Stryker 2015 FORM 10-K

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PART I ITEM 1. BUSINESS. General Stryker Corporation is a global leader in medical technology with 2015 revenues of $9,946 and net earnings of $1,439. Stryker's products include implants used in joint replacement and trauma surgeries; surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment; neurosurgical, neurovascular and spinal devices; as well as other medical device products used in a variety of medical specialties. 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 orthopaedic products. In the United States most of Stryker's products are marketed directly to doctors, hospitals and other healthcare facilities. Stryker's products are sold in over 100 countries through company-owned sales subsidiaries and branches as well as third-party dealers and distributors. 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 "Results of Operations" in Item 7 of this report and Note 13 to the Consolidated Financial Statements in Item 8 of this report. Net Sales by Reportable Segment 2015 2014 2013 Orthopaedics $ 4,223 43% $ 4,153 43% $ 3,949 44% MedSurg 3,895 39 3,781 39 3,414 38 Neurotechnology and Spine 1,828 18 1,741 18 1,658 18 Total $ 9,946 100% $ 9,675 100% $ 9,021 100% 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. Stryker is one of four leading competitors globally for joint replacement and trauma products; the other three being Zimmer Biomet Holdings, Inc. (Zimmer), DePuy Synthes (companies of Johnson & Johnson) and Smith & Nephew plc (Smith & Nephew). Composition of Net Sales 2015 2014 2013 Knees $ 1,403 33% $ 1,396 34% $ 1,371 35% Hips 1,263 30 1,291 31 1,272 32 Trauma and Extremities 1,291 31 1,230 30 1,116 28 Other 266 6 236 5 190 5 Total $ 4,223 100% $ 4,153 100% $ 3,949 100% In 2015 we received clearance by the Food and Drug Administration (FDA) for our Mako total knee application. This expands our Mako product offerings of partial knee and total hip applications to provide a comprehensive solution in the robotic arm-assisted reconstructive surgery line. In 2014 we acquired certain assets of Small Bone Innovations, Inc. (SBi). SBi products are designed and promoted for upper and lower extremity small bone indications, with a focus on small joint replacement. In 2012 we voluntarily recalled our Rejuvenate and ABG II Modular- Neck hip stems and terminated global distribution of these hip products. In November 2014 we entered into a settlement agreement to compensate eligible United States patients who had surgery to replace their Rejuvenate and ABG II Modular-Neck hip stems, known as a "revision surgery", prior to November 3, 2014. To date we have recorded charges to earnings totaling $1,824 ($2,056 before $232 of insurance recoveries) representing the actuarially determined low end of the range of probable loss to resolve this entire matter globally. In 2015 we made recall-related payments of $1,202 to eligible United States patients who had revision surgery to replace their Rejuvenate and/or ABG II Modular- Neck hip stem as part of the settlement agreement. See Note 8 to the Consolidated Financial Statements in Item 8 of this report for further information. MedSurg MedSurg products include surgical equipment and surgical navigation systems (Instruments); endoscopic and communications systems (Endoscopy); patient handling and emergency medical equipment (Medical); and reprocessed and remanufactured medical devices (Sustainability) as well as other medical device products used in a variety of medical specialties. Stryker is one of five leading competitors globally 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. Our primary competitor in Medical is Hill-Rom Holdings, Inc. Composition of Net Sales 2015 2014 2013 Instruments $ 1,466 38% $ 1,424 38% $ 1,269 37% Endoscopy 1,390 36 1,382 37 1,222 36 Medical 823 21 766 20 710 21 Sustainability 216 5 209 5 213 6 Total $ 3,895 100% $ 3,781 100% $ 3,414 100% In 2015 we acquired CHG Hospital Beds, Inc. ("CHG"). CHG designs, manufactures and markets low-height hospital beds and related accessories. In 2015 Instruments launched the Signature Drill Portfolio, the next generation neurosurgical high speed drill platform. The Signature Drill Portfolio allows surgeons to customize their preferences from three new motors, four new attachment lines, I.D. Touchâ„¢ Software, tunable drive technology, new cutting accessories, and a variety of user preferences to configure their Signature custom- fit drill. Endoscopy launched the 1588 AIM Platform which is the first visualization system to seamlessly integrate five unique imaging modalities into one platform designed to enhance visualization of patient anatomy across multiple surgical specialties. Medical launched the TruRize clinical chair which is designed to promote early patient mobility and safe patient handling. STRYKER CORPORATION 2015 Form 10-K 1 Dollar amounts in millions except per share amounts or as otherwise specified.

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