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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-13149
strykerlogoa72.jpg 
STRYKER CORPORATION
(Exact name of registrant as specified in its charter)
Michigan
 
 
 
 
38-1239739
(State of incorporation)
 
 
 
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
 
2825 Airview Boulevard,
Kalamazoo,
Michigan
 
49002
(Address of principal executive offices)
 
(Zip Code)
 
 
 
 
 
 
 
 
 

(269)
385-2600
 
 
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.10 Par Value
SYK
New York Stock Exchange
1.125% Notes due 2023
SYK23
New York Stock Exchange
0.250% Notes due 2024
SYK24A
New York Stock Exchange
2.125% Notes due 2027
SYK27
New York Stock Exchange
0.750% Notes due 2029
SYK29
New York Stock Exchange
2.625% Notes due 2030
SYK30
New York Stock Exchange
1.000% Notes due 2031
SYK31
New York Stock Exchange
Floating Rate Notes due 2020
SYK20A
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes     No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes No 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Emerging growth company
Non-accelerated filer
Small reporting company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes     No 
The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $71,863,352,935 at June 30, 2019. There were 374,575,145 shares outstanding of the registrant’s common stock, $0.10 par value, on January 31, 2020.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement to be filed with the U.S. Securities and Exchange Commission relating to the 2020 Annual Meeting of Shareholders (the 2020 proxy statement) are incorporated by reference into Part III.
 


STRYKER CORPORATION 2019 FORM 10-K


TABLE OF CONTENTS
PART I
 
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
 
 
PART II
 
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
 
Report of Independent Registered Public Accounting Firm
 
Consolidated Statements of Earnings
 
Consolidated Statements of Comprehensive Income
 
Consolidated Balance Sheets
 
Consolidated Statements of Shareholders’ Equity
 
Consolidated Statements of Cash Flows
 
Notes to Consolidated Financial Statements
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
 
 
PART III
 
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
 
 
PART IV
 
Item 15.
Exhibits, Financial Statement Schedules
Item 16.
Form 10-K Summary


STRYKER CORPORATION 2019 FORM 10-K

PART I

ITEM 1.
BUSINESS.
Stryker Corporation (Stryker or the Company) is one of the world's leading medical technology companies and, together with its customers, is driven to make healthcare better. The Company offers innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine that help improve patient and hospital outcomes.
Our core values guide our behaviors and actions and are fundamental to how we execute our mission.
missionvaluesa10.jpg
Stryker was incorporated in Michigan in 1946 as the successor company to a business founded in 1941 by Dr. Homer H. Stryker, a prominent orthopaedic surgeon and the inventor of several medical products. Our products are sold in over 75 countries through company-owned subsidiaries and branches, as well as third-party dealers and distributors, and include implants used in joint replacement and trauma surgeries; surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling, emergency medical equipment and intensive care disposable products; neurosurgical, neurovascular and spinal devices; as well as other products used in a variety of medical specialties. In the United States most of our products are marketed directly to doctors, hospitals and other healthcare facilities.
As used herein, and except where the context otherwise requires, "Stryker," "we," "us," and "our" refer to Stryker Corporation and its consolidated subsidiaries.
Business Segments and Geographic Information
We segregate our operations into three reportable business segments: Orthopaedics, MedSurg and Neurotechnology and Spine. Financial information regarding our reportable business segments and certain geographic information is included under "Consolidated Results of Operations" in Item 7 of this report and Note 14 to our Consolidated Financial Statements.
Net Sales by Reportable Segment
 
2019
 
2018
 
2017
Orthopaedics
$
5,252

35
%
 
$
4,991

37
%
 
$
4,713

38
%
MedSurg
6,574

44

 
6,045

44

 
5,557

45

Neurotechnology and Spine
3,058

21

 
2,565

19

 
2,174

17

Total
$
14,884

100
%
 
$
13,601

100
%
 
$
12,444

100
%
Orthopaedics
Orthopaedics products consist primarily of implants used in hip and knee joint replacements and trauma and extremities surgeries. We bring patients and physicians advanced implant designs and
 
specialized instrumentation that make orthopaedic surgery and recovery simpler, faster and more effective. We support surgeons with the technology and services they need as they develop new surgical techniques. The Mako Robotic-Arm Assisted Surgical System was designed to help surgeons provide patients with a personalized surgical experience based on their specific diagnosis and anatomy. The Mako System currently offers three applications supporting Partial Knee, Total Hip and Total Knee procedures. Mako is the only robotic-arm assisted technology enabled by 3D CT-based pre-operative planning, and with AccuStop™ haptic technology, Mako provides surgeons intra-operative haptic guidance for bone preparation and implant placement.
Stryker is one of four leading global competitors for joint replacement and trauma and extremities products; the other three being Zimmer Biomet Holdings, Inc. (Zimmer), DePuy Synthes (a Johnson & Johnson company) and Smith & Nephew plc (Smith & Nephew).
Composition of Orthopaedics Net Sales
 
2019
 
2018
 
2017
Knees
$
1,815

35
%
 
$
1,701

34
%
 
$
1,595

34
%
Hips
1,383

26

 
1,336

27

 
1,303

28

Trauma and Extremities
1,639

31

 
1,580

32

 
1,478

31

Other
415

8

 
374

7

 
337

7

Total
$
5,252

100
%
 
$
4,991

100
%
 
$
4,713

100
%
MedSurg
MedSurg products include surgical equipment and navigation systems (Instruments), endoscopic and communications systems (Endoscopy), patient handling, emergency medical equipment and intensive care disposable products (Medical), reprocessed and remanufactured medical devices (Sustainability) and other medical device products used in a variety of medical specialties.
Stryker is one of five leading global competitors in Instruments; the other four being Zimmer, Medtronic plc., Johnson & Johnson and ConMed Linvatec, Inc. (a subsidiary of CONMED Corporation). In Endoscopy we compete with Smith & Nephew, ConMed Linvatec, Arthrex, Inc., Karl Storz GmbH & Co., Olympus Optical Co. Ltd. and STERIS plc. In Medical our primary competitors are Hill-Rom Holdings, Inc., Zoll Medical Corporation, Medline Industries and Ferno-Washington, Inc. 
Composition of MedSurg Net Sales
 
2019
 
2018
 
2017
Instruments
$
2,041

31
%
 
$
1,822

30
%
 
$
1,678

30
%
Endoscopy
1,983

30

 
1,846

31

 
1,652

30

Medical
2,264

34

 
2,118

35

 
1,969

35

Sustainability
286

5

 
259

4

 
258

5

Total
$
6,574

100
%
 
$
6,045

100
%
 
$
5,557

100
%
In 2019 Instruments acquired SafeAir AG, a Swiss medical device company dedicated to the design, development and manufacture of innovative surgical smoke evacuation solutions. The company's smoke evacuation products help reduce staff and patient exposure to hazards associated with surgical smoke. Instruments also acquired TSO3, a Quebec City developer of sterilization processes, related consumable supplies and accessories utilized in sterile hospital environments that offer an advantageous replacement solution to other low temperature sterilization processes.
In 2019 Endoscopy launched the 1688 Advanced Imaging Modalities platform, the next generation of its flagship visualization technology with 4K image quality and ICG fluorescence overlay.  The 1688, coupled with the SPY-PHI portable handheld imager, delivers a standardized system for a multitude of minimally invasive and open surgical procedures.

