Stryker (SYK) 10-K risk factor changes: FY2018 vs FY2017

[added: These statements] are based on current projections about operations, industry conditions, financial condition and liquidity.

Therefore, actual results could differ materially and [removed: adversely from these forward-looking statements.]

We are continuing to evaluate the impact of tax reform [added: as new guidance] and [removed: expect our effective tax rate to increase.][added: regulations are published.]

STRYKER CORPORATION [removed: 2017] [added: 2018] FORM 10-K

[added: We] cannot predict what other healthcare programs and regulations will ultimately be implemented at the federal or state level or the effect of any future legislation or regulation in the United States may have on our business.

We are subject to extensive governmental regulation relating to the manufacturing, labeling and marketing of our products: The manufacturing, labeling and marketing of our products are subject to extensive and evolving regulations and rigorous regulatory enforcement by the FDA, European Union [added: (EU), the Safe Food] and [added: Drug Administration (SFDA) in China, and] other governmental authorities in the United States and internationally.

The process of obtaining regulatory approvals to market a medical device can be costly and time consuming and approvals might not [removed: be granted timely.]

Costs to comply with regulations, including the [removed: regulations set for medical devices regulation] [added: EU Medical Device Regulation] enacted by the [removed: European Union] [added: EU] in May 2017 and effective in [added: May] 2020, and [added: the regulatory laws established by the SFDA in China, and] costs associated with remediation can be significant.

If we fail to [removed: fully] comply with applicable regulatory requirements, we may be subject to a range of sanctions, including substantial fines, warning letters that require corrective action, product seizures, recalls, the suspension of product manufacturing, revocation of approvals, exclusion from future participation in government healthcare programs, substantial fines and criminal prosecution.

We are subject to federal, state and foreign healthcare [removed: regulations] [added: regulations,] including anti-bribery and anti-corruption laws, and could face substantial penalties if we fail to [removed: fully] comply with such regulations and laws: The relationships that we and our distributors and others that market our products have with healthcare professionals, such as physicians and hospitals, are subject to scrutiny under various state and federal laws often referred to collectively as healthcare fraud and abuse laws.

These laws and regulations are broad in scope and are subject to evolving interpretation and we [added: have in the past been, and in the future] could [removed: be] [added: be,] required to incur substantial costs to monitor compliance or to alter our [removed: practices if we are found not to be in compliance.][added: practices.]

[removed: We are currently defendants in a number of product liability matters,] including those relating to our Rejuvenate and ABGII Modular-Neck hip stems [added: and LFIT Anatomic CoCr V40 Femoral Heads] discussed in Note [removed: 6] [added: 7] to our Consolidated Financial Statements.

Intellectual property litigation and infringement claims could cause us to incur significant expenses or prevent us from selling certain of our products: The medical device industry is [added: characterized by extensive intellectual property litigation and, from time to time, we are the subject of claims of infringement or misappropriation.]

We have exposure to exchange rate fluctuations on cross border transactions and translation of local currency results into United States Dollars: We report our financial results in United States Dollars and [removed: 27%] [added: approximately 30%] of our net sales are denominated in foreign currencies, including the [removed: Euro, Japanese Yen,] Australian Dollar, British [removed: Pound] [added: Pound, Euro] and [removed: Canadian Dollar.][added: Japanese Yen.]

While we use derivative instruments to manage the impact of currency [removed: exchange;] [added: exchange,] our hedging strategies may not be successful, and our unhedged exposures continue to be subject to currency fluctuations.

We are subject to cost containment measures in the United States and other countries resulting in pricing pressures: Initiatives to limit the growth of general healthcare expenses and [removed: hospital costs are ongoing in the markets in which we do business.]

[removed: A significant] reduction in the estimated fair values could result in impairment charges.

[added: Income tax audits associated with the allocation of income and other complex issues, including] inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements, may require an extended period of time to resolve and may result in significant income tax adjustments.

In addition, we rely on networks and services, including internet sites, [added: cloud and SaaS solutions,] data hosting and processing facilities and tools and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used by third-parties or their vendors, to assist in conducting our business.

Numerous and evolving cybersecurity threats pose potential risks to the security of our IT systems, networks and [removed: services,] [added: product offerings,] as well as the confidentiality, availability and integrity of our data.

