Issue link: http://catalog.e-digitaleditions.com/i/955392
STRYKER CORPORATION 2017 FORM 10-K Dollar amounts in millions except per share amounts or as otherwise specified. 27 Summary of Other Intangible Assets Weighted Average Amortization Period (Years) Gross Carrying Amount Less Accumulated Amortization Net Carrying Amount Developed technologies 2017 12 $ 2,416 $ 917 $ 1,499 2016 14 2,091 706 1,385 Customer relationships 2017 15 $ 2,088 $ 561 $ 1,527 2016 15 2,049 407 1,642 Patents 2017 10 $ 340 $ 227 $ 113 2016 11 317 206 111 Trademarks 2017 18 $ 352 $ 84 $ 268 2016 18 348 59 289 In-process research and development 2017 N/A $ 25 — $ 25 2016 N/A 30 — 30 Other 2017 9 $ 93 $ 48 $ 45 2016 12 115 64 51 Total 2017 14 $ 5,314 $ 1,837 $ 3,477 2016 15 $ 4,950 $ 1,442 $ 3,508 Changes in the Net Carrying Value of Goodwill by Segment Orthopaedics MedSurg Neurotechnology and Spine Total 2015 $ 2,344 $ 782 $ 1,010 $ 4,136 Additions and adjustments 72 2,196 62 2,330 Foreign exchange (44) (44) (22) (110) 2016 $ 2,372 $ 2,934 $ 1,050 $ 6,356 Additions and adjustments 2 553 109 664 Foreign exchange 52 22 74 148 2017 $ 2,426 $ 3,509 $ 1,233 $ 7,168 Estimated Amortization Expense 2018 2019 2020 2021 2022 $ 368 $ 355 $ 330 $ 318 $ 311 NOTE 8 - CAPITAL STOCK The aggregate number of shares of all classes of stock with which we are authorized to issue is up to 1,000,500,000, divided into two classes consisting of 500,000 shares of $1 par value preferred stock and 1,000,000,000 shares of common stock with a par value of $0.10. No shares of preferred stock were outstanding on December 31, 2017. In 2017 we repurchased 1.9 million shares at a cost of $230. The manner, timing and amount of repurchases are determined by management based on an evaluation of market conditions, stock price and other factors and are subject to regulatory considerations. Purchases are made from time-to-time in the open market, in privately negotiated transactions or otherwise. On December 31, 2017 the total dollar value of shares that could be purchased under our authorized repurchase program was $1,640. Shares reserved for future compensation grants of our common stock were 37 million and 11 million on December 31, 2017 and 2016. Stock Options We measure the cost of employee stock options based on the grant- date fair value and recognize that cost using the straight-line method over the period in which a recipient is required to provide services in exchange for the options, typically the vesting period. The weighted-average fair value per share of options is estimated on the date of grant using the Black-Scholes option pricing model. Option Value and Assumptions 2017 2016 2015 Weighted-average fair value per share $ 22.43 $ 17.73 $ 22.55 Assumptions: Risk-free interest rate 2.0% 1.3% 1.8% Expected dividend yield 1.5% 1.6% 1.6% Expected stock price volatility 19.4% 20.5% 25.5% Expected option life (years) 6.0 6.1 7.3 The risk-free interest rate for periods within the expected life of options granted is based on the United States Treasury yield curve in effect at the time of grant. Expected stock price volatility is based on the historical volatility of our stock. The expected option life, representing the period of time that options granted are expected to be outstanding, is based on historical option exercise and employee termination data. 2017 Stock Option Activity Shares (in millions) Weighted Average Exercise Price Weighted- Average Remaining Term (in years) Aggregate Intrinsic Value Outstanding January 1 14.9 $ 73.14 Granted 2.9 122.66 Exercised (2.5) 62.66 Canceled (0.6) 97.87 Outstanding December 31 14.7 $ 83.71 5.4 $ 956.5 Exercisable December 31 7.5 $ 65.47 4.2 $ 666.8 Options expected to vest 6.6 $ 101.83 7.9 $ 347.9 The aggregate intrinsic value of options, which represents the cumulative difference between the fair market value of the underlying common stock and the option exercise prices, exercised was $184, $128, and $98 in 2017, 2016 and 2015. Exercise prices for options outstanding ranged from $38.71 to $154.87 on December 31, 2017. On December 31, 2017 there was $90 of unrecognized compensation cost related to nonvested stock options granted under the long-term incentive plans; that cost is expected to be recognized over the weighted-average period of approximately 1.6 years. Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) Activity Shares (in millions) Weighted Average Grant Date Fair Value RSUs PSUs RSUs PSUs Nonvested on January 1 1.1 0.3 $ 90.10 $ 91.19 Granted 0.5 0.1 117.44 122.41 Vested (0.5) (0.1) 87.08 81.14 Canceled or forfeited (0.1) — 102.01 92.18 Nonvested on December 31 1.0 0.3 $ 104.85 $ 104.51 On December 31, 2017 there was $56 of unrecognized compensation cost related to nonvested RSUs. That cost is expected to be recognized as expense over the weighted-average period of approximately one year. The weighted-average grant date fair value per share of RSUs granted was $117.44 and $94.70 in 2017 and 2016. The fair value of RSUs and PSUs vested in 2017 was $44 and $7. On December 31, 2017 there was $13 of unrecognized compensation cost related to nonvested PSUs; the cost is expected to be recognized as expense over the weighted- average period of approximately one year.