Dollar amounts in millions except per share amounts or as otherwise specified.
1

STRYKER CORPORATION 2019 FORM 10-K

Neurotechnology and Spine
Neurotechnology and Spine products include neurosurgical, neurovascular, and spinal implant devices. Our neurotechnology offering includes products used for minimally invasive endovascular techniques; 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; and minimally invasive products for the treatment of acute ischemic and hemorrhagic stroke. Our spinal implant offering includes cervical, thoracolumbar and interbody systems used in spinal injury, deformity and degenerative therapies.
Stryker is one of five leading global competitors in Neurotechnology; the other four being Medtronic, Johnson & Johnson, Terumo Corporation and Penumbra, Inc. Stryker is one of five leading global competitors in Spine; the other four being Medtronic Sofamor Danek, Inc. (a subsidiary of Medtronic), DePuy Synthes, Nuvasive, Inc. and Globus Medical, Inc.
Composition of Neurotechnology and Spine Net Sales
 
2019
 
2018
 
2017
Neurotechnology
$
1,973

65
%
 
$
1,737

68
%
 
$
1,423

65
%
Spine
1,085

35

 
828

32

 
751

35

Total
$
3,058

100
%
 
$
2,565

100
%
 
$
2,174

100
%
In 2019 Stryker received Food and Drug Administration (FDA) pre-market approval (PMA) of its Neuroform Atlas™ Stent System for the treatment of wide-neck intracranial aneurysms in conjunction with embolic detachable coils in the anterior circulation of the neurovasculature. The Neuroform Atlas™ device was previously approved under a humanitarian device exemption, which restricted use to specific hospitals with institutional review board approval. PMA was granted based on robust clinical trial evidence proving the efficacy of the device.
In 2018 Stryker received FDA PMA for the Surpass Streamline™ Flow Diverter to treat unruptured large and giant wide neck intracranial aneurysms. The device was the second flow diverting stent to gain FDA approval in the United States, expanding our commercial footprint into the flow diversion market and reinforcing our commitment to complete stroke care for patients suffering from cerebrovascular disease. Stryker’s next generation flow diverting stent, Surpass Evolve™, received CE mark approval in 2019.
Raw Materials and Inventory
Raw materials essential to our business are generally readily available from multiple sources; however, certain of our raw materials are currently sourced from single suppliers. Substantially all products we manufacture are stocked in inventory, while certain MedSurg products are assembled to order.
Patents and Trademarks
Patents and trademarks are significant to our business to the extent that a product or an attribute of a product represents a unique design or process. Patent protection of such products restricts competitors from duplicating these unique designs and features. We seek to obtain patent protection on our products whenever appropriate for protecting our competitive advantage. On December 31, 2019 we owned approximately 3,392 United States patents and approximately 5,491 international patents.
Seasonality
Our business is generally not seasonal in nature; however, the number of orthopaedic implant surgeries is typically lower in the summer months, and sales of capital equipment are generally higher in the fourth quarter.
 
Competition
In each of our product lines we compete with local and global companies. The development of new and innovative products is important to our success in all areas of our business. Competition in research involving the development and improvement of new and existing products and processes is particularly significant. The competitive environment requires substantial investments in continuing research and maintaining sales forces.
We believe our commitment to innovation, quality and service and our reputation differentiates us in the highly competitive product categories in which we operate and enables us to compete effectively. We believe that our competitive position in the future will depend to a large degree on our ability to develop new products and make improvements to existing products.
Regulation
Our businesses are subject to varying degrees of governmental regulation in the countries in which we operate, and the general trend is toward increasingly stringent regulation.
In the United States the Medical Device Amendments of 1976 to the Federal Food, Drug and Cosmetic Act and its subsequent amendments and the regulations issued and proposed thereunder provide for regulation by the FDA of the design, manufacture and marketing of medical devices, including most of our products. Many of our new products fall into FDA classifications that require notification submitted as a 510(k) and review by the FDA before we begin marketing them. Certain of our products require extensive clinical testing, consisting of safety and efficacy studies, followed by pre-market approval (PMA) applications for specific surgical indications. Certain of our products also fall under the FDA's drug classification, as well as other FDA classifications.
The FDA's Quality System regulations set forth standards for our product design and manufacturing processes, require the maintenance of certain records and provide for inspections of our facilities by the FDA. There are also certain requirements of state, local and foreign governments that must be complied with in the manufacture and marketing of our products.
The member states of the European Union (EU) adopted the European Medical Device Directives, which form a single set of medical device regulations for all EU member countries. These regulations require companies that manufacture and distribute medical devices in EU member countries to meet certain quality system requirements and obtain CE marking for their products. We have authorization to apply the CE marking to substantially all of our products. In addition, the EU enacted the EU Medical Device Regulation (EU MDR) in May 2017 with an effective date of May 2020, which imposes stricter requirements for the marketing and sale of medical devices, including in the areas of clinical evaluation requirements, quality systems, labeling and post-market surveillance. Finally, we are required to comply with the unique regulatory requirements of each of the countries in Europe and other countries, including China, in which we market our products.
Initiatives to limit the growth of general healthcare expenses and hospital costs are ongoing in the markets in which we do business. These initiatives are sponsored by government agencies, legislative bodies and the private sector and include price regulation and competitive pricing. It is not possible to predict at this time the long-term impact of such cost containment measures on our future business. In addition, business practices in the healthcare industry are scrutinized, particularly in the United States, by federal and state government agencies. The resulting investigations and prosecutions carry the risk of significant civil and criminal penalties.