[removed: If we are unable to recruit, hire, develop and retain a talented,] competitive work force, we may not be able to meet our strategic business objectives.

Orthopaedics has principal manufacturing and distribution facilities in the United States in New Jersey, [removed: Indiana, Pennsylvania, Utah] [added: Pennsylvania] and Florida and outside the United States in China, Ireland, Netherlands, [removed: Switzerland] [added: Switzerland, Germany] and [removed: Germany.][added: the United Kingdom.]

MedSurg has principal manufacturing and distribution facilities in the United States in Michigan, California, Illinois, [added: Indiana,] Washington, [removed: Utah,] Florida and Texas and outside the United States in Ireland, Germany, Mexico, Puerto Rico, Switzerland, [removed: Turkey] [added: Turkey, France] and the United Kingdom.

Neurotechnology and Spine has principal manufacturing and distribution facilities in Illinois, [removed: Indiana] [added: Indiana, Utah, Pennsylvania] and California and outside [added: the United States in China, Ireland, France, Switzerland and Netherlands.]

Damage to these facilities as a result of natural disasters or otherwise, as well as issues in our manufacturing arising from a failure to follow specific internal protocols and procedures, compliance concerns relating to the quality systems regulation, equipment breakdown or malfunction or other [removed: factors] [added: factors,] could adversely affect the availability of our products.

adversely from these forward-looking statements.

be granted timely.

We are subject to data privacy and protection regulations and laws globally, and could face substantial penalties if we fail to comply with such regulations and laws: We are subject to a variety of laws and regulations globally regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data.

For example, Europe’s General Data Protection Regulation (GDPR), which became effective in May 2018, applies to all of our activities related to products and services that we offer to EU customers and employees.

The GDPR established new requirements regarding the handling of personal data and includes significant penalties for non-compliance (including possible fines of up to 4% of total company revenue).

Other governmental authorities around the world are considering similar types of legislative and regulatory proposals concerning data protection, which could impose significant limitations and increase our cost of providing our products and services where we process end user personal data.

These laws and regulations are broad in scope and are subject to evolving interpretation and we have in the past been, and in the future could be, required to incur substantial costs to monitor compliance or to alter our practices.

We are currently defendants in a number of product liability matters,

STRYKER CORPORATION 2018 FORM 10-K

hospital costs are ongoing in the markets in which we do business.

A significant

A security breach, whether of our products, of our customers’ network security and systems or of third-party hosting services, could impact the use of such products and the security of information stored therein.

If we are unable to recruit, hire, develop and retain a talented,

STRYKER CORPORATION 2018 FORM 10-K

These statements

We

characterized by extensive intellectual property litigation and, from time to time, we are the subject of claims of infringement or misappropriation.

Income tax audits associated with the allocation of income and other complex issues, including

the United States in China and Netherlands.

In [removed: 2017] [added: 2018] we achieved reported net sales growth of [removed: 9.9%.][added: 9.3%.]

We reported net earnings of [removed: $1,020] [added: $3,553] and net earnings per diluted share of [removed: $2.68.][added: $9.34.]

Excluding the impact of certain items, we achieved adjusted net earnings of [removed: $2,465] [added: $2,779] and growth of [removed: 11.9%] [added: 12.6%] in adjusted net earnings per diluted share(1).

We continued our capital allocation strategy by investing [removed: $831] [added: $2,451] in acquisitions, paying [removed: $636] [added: $703] in dividends to our shareholders and using [removed: $230] [added: $300] for share repurchases.

[removed: In December 2017 we announced a definitive merger agreement to acquire] Entellus [removed: Medical, Inc. (Entellus), a high-growth global medical technology company] [added: is] focused on delivering superior patient and physician experiences through products designed for the minimally invasive treatment of various ear, nose and throat (ENT) disease [removed: states, for $24.00 per share, or total consideration of approximately $662.][added: states.]

Refer to Note [removed: 5] [added: 10] to our Consolidated Financial Statements for further information.

