STRYKER

2017 FORM 10-K

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STRYKER CORPORATION 2017 FORM 10-K Dollar amounts in millions except per share amounts or as otherwise specified. 1 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. 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 85 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 "Results of Operations" in Item 7 of this report and Note 13 to our Consolidated Financial Statements. Net Sales by Reportable Segment 2017 2016 2015 Orthopaedics $ 4,713 38% $ 4,422 39% $ 4,223 43% MedSurg 5,557 45 4,894 43 3,895 39 Neurotechnology and Spine 2,174 17 2,009 18 1,828 18 Total $ 12,444 100% $ 11,325 100% $ 9,946 100% 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. In 2015 we received clearance by the United States Food and Drug Administration (FDA) for our Mako total knee application and completed the full commercial launch in 2017. 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. 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 2017 2016 2015 Knees $ 1,595 34% $ 1,490 34% $ 1,403 33% Hips 1,303 28 1,283 29 1,263 30 Trauma and Extremities 1,478 31 1,364 31 1,291 31 Other 337 7 285 6 266 6 Total $ 4,713 100% $ 4,422 100% $ 4,223 100% 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 Koninklijke Philips N.V. Composition of MedSurg Net Sales 2017 2016 2015 Instruments $ 1,678 30% $ 1,553 32% $ 1,466 38% Endoscopy 1,652 30 1,470 30 1,390 36 Medical 1,969 35 1,633 33 823 21 Sustainability 258 5 238 5 216 5 Total $ 5,557 100% $ 4,894 100% $ 3,895 100% In 2017 Instruments launched System 8, the next generation of power tools comprised of a sagittal saw, reciprocating saw, rotary drill and sternum saw. The new power tools offer improved ergonomics, a quick and efficient keyless chuck system preventing loosening through a secondary locking mechanism and advanced material and coating to prevent sticking and slipping. In addition, the handpieces are built to be actively washed and temporarily submerged prior to sterilization. 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

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