Dollar amounts in millions except per share amounts or as otherwise specified.
2

STRYKER CORPORATION 2019 FORM 10-K

Environment
We are subject to various rules and regulation in the United States and internationally related to the protection of human health and the environment. Our operations involve the use of substances regulated under environmental laws, primarily in manufacturing and sterilization processes. We believe our policies, practices and procedures are properly designed to comply, in all material respects, with applicable environmental laws and regulations. We do not expect compliance with these requirements to have a material effect on purchases of property, plant and equipment, cash flows, net earnings or competitive position.
Employees
On December 31, 2019 we had approximately 40,000 employees globally.
Information about our Executive Officers
As of January 31, 2020
Name
Age
Title
First Became an Executive Officer
Kevin A. Lobo
54
Chairman and Chief Executive Officer
2011
Yin C. Becker
56
Vice President, Communications, Public Affairs and Corporate Marketing
2016
William E. Berry Jr.
54
Vice President, Corporate Controller and Principal Accounting Officer
2014
Glenn S. Boehnlein
58
Vice President, Chief Financial Officer
2016
M. Kathryn Fink
50
Vice President, Chief Human Resources Officer
2016
Robert S. Fletcher
49
Vice President, Chief Legal Officer
2019
Viju S. Menon
52
Group President, Global Quality and Operations
2018
Katherine A. Owen
49
Vice President, Strategy and Investor Relations
2007
Timothy J. Scannell
55
President and Chief Operating Officer
2008
Each of our executive officers was elected by our Board of Directors to serve in the office indicated until the first meeting of the Board of Directors following the annual meeting of shareholders in 2020 or until a successor is chosen and qualified or until his or her resignation or removal. Each of our executive officers held the position above or served Stryker in various executive or administrative capacities for at least five years, except for Mr. Fletcher and Mr. Menon. Prior to joining Stryker in April 2019, Mr. Fletcher held various legal leadership roles with Johnson & Johnson for the previous 14 years, most recently as the Worldwide Vice President, Litigation. Prior to joining Stryker in April 2018, Mr. Menon held various senior supply chain leadership roles with Verizon Communications Inc. during the previous eight years, most recently as the Chief Supply Chain Officer.
Available Information
Our main corporate website address is www.stryker.com. Copies of our filings with the United States Securities and Exchange Commission (SEC) are available free of charge on our website within the "Investors Relations" section as soon as reasonably practicable after having been electronically filed or furnished to the SEC. All SEC filings are also available at the SEC's website at www.sec.gov.
ITEM 1A.
RISK FACTORS.
This report contains statements that are not historical facts and are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current projections about operations, industry conditions, financial condition and liquidity. Words that identify
 
forward-looking statements include words such as "may," "could," "will," "should," "possible," "plan," "predict," "forecast," "potential," "anticipate," "estimate," "expect," "project," "intend," "believe," "may impact," "on track," "goal," "strategy" and words and terms of similar substance used in connection with any discussion of future operating or financial performance, an acquisition or our businesses. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Those statements are not guarantees and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results could differ materially and adversely from these forward-looking statements. Some important factors that could cause our actual results to differ from our expectations in any forward-looking statements include the risks discussed below.
Our operations and financial results are subject to various risks and uncertainties discussed below that could materially and adversely affect our business, cash flows, financial condition and results of operations. Additional risks and uncertainties not currently known to us or that we currently deem not to be material may also materially and adversely affect our business, cash flows, financial condition or results of operations.
LEGAL AND REGULATORY RISKS
Current economic and political conditions make tax rules in jurisdictions subject to significant change: 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. In December 2017, the Tax Cuts and Jobs Act of 2017 was signed into law in the United States. We are continuing to evaluate the impact of tax reform as new guidance and regulations are published. In addition, further changes in the tax laws of foreign jurisdictions could arise, including as a result of the base erosion and profit shifting (BEPS) project undertaken by the Organisation for Economic Cooperation and Development (OECD). The OECD, which represents a coalition of member countries, has issued recommendations that, in some cases, would make substantial changes to numerous long-standing tax positions and principles. These contemplated changes, to the extent adopted by OECD members and/or other countries, could increase tax uncertainty and may adversely affect our provision for income taxes.
The impact of United States healthcare reform legislation on our business remains uncertain: In 2010 the Patient Protection and Affordable Care Act (ACA) was enacted. While the provisions of the ACA are intended to expand access to health insurance coverage and improve the quality of healthcare over time, other provisions of the legislation, including Medicare provisions aimed at decreasing costs, comparative effectiveness research, an independent payment advisory board and pilot programs to evaluate alternative payment methodologies, are having a meaningful effect on the way healthcare is developed and delivered and could have a significant effect on our business. There have been ongoing judicial and congressional efforts to modify or repeal all or certain provisions of the ACA. Among other things, the ACA imposed a 2.3 percent excise tax on medical devices that applies only to United States sales, which are a majority of our medical device sales. Congress suspended the excise tax for 2016 and 2017 and the suspension was once again upheld in January 2018 for two years. In December 2019, the excise tax was permanently repealed. We face uncertainties that might result from modification or repeal of any of the provisions of the ACA, including as a result of current and future executive orders and legislative actions. We cannot predict what other healthcare programs and regulations will ultimately be implemented at the federal or state level or the effect

Dollar amounts in millions except per share amounts or as otherwise specified.
3

STRYKER CORPORATION 2019 FORM 10-K

of any future legislation or regulation in the United States may have on our business.
We are subject to extensive governmental regulation relating to the classification, manufacturing, labeling, marketing and sale of our products: The classification, manufacturing, labeling, marketing and sale of our products are subject to extensive and evolving regulations and rigorous regulatory enforcement by the FDA, European Union (EU), the National Medical Products Administration (NMPA) in China, and other governmental authorities in the United States and internationally. The process of obtaining regulatory clearances and/or approvals to market and sell our products can be costly and time consuming and the clearances and/or approvals might not be granted timely. We have ongoing responsibilities under the laws and regulations applicable to the manufacturing of products within our facilities and those contracted by third parties that are subject to periodic inspections by the FDA and other governmental authorities to determine compliance with the quality system, medical device reporting regulations and other requirements. Costs to comply with regulations, including the EU Medical Device Regulation enacted by the EU in May 2017 and effective in May 2020, and the regulatory laws established by the NMPA in China, and costs associated with remediation can be significant. If we fail to comply with applicable regulatory requirements, we may be subject to a range of sanctions, including substantial fines, warning letters that require corrective action, product seizures, recalls, the suspension of product manufacturing, revocation of approvals, exclusion from future participation in government healthcare programs, substantial fines and criminal prosecution.
We are subject to federal, state and foreign healthcare regulations, including anti-bribery and anti-corruption laws, and could face substantial penalties if we fail to comply with such regulations and laws: The relationships that we, and third parties that market and/or sell our products, have with healthcare professionals, such as physicians, hospitals and other healthcare organizations, are subject to scrutiny under various state and federal laws often referred to collectively as healthcare fraud and abuse laws. In addition, the United States and foreign government regulators have increased the enforcement of the Foreign Corrupt Practices Act (FCPA) and other anti-bribery laws. We also must comply with a variety of other laws that impose extensive tracking and reporting related to all transfers of value provided to certain healthcare professionals. These laws and regulations are broad in scope and are subject to evolving interpretation and we have in the past been, and in the future could be, required to incur substantial costs to monitor compliance or to alter our practices. Violations of these laws may be punishable by criminal or civil sanctions, including substantial fines, imprisonment of current or former employees and exclusion from participation in governmental healthcare programs. In 2013 and 2018 we settled claims brought by the Securities and Exchange Commission (SEC) related to the FCPA. Pursuant to these settlements, we paid fines and penalties, and we are working with an independent compliance consultant to implement recommendations that resulted from the independent compliance consultant’s review of our commercial practices.
We are subject to data privacy and protection regulations and laws globally, and could face substantial penalties if we fail to comply with such regulations and laws: We are subject to a variety of laws and regulations globally regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personally identifiable healthcare information. For example, Europe’s General Data Protection Regulation (GDPR), which became effective in May 2018, applies to all of our activities related
 