Refer to Note [removed: 9] [added: 10] to our Consolidated Financial Statements for further information.

| [removed: 2017] | [removed: | | 2016 | | | 2015 |] [added: 2018] | | | 2017 | | [added: |] 2016 | | [removed: 2015] | | [added: 2018] | [removed: 2017/2016] | [added: 2017] | [removed: 2016/2015] | [added: 2016] | |

| Net sales | $ | [removed: 12,444] [added: 13,601] | | $ | [removed: 11,325] [added: 12,444] | | $ | [removed: 9,946] [added: 11,325] | | | 100.0 | % | 100.0 | % | 100.0 | % | | [removed: 9.9] [added: 9.3] | % | [removed: 13.9] [added: 9.9] | % |

| Research, development and engineering expenses | [removed: 787] [added: 862] | | | [removed: 715] [added: 787] | | | [removed: 625] [added: 715] | | | | 6.3 | | 6.3 | | 6.3 | | | [removed: 10.1] [added: 9.5] | | [removed: 14.4] [added: 10.1] | |

| Selling, general and administrative expenses | [added: 5,099 | | |] 4,552 | | | 4,137 | | | [removed: 3,610] | [removed: |] [added: 37.5] | | 36.6 | | 36.5 | | [removed: 36.3] | [added: 12.0] | | 10.0 | | [removed: 14.6 | |]

| Recall charges, net of insurance proceeds | [added: 23 | | |] 173 | | | 158 | | | [removed: 296] | [removed: |] [added: 0.2] | | 1.4 | | 1.4 | | [removed: 3.0] | [added: (86.7] | [added: )] | 9.5 | | [removed: (46.6 | ) |]

| Amortization of intangible assets | [added: 417 | | |] 371 | | | 319 | | | [removed: 210] | [removed: |] [added: 3.1] | | 3.0 | | 2.8 | | [removed: 2.1] | [added: 12.4] | | 16.3 | | [removed: 51.9 | |]

| Income taxes | [removed: 1,043] [added: (1,197] | | [added: )] | [removed: 274] [added: 1,043] | | | [removed: 296] [added: 274] | | | | | | | | | | | [removed: 280.7] [added: (214.8] | [added: )] | [removed: (7.4] [added: 280.7] | [removed: )] |

| Net earnings | $ | [removed: 1,020] [added: 3,553] | | $ | [removed: 1,647] [added: 1,020] | | $ | [removed: 1,439] [added: 1,647] | | | [removed: 8.2] [added: 26.1] | % | [removed: 14.5] [added: 8.2] | % | 14.5 | % | | [removed: (38.1] [added: 248.3] | [removed: )%] [added: %] | [removed: 14.5] [added: (38.1] | [removed: %] [added: )%] |

| Net earnings per diluted share | $ | [removed: 2.68] [added: 9.34] | | $ | [removed: 4.35] [added: 2.68] | | $ | [removed: 3.78] [added: 4.35] | | | | | | | | | | [removed: (38.4] [added: 248.5] | [removed: )%] [added: %] | [removed: 15.1] [added: (38.4] | [removed: %] [added: )%] |

| Adjusted net earnings per diluted share(1) | $ | [removed: 6.49] [added: 7.31] | | $ | [removed: 5.80] [added: 6.49] | | $ | [removed: 5.12] [added: 5.80] | | | | | | | | | | [removed: 11.9] [added: 12.6] | % | [removed: 13.3] [added: 11.9] | % |

| | [removed: | | |] [added: 2018] | | | [added: 2017] | | | [removed: 2017/2016] [added: 2016] | | | | [added: 2018] | [removed: 2016/2015] | [added: 2017] | | [added: 2016] | |

| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | | | | As Reported | | Constant Currency | | | As Reported | | Constant Currency | |

| United States | $ | [removed: 9,059] [added: 9,848] | | $ | [removed: 8,230] [added: 9,059] | | $ | [removed: 7,116] [added: 8,230] | | | [removed: 10.1] [added: 8.7] | % | [removed: 10.1] [added: 8.7] | % | | [removed: 15.7] [added: 10.1] | % | [removed: 15.6] [added: 10.1] | % |

| International | [removed: 3,385] [added: 3,753] | | | [removed: 3,095] [added: 3,385] | | | [removed: 2,830] [added: 3,095] | | | | [removed: 9.4] [added: 10.9] | | [removed: 9.0] [added: 9.7] | | | 9.4 | | [removed: 10.8] [added: 9.0] | |

