Stryker 2014 Annual Report

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We may record future goodwill impairment charges related to one or more of our business units, which could materially adversely impact our results of operations. 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 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 that could materially affect our results of operations. Our results of operations 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. If changes to the income allocation are required between jurisdictions with different income tax rates, the related adjustments could have a material unfavorable impact on our results of operations. Failure of a key information technology system, process or site could have a material adverse impact on our business. We rely extensively on information technology systems to conduct business. These systems include, but are not limited to, ordering and managing materials from suppliers, converting materials to finished products, shipping products to customers, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal or tax requirements, providing data security and other processes necessary to manage our business. If our systems are damaged or cease to function properly due to any number of causes, ranging from catastrophic events to power outages to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may suffer interruptions in our operations. 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 could have a material adverse impact on our business or reputation. We rely extensively on information technology (IT) systems, networks and services, including internet sites, 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, including advanced persistent threats, pose a potential risk to the security of our IT systems, networks and services, as well as the confidentiality, availability, integrity of our data and our responsibilities to governments. 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. However, because the techniques used in these attacks change frequently and may be difficult to detect for periods of time, we may face difficulties in anticipating and implementing adequate preventative measures. If the IT systems, networks or service providers we rely upon fail to function properly, or if 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. The costs and operational consequences of responding to breaches and implementing remediation measures could be significant. 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, we may not be able to meet our strategic business objectives. STRYKER CORPORATION 2014 Form 10-K 6 Dollar amounts in millions except per share amounts or as otherwise specified. ITEM 1B. UNRESOLVED STAFF COMMENTS. None. ITEM 2. PROPERTIES. The following are our principal manufacturing locations as of December 31, 2014: Location Segment Approximate Square Feet Owned/ Leased Portage, Michigan M 1,027,000 Owned Changzhou, China O, NS 625,000 Owned Mahwah, New Jersey O 531,000 Owned Arroyo, Puerto Rico M 220,000 Leased San Jose, California M 185,000 Leased Kiel, Germany O 173,000 Owned Suzhou, China O, NS 160,000 Owned Carrigtwohill, Ireland M, O 154,000 Owned Lakeland, Florida M 153,000 Leased Selzach, Switzerland O 137,000 Owned Limerick, Ireland O 130,000 Owned Freiburg, Germany O 123,000 Owned Flower Mound, Texas M 114,000 Leased Carrigtwohill, Ireland NS 110,000 Leased Phoenix, Arizona M 100,000 Leased Cestas, France NS 91,000 Owned Neuchatel, Switzerland NS 88,000 Owned Limerick, Ireland O 78,000 Leased Ft. Lauderdale, Florida O, NS 78,000 Leased Malvern, Pennsylvania O 65,000 Leased Mountain View, California M, NS 62,000 Leased Fremont, California M, NS 50,000 Leased Guayama Puerto Rico M 46,000 Leased Cestas, France NS 35,000 Leased Freiburg, Germany M, O 34,000 Leased Stetten, Germany O 33,000 Owned Rennes, France O 31,000 Leased West Valley, Utah O, NS 29,000 Leased Tokyo, Japan M 11,000 Leased O = Orthopaedics M = MedSurg NS = Neurotechnology and Spine Our corporate headquarters is located in Kalamazoo, Michigan, in a 75,000 square foot owned facility. In addition, we maintain administrative and sales offices and warehousing and distribution facilities in multiple countries. We believe that our properties are suitable and adequate for the manufacture and distribution of our products.

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