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. 30 Components of Net Periodic Pension Cost Net periodic benefit cost: 2017 2016 2015 Service cost $ (42) $ (33) $ (36) Interest cost (10) (11) (10) Expected return on plan assets 11 10 11 Amortization of prior service credit 1 1 1 Recognized actuarial loss (9) (9) (13) Net periodic benefit cost $ (49) $ (42) $ (47) Changes in assets and benefit obligations recognized in OCI: Net actuarial gain (loss) $ (25) $ (26) $ 26 Recognized net actuarial loss 9 9 13 Prior service (credit) cost and transition amount (1) (1) (1) Total recognized in other comprehensive income (loss) $ (17) $ (18) $ 38 Total recognized in net periodic benefit cost and OCI $ (66) $ (60) $ (9) Weighted-average rates used to determine net periodic benefit cost: Discount rate 1.8% 2.1% 2.0% Expected return on plan assets 3.3% 3.6% 4.0% Rate of compensation increase 2.8% 2.3% 2.9% Weighted-average discount rate used to determine projected benefit obligations 1.8% 1.8% 2.1% Investment Strategy The investment strategy for our defined benefit pension plans is to meet the liabilities of the plans as they fall due and to maximize the return on invested assets within appropriate risk tolerances. 2017 2016 Fair value of plan assets $ 370 $ 308 Benefit obligations (708) (588) Funded status $ (338) $ (280) Reported as: Current liabilities—accrued compensation $ (2) $ (1) Noncurrent liabilities—other liabilities (336) (279) Pre-tax amounts recognized in AOCI: Unrecognized net actuarial loss (189) (171) Unrecognized prior service credit 12 11 Total $ (177) $ (160) The estimated net actuarial loss for the defined benefit pension plans to be reclassified from AOCI into net periodic benefit cost is $9 in 2018.The total estimated amortization of prior service credit and transition asset for the defined benefit pension plans to be reclassified from AOCI into net periodic benefit credit is $1 in 2018. Change in Benefit Obligations 2017 2016 Beginning projected benefit obligations $ 588 $ 529 Service cost 42 33 Interest cost 10 11 Foreign exchange impact 60 (18) Employee contributions 6 6 Actuarial losses 19 40 Acquisition — 7 Benefits paid (17) (20) Ending projected benefit obligations $ 708 $ 588 Ending accumulated benefit obligations $ 675 $ 560 Change in Plan Assets 2017 2016 Beginning fair value of plan assets $ 308 $ 289 Actual return 21 20 Employer contributions 23 18 Employee contributions 6 6 Foreign exchange impact 26 (9) Acquisition — 2 Benefits paid (14) (18) Ending fair value of plan assets $ 370 $ 308 Allocation of Plan Assets 2017 Target 2017 Actual 2016 Actual Equity securities 26% 28% 28% Debt securities 45 45 50 Other 29 27 22 Total 100% 100% 100% Valuation of Plan Assets 2017 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 4 $ — $ — $ 4 Equity securities 104 17 — 121 Corporate debt securities 33 1 — 34 Other 148 14 49 211 Total $ 289 $ 32 $ 49 $ 370 2016 Cash and cash equivalents $ 7 $ — $ — $ 7 Equity securities 83 17 — 100 Corporate debt securities 127 — — 127 Other 23 13 38 74 Total $ 240 $ 30 $ 38 $ 308 Our Level 3 pension plan assets consist primarily of guaranteed investment contracts with insurance companies. The insurance contracts guarantee us principal repayment and a fixed rate of return. The $11 increase in Level 3 pension plan assets is primarily related to actual returns and acquired assets. We expect to contribute $24 to our defined benefit pension plans in 2018. Estimated Future Benefit Payments 2018 2019 2020 2021 2022 2023-2027 $ 18 $ 17 $ 17 $ 17 $ 17 $ 101

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