| Total | $ | [removed: 12,444] [added: 13,601] | | $ | [removed: 11,325] [added: 12,444] | | $ | [removed: 9,946] [added: 11,325] | | | [removed: 9.9] [added: 9.3] | % | [removed: 9.8] [added: 9.0] | % | | [removed: 13.9] [added: 9.9] | % | [removed: 14.3] [added: 9.8] | % |

| Orthopaedics | $ | [removed: 4,713] [added: 4,991] | | $ | [removed: 4,422] [added: 4,713] | | $ | [removed: 4,223] [added: 4,422] | | | [removed: 6.6] [added: 5.9] | % | [removed: 6.5] [added: 5.4] | % | | [removed: 4.7] [added: 6.6] | % | [removed: 5.1] [added: 6.5] | % |

| MedSurg | [removed: 5,557] [added: 6,045] | | | [removed: 4,894] [added: 5,557] | | | [removed: 3,895] [added: 4,894] | | | | [removed: 13.6] [added: 8.8] | | [removed: 13.4] [added: 8.7] | | | [removed: 25.6] [added: 13.6] | | [removed: 26.3] [added: 13.4] | |

| Neurotechnology and Spine | [removed: 2,174] [added: 2,565] | | | [removed: 2,009] [added: 2,174] | | | [removed: 1,828] [added: 2,009] | | | | [removed: 8.2] [added: 18.0] | | [removed: 8.3] [added: 17.4] | | | [removed: 9.9] [added: 8.2] | | [removed: 9.8] [added: 8.3] | |

STRYKER CORPORATION [removed: 2017] [added: 2018] FORM 10-K

| | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | As Reported | | Constant Currency | | As Reported | | As Reported | | Constant Currency | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | | | As Reported | | Constant Currency | | As Reported | | As Reported | | Constant Currency | |

| Knees | $ | [removed: 1,595] [added: 1,701] | | $ | [removed: 1,490] [added: 1,595] | | [removed: 7.0] [added: 6.6] | % | [removed: 6.9] [added: 6.3] | % | [removed: 7.4] [added: 6.4] | % | [removed: 5.9] [added: 7.3] | % | [removed: 5.5] [added: 5.7] | % | | $ | [removed: 1,490] [added: 1,595] | | $ | [removed: 1,403] [added: 1,490] | | [removed: 6.2] [added: 7.0] | % | [removed: 6.7] [added: 6.9] | % | [removed: 6.8] [added: 7.4] | % | [removed: 4.6] [added: 5.9] | % | [removed: 6.5] [added: 5.5] | % |

| Hips | [removed: 1,303] [added: 1,336] | | | [removed: 1,283] [added: 1,303] | | | [removed: 1.6] [added: 2.5] | | [removed: 1.8] [added: 2.1] | | [removed: 2.0] [added: 2.2] | | [removed: 0.9] [added: 3.1] | | [removed: 1.4] [added: 2.0] | | | [removed: 1,283] [added: 1,303] | | | [removed: 1,263] [added: 1,283] | | | [removed: 1.5] [added: 1.6] | | [removed: 2.3] [added: 1.8] | | 2.0 | | [removed: 0.8] [added: 0.9] | | [removed: 2.9] [added: 1.4] | |

| Trauma and Extremities | [removed: 1,478] [added: 1,580] | | | [removed: 1,364] [added: 1,478] | | | [removed: 8.3] [added: 6.9] | | [removed: 8.2] [added: 6.2] | | [removed: 11.0] [added: 5.4] | | [removed: 3.8] [added: 9.7] | | [removed: 3.5] [added: 7.4] | | | [removed: 1,364] [added: 1,478] | | | [removed: 1,291] [added: 1,364] | | | [removed: 5.7] [added: 8.3] | | [removed: 5.7] [added: 8.2] | | [removed: 9.1] [added: 11.0] | | [removed: 0.4] [added: 3.8] | | [removed: 0.4] [added: 3.5] | |