to products and services that we offer to EU customers and employees. The GDPR established new requirements regarding the handling of personal data and includes significant penalties for non-compliance (including possible fines of up to 4% of total company revenue). Other governmental authorities around the world are considering similar types of legislative and regulatory proposals concerning data protection, which could impose significant limitations and increase our cost of providing our products and services where we process personal data. These laws and regulations are broad in scope and are subject to evolving interpretation and we have in the past been, and in the future could be, required to incur substantial costs to monitor compliance or to alter our practices.
We may be adversely affected by product liability claims, unfavorable court decisions or legal settlements: We are exposed to potential product liability risks inherent in the design, manufacture and marketing of medical devices, many of which are implanted in the human body for long periods of time or indefinitely. We are currently defendants in a number of product liability matters, including those relating to our Rejuvenate and ABGII Modular-Neck hip stems and LFIT Anatomic CoCr V40 Femoral Heads discussed in Note 7 to our Consolidated Financial Statements. These matters are subject to many uncertainties and outcomes are not predictable. In addition, we may incur significant legal expenses regardless of whether we are found to be liable. We are self-insured for product liability-related claims and expenses.
Intellectual property litigation and infringement claims could cause us to incur significant expenses or prevent us from selling certain of our products: The medical device industry is characterized by extensive intellectual property litigation and, from time to time, we are the subject of claims of infringement or misappropriation.  Regardless of outcome, such claims are expensive to defend and divert management and operating personnel from other business issues.  A successful claim or claims of patent or other intellectual property infringement against us could result in payment of significant monetary damages and/or royalty payments or negatively impact our ability to sell current or future products in the affected category.
Dependence on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to such rights may impact offerings in our product portfolios: Our long-term success largely depends on our ability to market technologically competitive products. If we fail to obtain or maintain adequate intellectual property protection, it could allow others to sell products that directly compete with proprietary features in our product portfolio. Also, our issued patents may be subject to claims challenging their validity and scope and raising other issues. In addition, currently pending or future patent applications may not result in issued patents.
MARKET RISKS
We have exposure to exchange rate fluctuations on cross border transactions and translation of local currency results into United States Dollars: We report our financial results in United States Dollars and approximately 30% of our net sales are denominated in foreign currencies, including the Australian Dollar, British Pound, Euro and Japanese Yen. Cross border transactions with external parties and intercompany relationships result in increased exposure to foreign currency exchange effects. While we use derivative instruments to manage the impact of currency exchange, our hedging strategies may not be successful, and our unhedged exposures continue to be subject to currency fluctuations. In addition, the weakening or strengthening of the United States Dollar results in favorable or unfavorable translation

Dollar amounts in millions except per share amounts or as otherwise specified.
4

STRYKER CORPORATION 2019 FORM 10-K

effects when the results of our foreign locations are translated into United States Dollars.
Additional capital that we may require in the future may not be available to us or may only be available to us on unfavorable terms: Our future capital requirements will depend on many factors, including operating requirements, current and future acquisitions and the need to refinance existing debt. Our ability to issue additional debt or enter into other financing arrangements on acceptable terms could be adversely affected by our debt levels, unfavorable changes in economic conditions or uncertainties that affect the capital markets.  Changes in credit ratings issued by nationally recognized credit rating agencies could also adversely affect our access to and cost of financing.  Higher borrowing costs or the inability to access capital markets could adversely affect our ability to support future growth and operating requirements.
BUSINESS AND OPERATIONAL RISKS
We are subject to cost containment measures in the United States and other countries resulting in pricing pressures: Initiatives to limit the growth of general healthcare expenses and hospital costs are ongoing in the markets in which we do business. These initiatives are sponsored by government agencies, legislative bodies and the private sector and include price regulation and competitive pricing. Pricing pressure has also increased due to continued consolidation among healthcare providers, trends toward managed care, the shift toward governments becoming the primary payers of healthcare expenses, reduction in reimbursement levels and medical procedure volumes and government laws and regulations relating to sales and promotion, reimbursement and pricing generally.
We operate in a highly competitive industry in which competition in the development and improvement of new and existing products is significant: The markets in which we compete are highly competitive.  New products and surgical procedures are introduced on an ongoing basis and our present or future products could be rendered obsolete or uneconomical by technological advances by our competitors, who may respond more quickly to new or emerging technologies, undertake more extensive marketing campaigns, have greater financial, marketing and other resources or be more successful in attracting potential customers, employees and strategic partners.
We may be unable to maintain adequate working relationships with healthcare professionals: We seek to maintain close working relationships with respected physicians and medical personnel in healthcare organizations such as hospitals and universities who assist in product research and development. We rely on these professionals to assist us in the development and improvement of proprietary products. If we are unable to maintain these relationships, our ability to develop, market and sell new and improved products could be adversely affected.
We rely on indirect distribution channels and major distributors that are independent of Stryker: In many markets, we rely on indirect distribution channels to market, distribute, and sell our products. These indirect channels often are the main point of contact for the healthcare professional and healthcare organization customers who buy and use our products. Our ability to continue to market, distribute, and sell our products may be at risk if the indirect channels choose to sell competitive products, choose to stop selling medical technology, or are subject to new or additional government regulation.
We are subject to additional risks associated with our extensive global operations: We develop, manufacture and distribute our products globally. Our global operations are subject to risks and potential costs, including changes in reimbursement,
 
