first half of 2025 we recognized immaterial impairment charges to

record the disposal group at its fair value less cost to sell within

goodwill and other impairments in our Consolidated Statements

of Earnings. The fair value of the disposal group and

consideration received was measured using a discounted cash

flow analysis based upon the selling price and unobservable

inputs, such as market conditions and the rate used to discount

the estimated future cash flows to their present value based on

factors including the disposal group’s cost of equity and market

yield rates, which are Level 3 inputs. Consideration could

increase by up to $57 or decrease by up to $245 based on the

amount received.

With the acquisition of Inari in February 2025 discussed in Note 6

to our Consolidated Financial Statements, we established a new

Peripheral Vascular reporting unit consisting of the acquired Inari

business. Given the proximity of the impairment testing date to

the date of acquisition, the fair value of this new reporting unit

was not expected to exceed its carrying value by a significant

amount. We performed a quantitative impairment test for our

Peripheral Vascular reporting unit at October 31, 2025 and

determined that its fair value exceeded its carrying amount by

12%. At October 31, 2025, goodwill attributable to this reporting

unit was $3,203. The fair value of this reporting unit was

determined using a discounted cash flow analysis, which is a

form of the income approach. Significant inputs to the analysis

included assumptions for future revenue growth, operating

margin and the rate used to discount the estimated future cash

flows to their present value, based on the reporting unit’s

estimated weighted average cost of capital. We believe our

estimates are appropriate based upon current and future market

conditions and the best information available at the impairment

assessment date; however, future impairment charges could be

required if we do not achieve our cash flow, revenue and

profitability projections or if there is an increase in the weighted

average cost of capital.

The assumptions used in the discounted cash flow analysis are

subject to inherent uncertainties and subjectivity. The use of

different assumptions, estimates or judgments with respect to the

estimation of future cash flows and the determination of the

discount rate used to reduce such estimated future cash flows to

their net present value could materially affect the determination of

any impairment charges. Hypothetical changes in our estimates

of the discount rate, long-term revenue growth and long-term

operating margin would result in impairment charges as follows:

Change in selected assumption

Percentage

decline in fair

value

Impairment

charge

100 bps increase in discount rate

14%

$198

100 bps decrease in long-term revenue growth

8

—

100 bps decrease in long-term operating margin

2

—

We did not identify any factors in 2025 or 2024 that would lead us

to believe that our other reporting units were at risk of a goodwill

impairment. Accordingly, we performed qualitative assessments

and concluded it was more likely than not that the fair values of

those reporting units exceeded their respective carrying amounts.

In 2025 our qualitative assessment was supplemented with a

corroborative quantitative analysis which indicated that the

implied fair values of our other reporting units exceed their

respective carrying amounts by at least 100%. Future changes in

the judgments, assumptions and estimates that are used in our

impairment testing for goodwill and indefinite-lived intangible

assets, including discount rates and cash flow projections, could

result in different estimates of fair value. A significant reduction in

estimated fair values could result in impairment charges that

could materially affect our results of operations.

Legal and Other Contingencies

We are involved in various ongoing proceedings, legal actions

and claims arising in the normal course of business, including

proceedings related to product, labor, tax, intellectual property

and other matters that are more fully described in Notes 7 and 11

to our Consolidated Financial Statements. The outcomes of these

matters will generally not be known for prolonged periods of time.

In certain of the legal proceedings, the claimants seek damages,

as well as other compensatory and equitable relief, that could

result in the payment of significant claims and settlements and/or

the imposition of injunctions or other equitable relief. For legal

matters for which management had sufficient information to

reasonably estimate our future obligations, a liability representing

management's best estimate of the probable loss, or the

minimum of the range of probable losses when a best estimate

within the range is not known, for the resolution of these legal

matters 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 projected by management, additional expense may be

incurred, which could unfavorably affect future operating results.

We are currently 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.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 to our Consolidated Financial Statements for

further information.