| Other | [removed: 337] [added: 374] | | | [removed: 285] [added: 337] | | | [removed: 18.0] [added: 11.0] | | [removed: 17.6] [added: 11.0] | | [removed: 17.9] [added: 8.7] | | [removed: 18.6] [added: 21.3] | | [removed: 16.4] [added: 21.3] | | | [removed: 285] [added: 337] | | | [removed: 266] [added: 285] | | | [removed: 7.3] [added: 18.0] | | [removed: 7.6] [added: 17.6] | | [removed: 8.1] [added: 17.9] | | [removed: 4.1] [added: 18.6] | | [removed: 5.6] [added: 16.4] | |

| Endoscopy | [removed: 1,652] [added: 1,846] | | | [removed: 1,470] [added: 1,652] | | | [removed: 12.4] [added: 11.7] | | [removed: 12.0] [added: 11.9] | | [removed: 14.2] [added: 11.0] | | [removed: 6.3] [added: 14.4] | | [removed: 5.0] [added: 14.7] | | | [removed: 1,470] [added: 1,652] | | | [removed: 1,390] [added: 1,470] | | | [removed: 5.8] [added: 12.4] | | [removed: 6.3] [added: 12.0] | | [removed: 8.8] [added: 14.2] | | [removed: (3.1] [added: 6.3] | [removed: )] | [removed: (1.0] [added: 5.0] | [removed: )] |

| Medical | [removed: 1,969] [added: 2,118] | | | [removed: 1,633] [added: 1,969] | | | [removed: 20.5] [added: 7.6] | | [removed: 20.4] [added: 7.5] | | [removed: 17.7] [added: 6.9] | | [removed: 31.4] [added: 9.9] | | [removed: 30.4] [added: 9.4] | | | [removed: 1,633] [added: 1,969] | | | [removed: 823] [added: 1,633] | | | [removed: 98.4] [added: 20.5] | | [removed: 99.9] [added: 20.4] | | [removed: 92.4] [added: 17.7] | | [removed: 125.3] [added: 31.4] | | [removed: 133.4] [added: 30.4] | |

| Total | $ | [removed: 12,444] [added: 13,601] | | $ | [removed: 11,325] [added: 12,444] | | [removed: 9.9] [added: 9.3] | % | [removed: 9.8] [added: 9.0] | % | [removed: 10.1] [added: 8.7] | % | [removed: 9.4] [added: 10.9] | % | [removed: 9.0] [added: 9.7] | % | | $ | [removed: 11,325] [added: 12,444] | | $ | [removed: 9,946] [added: 11,325] | | [removed: 13.9] [added: 9.9] | % | [removed: 14.3] [added: 9.8] | % | [removed: 15.6] [added: 10.1] | % | 9.4 | % | [removed: 10.8] [added: 9.0] | % |

Excluding the 2.7% impact of acquisitions, net sales increased in constant currency by 8.2% from increased unit volume partially offset by 1.1% [added: due to] lower prices.

Consolidated net sales [removed: in 2016] increased [removed: 13.9% as reported] [added: 10.2% in 2018] and [removed: 14.3%] [added: 9.8%] in constant currency, as foreign currency exchange rates [removed: negatively] [added: positively] impacted net sales by 0.4%.

Excluding the [removed: 7.9%] [added: 1.9%] impact of [removed: acquisitions,] [added: acquisitions] net sales [removed: increased] in constant currency [added: increased] by [removed: 7.8%] [added: 9.3%] from [removed: increased] unit volume partially offset by 1.4% [added: due to] lower prices.

The unit volume increase was primarily due to higher shipments of [removed: knees,] [added: medical,] instruments, endoscopy, neurotechnology, [added: knees, and] trauma and extremities [removed: and medical] products.

Excluding the 0.3% impact of acquisitions, net sales increased in constant currency by 8.6% from increased unit volume partially offset by 2.4% [added: due to] lower prices.

The unit volume increase was [removed: led] primarily [removed: by] [added: due to] higher shipments of knees and trauma and extremities products.

Overview of 2018

Excluding the impact of acquisitions and the adoption of Accounting Standards Update 2014-9, Revenue From Contracts with Customers, as well as related amendments, sales grew 7.9% in constant currency.