changes in regulatory requirements, differing local product preferences and product requirements, diminished protection of intellectual property in some countries, tariffs and other trade protection measures, international trade disputes and import or export requirements, difficulty in staffing and managing foreign operations, introduction of new internal business structures and programs, and political and economic instability (such as the United Kingdom's exit from the European Union, commonly referred to as "Brexit"). Our business could be adversely impacted if we are unable to successfully manage these and other risks of global operations in an increasingly volatile environment.
We may be unable to capitalize on previous or future acquisitions: In addition to internally developed products, we invest in new products and technologies through acquisitions. Such investments are inherently risky, and we cannot guarantee that any acquisition will be successful or will not have a material unfavorable impact on us. The risks include the activities required and resources allocated to integrate new businesses, diversion of management time that could adversely affect management's ability to focus on other projects, the inability to realize the expected benefits, savings or synergies from the acquisition, the loss of key personnel, litigation resulting from the acquisition and exposure to unexpected liabilities of acquired companies. In addition, we cannot be certain that the businesses we acquire will become or remain profitable.
We may be unable to close the Wright Medical acquisition or, if the acquisition does close, to capitalize on it: The completion of the acquisition of Wright Medical Group N.V. (Wright) is subject to a number of conditions. The failure to satisfy all of the required conditions, including the receipt of required regulatory clearances, could delay the completion of the transaction for a significant period of time or prevent it from occurring at all. Any delay in completing the transaction could cause us not to realize some or all of the expected benefits of the transaction or to realize them on a different timeline than expected. In addition, the terms and conditions of the required regulatory clearances for the acquisition may impose requirements, limitations or costs that may materially delay the completion of the transaction or could materially adversely affect the expected benefits of the transaction. Any breach by us of the acquisition agreement could also subject us to material liabilities related to the transaction.
If completed, the success of the Wright acquisition will depend, in part, on our ability to successfully combine and integrate Wright into our businesses and realize the anticipated benefits, including synergies, from the transaction. If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected.
The integration of Wright into Stryker may result in material challenges, including: the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both of the companies; maintaining employee morale and retaining key management, sales and other employees; retaining existing business and operational relationships; the possibility of faulty assumptions underlying expectations regarding the integration process; consolidating corporate and administrative infrastructures and eliminating duplicative operations; unanticipated issues in integrating information technology, communications and other systems; and unforeseen costs, expenses and liabilities (including litigation related liabilities) associated with the acquisition.
We may incur goodwill impairment charges related to one or more of our business units: We perform our annual impairment test for goodwill in the fourth quarter of each year, or more frequently if indicators are present or changes in circumstances suggest that

Dollar amounts in millions except per share amounts or as otherwise specified.
5

STRYKER CORPORATION 2019 FORM 10-K

impairment may exist. In evaluating the potential for impairment we make assumptions regarding revenue projections, growth rates, cash flows, tax rates and discount rates. These assumptions are uncertain and by nature may vary from actual results. A significant reduction in the estimated fair values could result in impairment charges.
We could be negatively impacted by future changes in the allocation of income to each of the income tax jurisdictions in which we operate: We operate in multiple income tax jurisdictions both in the United States and internationally. Accordingly, our management must determine the appropriate allocation of income to each jurisdiction based on current interpretations of complex income tax regulations. Income tax authorities regularly perform audits of our income tax filings. Income tax audits associated with the allocation of income and other complex issues, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements, may require an extended period of time to resolve and may result in significant income tax adjustments.
We could experience a failure of a key information technology system, process or site or a breach of information security, including a cybersecurity breach or failure of one or more key information technology systems, networks, processes, associated sites or service providers: We rely extensively on information technology (IT) systems to conduct business. In addition, we rely on networks and services, including internet sites, cloud and SaaS solutions, data hosting and processing facilities and tools and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used by third-parties or their vendors, to assist in conducting our business. Numerous and evolving cybersecurity threats pose potential risks to the security of our IT systems, networks and product offerings, as well as the confidentiality, availability and integrity of our data. A security breach, whether of our products, of our customers’ network security and systems or of third-party hosting services, could impact the use of such products and the security of information stored therein. While we have made investments seeking to address these threats, including monitoring of networks and systems, hiring of experts, employee training and security policies for employees and third-party providers, the techniques used in these attacks change frequently and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures. If our IT systems are damaged or cease to function properly, the networks or service providers we rely upon fail to function properly, or we or one of our third-party providers suffer a loss or disclosure of our business or stakeholder information due to any number of causes ranging from catastrophic events or power outages to improper data handling or security breaches and our business continuity plans do not effectively address these failures on a timely basis, we may be exposed to reputational, competitive and business harm as well as litigation and regulatory action.
An inability to successfully manage the implementation of our new global enterprise resource planning (ERP) system could adversely affect our operations and operating results: We are in the process of implementing a new global ERP system. This system will replace many of our existing operating and financial systems. Such an implementation is a major undertaking, both financially and from a management and personnel perspective. Any disruptions, delays or deficiencies in the design and implementation of our new ERP system could adversely affect our ability to process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations or otherwise operate our business.
 
We may be unable to attract and retain key employees: Our sales, technical and other key personnel play an integral role in the development, marketing and selling of new and existing products. If we are unable to recruit, hire, develop and retain a talented, competitive work force in our highly competitive industry, we may not be able to meet our strategic business objectives. In addition, if we are unable to maintain an inclusive culture that aligns our diverse work force with our mission and values, this could adversely impact our ability to recruit, hire, develop and retain key talent.
Interruption of manufacturing operations could adversely affect our business: We and our suppliers have manufacturing sites all over the world; however, the manufacturing of certain of our product lines is concentrated in one or more plants or geographic regions. Orthopaedics has principal manufacturing and distribution facilities in the United States in Florida, Indiana, New Jersey and Virginia and outside the United States in China, France, Germany, Ireland, Netherlands, Switzerland, and the United Kingdom. MedSurg has principal manufacturing and distribution facilities in the United States in Arizona, California, Florida, Illinois, Indiana, Michigan, Puerto Rico, Texas and Washington and outside the United States in France, Germany, Ireland, Mexico, Switzerland, Turkey, and the United Kingdom. Neurotechnology and Spine has principal manufacturing and distribution facilities in California, Illinois, Indiana, Utah and Virginia and outside the United States in China, France, Ireland, and Switzerland. Damage to our facilities, to our suppliers’ facilities, or to our central distribution centers in Indiana and the Netherlands as a result of natural disasters or otherwise, as well as issues in our manufacturing arising from a failure to follow specific internal protocols and procedures, compliance concerns relating to the quality systems regulation, equipment breakdown or malfunction, environmental hazard incidents or changes to environmental regulations or other factors, could adversely affect the availability of our products. In the event of an interruption in manufacturing, we may be unable to move quickly to alternate means of producing affected products to meet customer demand. In the event of a significant interruption, we may experience lengthy delays in resuming production of affected products due to the need for regulatory approvals. We may experience loss of market share, additional expense and harm to our reputation.
We use a variety of raw materials, components, devices and third-party services in our global supply chains, production and distribution processes; significant shortages, price increases or unavailability of third-party services could increase our operating costs, require significant capital expenditures, or adversely impact the competitive position of our products: Our reliance on certain suppliers to secure raw materials, components and finished devices, and on certain third-party service providers, such as sterilization service providers, exposes us to product shortages and unanticipated increases in prices. In addition, several raw materials, components, finished devices and services are procured from a sole-source due to the quality considerations, unique intellectual property considerations or constraints associated with regulatory requirements. If sole-source suppliers or service providers are acquired or were unable or unwilling to deliver these materials or services, we may not be able to manufacture or have available one or more products during such period of unavailability and our business could suffer. In certain cases we may not be able to establish additional or replacement suppliers for such materials or service providers for such services in a timely or cost effective manner, largely as a result of FDA and other regulations that require, among other things, validation of materials, components and services prior to their use in or with our products.

