Stryker 2015 FORM 10-K

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Our income tax expense could have been reduced by $304 and $307 on December 31, 2015 and 2014, had these uncertain income tax positions been favorably resolved. It is reasonably possible that the amount of unrecognized tax benefits will significantly change due to one or more of the following events in the next twelve months: expiring statutes, audit activity, tax payments, competent authority proceedings related to transfer pricing or final decisions in matters that are the subject of controversy in various taxing jurisdictions in which we operate, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements. We are not able to reasonably estimate the amount or the future periods in which changes in unrecognized tax benefits may be resolved; however, we anticipate certain unrecognized tax benefits related to some examinations to be resolved within the next twelve months. As a result, it is reasonably possible that the gross unrecognized tax benefits could decrease by amounts up to $55 because of these potential resolved examinations. Interest and penalties incurred associated with uncertain tax positions are included in other income (expense), net. In the normal course of business, income tax authorities in various income tax jurisdictions both within the United States and internationally conduct routine audits of our income tax returns filed in prior years. These audits are generally designed to determine if individual income tax authorities are in agreement with our interpretations of complex income tax regulations regarding the allocation of income to the various income tax jurisdictions. Income tax years are open from 2010 through the current year for the United States federal jurisdiction; income tax years open for our other major jurisdictions range from 2005 through the current year. NOTE 13 - SEGMENT AND GEOGRAPHIC DATA We segregate our operations into three reportable business segments: Orthopaedics, MedSurg, and Neurotechnology and Spine. The Orthopaedics segment includes reconstructive (hip and knee) and trauma implant systems and other related products. The MedSurg segment includes surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling and emergency medical equipment; and reprocessed and remanufactured medical devices and other related products. The Neurotechnology and Spine segment includes neurovascular products, spinal implant systems and other related products. The Corporate and Other category shown in the table below includes corporate and global manufacturing operations and administration, central research and development initiatives, interest expense, interest and marketable securities income and share-based compensation, which includes compensation related to both employee and director stock option, restricted stock unit and performance stock unit grants. Certain prior year amounts have been reclassified to conform with the current year presentation of our segments. Results by Reportable Segments 2015 2014 2013 Orthopaedics $ 4,223 $ 4,153 $ 3,949 MedSurg 3,895 3,781 3,414 Neurotechnology & Spine 1,828 1,741 1,658 Net sales $ 9,946 $ 9,675 $ 9,021 Orthopaedics $ 290 $ 319 $ 273 MedSurg 117 113 84 Neurotechnology & Spine 132 134 135 Segment depreciation and amortization $ 539 $ 566 $ 492 Corporate and Other 51 20 19 Total depreciation and amortization $ 590 $ 586 $ 511 Orthopaedics $ 1,487 $ 1,410 $ 1,353 MedSurg 822 850 802 Neurotechnology & Spine 474 476 430 Segment operating income $ 2,783 $ 2,736 $ 2,585 Items not allocated to segments: Corporate and Other $ (302) $ (322) $ (314) Acquisition & integration-related charges (35) (102) (98) Amortization of intangible assets (210) (188) (138) Restructuring related charges (132) (117) (63) Rejuvenate and related charges (296) (761) (622) Regulatory and legal matters 53 — (69) Donation — — (25) Consolidated operating income $ 1,861 $ 1,246 $ 1,256 Total Assets and Capital Spending by Reportable Segments 2015 2014 2013 Orthopaedics $ 6,149 $ 8,357 $ 7,756 MedSurg 5,341 5,557 4,533 Neurotechnology & Spine 3,904 3,684 3,017 Total segment assets $ 15,394 $ 17,598 $ 15,306 Corporate and Other 853 (319) 93 Total assets $ 16,247 $ 17,279 $ 15,399 Orthopaedics $ 95 $ 80 $ 89 MedSurg 89 77 59 Neurotechnology & Spine 28 20 16 Total segment capital spending $ 212 $ 177 $ 164 Corporate and Other 58 56 31 Capital spending $ 270 $ 233 $ 195 Our reportable segments are business units that offer different products and services and are managed separately because each business requires different manufacturing, technology and marketing strategies. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1 to the Consolidated Financial Statements. We measure the financial results of our reportable segments using an internal performance measure that excludes acquisition and integration-related charges, restructuring related charges, reserves for certain product recall matters, reserves for certain legal and regulatory matters, a donation to an educational institution, other income (expense), net and income taxes. Identifiable assets are those assets used exclusively in the operations of each business segment or allocated when used jointly. Corporate assets are principally cash and cash equivalents, marketable securities and property, plant and equipment. The countries in which we have local revenue generating operations have been combined into the following geographic areas: the United States (including Puerto Rico); Europe, Middle East, Africa (EMEA); Asia Pacific; and other foreign countries, which include Canada and countries in the Latin American region. Net sales are attributable to a geographic area based upon the customer's country of domicile. STRYKER CORPORATION 2015 Form 10-K 32 Dollar amounts in millions except per share amounts or as otherwise specified.

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