Dollar amounts in millions except per share amounts or as otherwise specified.
6


ITEM 1B.
UNRESOLVED STAFF COMMENTS.
None.
ITEM 2.
PROPERTIES.
We have approximately 24 company-owned and 295 leased locations worldwide including 50 manufacturing locations. We believe that our properties are in good operating condition and adequate for the manufacture and distribution of our products. We do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities.
ITEM 3.
LEGAL PROCEEDINGS.
We are involved in various proceedings, legal actions and claims arising in the normal course of business, including proceedings related to product, labor and intellectual property, and the matters described in more detail in Note 7 to our Consolidated Financial Statements.
ITEM 4.
MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is traded on the New York Stock Exchange under the symbol SYK.
Our Board of Directors considers payment of cash dividends at its quarterly meetings. On January 31, 2020 there were 2,617 shareholders of record of our common stock.
We did not repurchase any shares in the three months ended December 31, 2019 and the total dollar value of shares that could be acquired under our authorized repurchase program at December 31, 2019 was $1,033.
We issued 213 shares of our common stock in the fourth quarter of 2019 as performance incentive awards. These shares were not registered under the Securities Act of 1933 based on the conclusion that the awards would not be events of sale within the meaning of Section 2(a)(3) of the Act.
The following graph compares our total returns (including reinvestments of dividends) against the Standard & Poor’s (S&P) 500 Index and the S&P 500 Health Care Index. The graph assumes $100 (not in millions) invested on December 31, 2014 in our common stock and each of the indices.
 
chart-656666fbd03255fbba9.jpg
Company / Index
2014
2015
2016
2017
2018
2019
Stryker Corporation
$
100.00

$
100.01

$
130.71

$
171.01

$
175.18

$
237.06

S&P 500 Index
$
100.00

$
101.38

$
113.51

$
138.29

$
132.23

$
173.86

S&P 500 Health Care Index
$
100.00

$
106.89

$
104.01

$
126.98

$
135.19

$
163.34


Dollar amounts in millions except per share amounts or as otherwise specified.
7

STRYKER CORPORATION 2019 FORM 10-K

ITEM 6.
SELECTED FINANCIAL DATA.
Statement of Earnings Data
 
2019
 
2018
 
2017
 
2016
 
2015
Net sales
 
$
14,884

 
$
13,601

 
$
12,444

 
$
11,325

 
$
9,946

Cost of sales
 
5,188

 
4,663

 
4,264

 
3,821

 
3,333

Gross profit
 
$
9,696

 
$
8,938

 
$
8,180

 
$
7,504

 
$
6,613

Research, development and engineering expenses
 
971

 
862

 
787

 
715

 
625

Selling, general and administrative expenses
 
5,356

 
5,099

 
4,552

 
4,137

 
3,610

Recall charges
 
192

 
23

 
173

 
158

 
296

Amortization of intangible assets
 
464

 
417

 
371

 
319

 
210

Total operating expenses
 
$
6,983

 
$
6,401

 
$
5,883

 
$
5,329

 
$
4,741

Operating income
 
$
2,713

 
$
2,537

 
$
2,297

 
$
2,175

 
$
1,872

Other income (expense), net
 
(151
)
 
(181
)
 
(234
)
 
(254
)
 
(137
)
Earnings before income taxes
 
$
2,562

 
$
2,356

 
$
2,063

 
$
1,921

 
$
1,735

Income taxes
 
479

 
(1,197
)
 
1,043

 
274

 
296

Net earnings
 
$
2,083

 
$
3,553

 
$
1,020

 
$
1,647

 
$
1,439

 
 
 
 
 
 
 
 
 
 
 
Net earnings per share of common stock:
 
 
 
 
 
 
 
 
 
 
Basic net earnings per share of common stock
 
$
5.57

 
$
9.50

 
$
2.73

 
$
4.40

 
$
3.82

Diluted net earnings per share of common stock
 
$
5.48

 
$
9.34

 
$
2.68

 
$
4.35

 
$
3.78

 
 
 
 
 
 
 
 
 
 
 
Dividends declared per share of common stock
 
$
2.135

 
$
1.93

 
$
1.745

 
$
1.565

 
$
1.415

 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and current marketable securities
 
$
4,425

 
$
3,699

 
$
2,793

 
$
3,384

 
$
4,079

Accounts receivable, net
 
2,893

 
2,332

 
2,198

 
1,967

 
1,662

Inventories
 
3,282

 
2,955

 
2,465

 
2,030

 
1,639

Property, plant and equipment, net
 
2,567

 
2,291

 
1,975

 
1,569

 
1,199

Total assets
 
$
30,167

 
$
27,229

 
$
22,197

 
$
20,435

 
$
16,223

Accounts payable
 
675

 
646

 
487

 
437

 
410

Total debt
 
11,090

 
9,859

 
7,222

 
6,914

 
3,998

Shareholders’ equity
 
$
12,807

 
$
11,730

 
$
9,980

 
$
9,550

 
$
8,511

 
 
 
 
 
 
 
 
 
 
 
Cash Flow Data
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
2,191

 
$
2,610

 
$
1,559

 
$
1,915

 
$
981

Purchases of property, plant and equipment
 
649

 
572

 
598

 
490

 
270

Depreciation
 
314

 
306

 
271

 
227

 
187

Acquisitions, net of cash acquired
 
802

 
2,451

 
831

 
4,332

 
153

Amortization of intangible assets
 
464

 
417

 
371

 
319

 
210

Dividends paid
 
778

 
703

 
636

 
568

 
521

Repurchase of common stock
 
307

 
300

 
230

 
13

 
700

 
 
 
 
 
 
 
 
 
 
 
Other Data
 
 
 
 
 
 
 
 
 
 
Number of shareholders of record
 
2,636

 
2,732

 
2,850

 
3,010

 
3,118

Approximate number of employees
 
40,000

 
36,000

 
33,000

 
33,000

 
27,000




Dollar amounts in millions except per share amounts or as otherwise specified.
8

STRYKER CORPORATION 2019 FORM 10-K

ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview of 2019
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.
In 2019 we achieved reported net sales growth of 9.4%. Excluding the impact of acquisitions, sales grew 8.1% in constant currency. We reported net earnings of $2,083 and net earnings per diluted share of $5.48. Excluding the impact of certain items, we achieved adjusted net earnings of $3,139 and growth of 13.0% in adjusted net earnings per diluted share(1).
We continued our capital allocation strategy by investing $802 in acquisitions, paying $778 in dividends to our shareholders and using $307 for share repurchases.
In January 2019 we repaid $500 of our senior unsecured notes with a coupon of 1.800% that were due on January 15, 2019. In March 2019 we repaid $750 of our senior unsecured notes with a coupon of 2.000% that were due on March 8, 2019. In December 2019 we issued €2.4 billion senior unsecured notes comprised of €850 of senior unsecured notes with a coupon of 0.250% due December 3, 2024, €800 of senior unsecured notes with a coupon of 0.750% due March 1, 2029 and €750 of senior unsecured notes with a coupon of 1.000% due December 3, 2031.
In January 2020 we repaid $500 of senior unsecured notes with a coupon of 4.375% that were due on January 15, 2020. Refer to Note 10 to our Consolidated Financial Statements for further information.
 
In 2019 we completed acquisitions for total net cash consideration of $802 and $294 in future milestone payments primarily due upon the achievement of certain regulatory and commercial milestones. In November 2019 we announced a definitive agreement to acquire all of the issued and outstanding ordinary shares of Wright Medical Group N.V. (Wright) for $30.75 per share, or an aggregate purchase price of approximately $5.4 billion (including convertible notes). We expect the acquisition to close in the second half of 2020, subject to the expiration of the waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of other required approvals and clearances under applicable antitrust laws, the adoption of certain resolutions by Wright’s shareholders and other customary conditions. Wright is a global medical device company focused on extremities and biologics. Following closing, we plan to integrate Wright into our Trauma and Extremities business within Orthopaedics. See Note 6 to our Consolidated Financial Statements for further information.
In 2019 we repurchased 1.9 million shares of our common stock at a cost of $307 under our authorized repurchase program. The total dollar value of shares of our common stock that could be acquired under our authorized repurchase program was $1,033 as of December 31, 2019. When we issued the €2.4 billion of senior unsecured notes we also announced our intention to suspend our share repurchase program in 2020 and 2021.
(1) Refer to "Non-GAAP Financial Measures" for a discussion of non-GAAP financial measures used in this report and a reconciliation to the most directly comparable GAAP financial measure.
 
CONSOLIDATED RESULTS OF OPERATIONS
 
 
 
 
 
Percent Net Sales
 
Percentage Change
2019
2018
2017
 
2019
2018
2017
 
Current Year End
Prior Year End
Net sales
$
14,884

$
13,601

$
12,444

 
100.0
 %
100.0
 %
100.0
 %
 
9.4
 %
9.3
 %
Gross profit
9,696

8,938

8,180

 
65.1

65.7

65.7

 
8.5

9.3

Research, development and engineering expenses
971

862

787

 
6.5

6.3

6.3

 
12.6

9.5

Selling, general and administrative expenses
5,356

5,099

4,552

 
36.0

37.5

36.6

 
5.0

12.0

Recall charges, net of insurance proceeds
192

23

173

 
1.3

0.2

1.4

 
nm

nm

Amortization of intangible assets
464

417

371

 
3.1

3.1

3.0

 
11.3

12.4

Other income (expense), net
(151
)
(181
)
(234
)
 
(1.0
)
(1.3
)
(1.9
)
 
(16.6
)
(22.6
)
Income taxes
479

(1,197
)
1,043

 
 
 
 
 
nm

nm

Net earnings
$
2,083

$
3,553

$
1,020

 
14.0
 %
26.1
 %
8.2
 %
 
(41.4
)%
248.3
 %
 
 
 
 
 
 
 
 
 
 
 
Net earnings per diluted share
$
5.48

$
9.34

$
2.68

 
 
 
 
 
(41.3
)%
248.5
 %
Adjusted net earnings per diluted share(1)
$
8.26

$
7.31

$
6.49

 
 
 
 
 
13.0
 %
12.6
 %
Geographic and Segment Net Sales

 
 
Percentage Change
 
 
Current Year End
 
Prior Year End
 
2019
2018
2017
 
As Reported
Constant
Currency
 
As Reported
Constant
Currency
Geographic:
 
 
 
 
 
 
 
 
 
United States
$
10,957

$
9,848

$
9,059

 
11.3
%
11.3
%
 
8.7
%
8.7
%
International
3,927

3,753

3,385

 
4.6

9.3

 
10.9

9.7

Total
$
14,884

$
13,601

$
12,444

 
9.4
%
10.7
%
 
9.3
%
9.0
%
Segment:
 
 
 
 
 
 
 
 
 
Orthopaedics
$
5,252

$
4,991

$
4,713

 
5.2
%
6.7
%
 
5.9
%
5.4
%
MedSurg
6,574

6,045

5,557

 
8.8

9.9

 
8.8

8.7

Neurotechnology and Spine
3,058

2,565

2,174

 
19.2

20.5

 
18.0

17.4

Total
$
14,884

$
13,601

$
12,444

 
9.4
%
10.7
%
 
9.3
%
9.0
%

Dollar amounts in millions except per share amounts or as otherwise specified.
9

STRYKER CORPORATION 2019 FORM 10-K

Supplemental Net Sales Growth Information
 
 
 
Percentage Change
 
 
 
Percentage Change
 
 
 
 
 
United States
International
 
 
 
 
 
United States
International
 
2019
2018
As Reported
Constant Currency
As Reported
As Reported
Constant Currency
 
2018
2017
As Reported
Constant Currency
As Reported
As Reported
Constant Currency
Orthopaedics:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Knees
$
1,815

$
1,701

6.7
%
8.1
%
8.2
%
2.6
 %
7.6
%
 
$
1,701

$
1,595

6.6
%
6.3
%
6.4
%
7.3
%
5.7
%
Hips
1,383

1,336

3.5

5.2

5.4

0.3

4.8

 
1,336

1,303

2.5

2.1

2.2

3.1

2.0

Trauma and Extremities
1,639

1,580

3.7

5.2

4.9

1.6

5.8

 
1,580

1,478

6.9

6.2

5.4

9.7

7.4

Other
415

374

11.2

12.0

11.5

10.0

14.2

 
374

337

11.0

11.0

8.7

21.3

21.3


$
5,252

$
4,991

5.2
%
6.7
%
6.8
%
1.9
 %
6.4
%
 
$
4,991

$
4,713

5.9
%
5.4
%
5.2
%
7.3
%
5.7
%
MedSurg:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Instruments
$
2,041

$
1,822

12.0
%
13.1
%
12.9
%
8.7
 %
13.8
%
 
$
1,822

$
1,678

8.6
%
8.4
%
9.2
%
6.4
%
6.0
%
Endoscopy
1,983

1,846

7.5

8.6

10.1

(1.8
)
3.4

 
1,846

1,652

11.7

11.9

11.0

14.4

14.7

Medical
2,264

2,118

6.9

8.1

9.6

(2.4
)
2.9

 
2,118

1,969

7.6

7.5

6.9

9.9

9.4

Sustainability
286

259

10.4

10.4

9.9

nm

nm

 
259

258

0.4

0.1


100.0

19.5


$
6,574

$
6,045

8.8
%
9.9
%
10.8
%
1.3
 %
6.5
%
 
$
6,045

$
5,557

8.8
%
8.7
%
8.4
%
10.2
%
10.0
%
Neurotechnology and Spine:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Neurotechnology
$
1,973

$
1,737

13.5
%
14.9
%
13.9
%
12.7
 %
16.7
%
 
$
1,737

$
1,423

22.1
%
21.4
%
23.9
%
18.9
%
17.2
%
Spine
1,085

828

31.1

32.3

34.7

21.3

25.4

 
828

751

10.3

9.9

6.9

20.8

19.1


$
3,058

$
2,565

19.2
%
20.5
%
21.3
%
14.9
 %
18.9
%
 
$
2,565

$
2,174

18.0
%
17.4
%
17.3
%
19.4
%
17.6
%
Total
$
14,884

$
13,601

9.4
%
10.7
%
11.3
%
4.6
 %
9.3
%
 
$
13,601

$
12,444

9.3
%
9.0
%
8.7
%
10.9
%
9.7
%
nm - not meaningful
 
Consolidated Net Sales
Consolidated net sales in 2019 increased 9.4% as reported and 10.7% in constant currency, as foreign currency exchange rates negatively impacted net sales by 1.3%. Excluding the 2.6% impact of acquisitions, net sales in constant currency increased by 9.0% from increased unit volume partially offset by 0.9% due to lower prices. The unit volume increase was primarily due to higher shipments of medical, instruments, endoscopy, neurotechnology, knees, hips and trauma and extremities products.
Consolidated net sales in 2018 increased 9.3% as reported and 9.0% in constant currency, as foreign currency exchange rates positively impacted net sales by 0.3%. Excluding the 1.9% impact of acquisitions and the 0.9% impact from the adoption of a new revenue recognition standard (ASC 606)(2), net sales increased in constant currency by 9.3% from increased unit volume partially offset by 1.4% due to lower prices. The unit volume increase was primarily due to higher shipments of medical, instruments, endoscopy, neurotechnology, knees, and trauma and extremities products.
Orthopaedics Net Sales
Orthopaedics net sales in 2019 increased 5.2% as reported and 6.7% in constant currency, as foreign currency exchange rates negatively impacted net sales by 1.5%. Net sales in constant currency increased by 8.2% from unit volume partially offset by 1.5% due to lower prices. The unit volume increase was primarily due to higher shipments of knee, hip and trauma and extremities products.
Orthopaedics net sales in 2018 increased 5.9% as reported and 5.4% in constant currency, as foreign currency exchange rates positively impacted net sales by 0.5%. Excluding the 0.5% impact from the adoption of ASC 606(2), net sales increased in constant currency by 8.1% from increased unit volume partially offset by 2.2% due to lower prices. The unit volume increase was primarily due to higher shipments of knees and trauma and extremities products.
 
MedSurg Net Sales
MedSurg net sales in 2019 increased 8.8% as reported and 9.9% in constant currency, as foreign currency exchange rates negatively impacted net sales by 1.1%. Excluding the 1.0% impact of acquisitions, net sales in constant currency increased by 9.4% from increased unit volume partially offset by 0.5% due to lower prices. The unit volume increase was primarily due to higher shipments of medical, instruments and endoscopy products and sustainability solutions.
MedSurg net sales in 2018 increased 8.8% as reported and 8.7% in constant currency, as foreign currency exchange rates positively impacted net sales by 0.1%. Excluding the 1.4% impact of acquisitions and the 1.3% impact from the adoption of ASC 606(2), net sales increased in constant currency by 9.3% from increased unit volume partially offset by 0.7% due to lower prices. The unit volume increase was primarily due to higher shipments of medical, instruments, and endoscopy products.
Neurotechnology and Spine Net Sales
Neurotechnology and Spine net sales in 2019 increased 19.2% as reported and 20.5% in constant currency, as foreign currency exchange rates negatively impacted net sales by 1.3%. Excluding the 11.6% impact of acquisitions, net sales in constant currency increased by 9.6% from increased unit volume partially offset by 0.7% due to lower prices. The unit volume increase was primarily due to higher shipments of neurotechnology products.
Neurotechnology and Spine net sales in 2018 increased 18.0% as reported and 17.4% in constant currency, as foreign currency exchange rates positively impacted net sales by 0.6%. Excluding the 7.4% impact of acquisitions and the 0.6% impact from adoption of ASC 606(2), net sales in constant currency increased by 12.2% from increased unit volume partially offset by 1.6% due to lower prices. The unit volume increase was primarily due to higher shipments of neurotechnology products.
(2) We adopted Accounting Standards Update 2014-09, Revenue From Contracts with Customers, as well as related amendments (ASC 606), issued by the Financial Accounting Standards Board on a modified retrospective basis, effective January 1, 2018. Refer to Note 1 and Note 2 to our Consolidated Financial Statements for further information on our revenue recognition policies and disclosures.


Dollar amounts in millions except per share amounts or as otherwise specified.
10

STRYKER CORPORATION 2019 FORM 10-K

Gross Profit
Gross profit as a percentage of net sales decreased to 65.1% in 2019 from 65.7% in 2018. Excluding the impact of the items noted below, gross profit decreased to 65.9% from 66.1% in 2018 primarily due to the impact of lower selling prices.
Gross profit in 2018 as a percentage of net sales of 65.7% was consistent with 2017. Excluding the impact of the items noted below, gross profit decreased to 66.1% from 66.4% in 2017 primarily due to the impact of adopting ASC 606(2) and by lower selling prices.
 
 
 
 
 
Percent Net Sales
 
2019
2018
2017
 
2019
2018
2017
Reported
$
9,696

$
8,938

$
8,180

 
65.1
%
65.7
%
65.7
%
Inventory stepped up to fair value
67

16

22

 
0.5

0.1

0.2

Restructuring-related and other charges
38

27

57

 
0.3