In November 2018 we completed the acquisition of K2M Group Holdings, Inc. (K2M) for $27.50 per share, or an aggregate purchase price of approximately $1,380.

K2M is a global leader of complex spine and minimally invasive solutions focused on achieving three-dimensional Total Body Balance.

K2M is part of our Spine business within Neurotechnology and Spine.

In February 2018 we completed the acquisition of Entellus Medical, Inc. (Entellus) for $24.00 per share, or an aggregate purchase price

of $697, net of cash acquired.

Entellus is part of our Neurotechnology business within Neurotechnology and Spine.

In March 2018 we issued $600 of senior unsecured notes with a coupon of 3.650% due on March 7, 2028.

In April 2018 we repaid $600 of our senior unsecured notes with a coupon of 1.300%.

In November 2018 we issued: €300 of senior unsecured notes with a floating interest rate (Three Month EURIBOR plus 28 bps) due on November 30, 2020, €550 of senior unsecured notes with a fixed interest rate of 1.125% due on November 30, 2023, €750 of senior unsecured notes with a fixed interest rate of 2.125% due on November 30, 2027, and €650 of senior unsecured notes with a fixed interest rate of 2.625% due on November 30, 2030.

In December 2018 the transfer of certain intellectual properties between tax jurisdictions resulted in a $1.5 billion non-cash tax benefit and a corresponding $1.5 billion deferred tax asset.

The benefit of the transaction will be realized as a reduction of cash paid for taxes over a period of nine years and a corresponding charge to tax expense, which consistent with the benefit recognized in 2018 will also be adjusted out of reported net earnings going forward in our non-GAAP financial measure.

| 2018 | | | 2017 | | | 2016 | | | | 2018 | | 2017 | | 2016 | | | Current Year End | | Prior Year End | | |

| Gross profit | 8,938 | | | 8,180 | | | 7,504 | | | | 65.7 | | 65.7 | | 66.3 | | | 9.3 | | 9.0 | |

| Other income (expense), net | (181 | | ) | (234 | | ) | (254 | | ) | | (1.3 | ) | (1.9 | ) | (2.2 | ) | | (22.6 | ) | (7.9 | ) |

| | | | | | | | | | | Current Year End | | | | | Prior Year End | | | | |

| Total | $ | 13,601 | | $ | 12,444 | | $ | 11,325 | | | 9.3 | % | 9.0 | % | | 9.9 | % | 9.8 | % |

| | $ | 4,991 | | $ | 4,713 | | 5.9 | % | 5.4 | % | 5.2 | % | 7.3 | % | 5.7 | % | | $ | 4,713 | | $ | 4,422 | | 6.6 | % | 6.5 | % | 7.8 | % | 4.0 | % | 3.8 | % |

| Instruments | $ | 1,822 | | $ | 1,678 | | 8.6 | % | 8.4 | % | 9.2 | % | 6.4 | % | 6.0 | % | | $ | 1,678 | | $ | 1,553 | | 8.1 | % | 8.0 | % | 8.1 | % | 7.9 | % | 7.5 | % |

| Sustainability | 259 | | | 258 | | | 0.4 | | 0.1 | | — | | 100.0 | | 19.5 | | | 258 | | | 238 | | | 8.9 | | 8.9 | | 8.9 | | 26.2 | | 24.4 | |

| | $ | 6,045 | | $ | 5,557 | | 8.8 | % | 8.7 | % | 8.4 | % | 10.2 | % | 10.0 | % | | $ | 5,557 | | $ | 4,894 | | 13.5 | % | 13.4 | % | 13.2 | % | 15.1 | % | 14.1 | % |

| Neurotechnology | $ | 1,737 | | $ | 1,423 | | 22.1 | % | 21.4 | % | 23.9 | % | 18.9 | % | 17.2 | % | | $ | 1,423 | | $ | 1,255 | | 13.4 | % | 13.4 | % | 11.2 | % | 17.4 | % | 17.3 | % |

| Spine | 828 | | | 751 | | | 10.3 | | 9.9 | | 6.9 | | 20.8 | | 19.1 | | | 751 | | | 754 | | | (0.4 | ) | (0.4 | ) | (0.6 | ) | 0.1 | | 0.2 | |

| | $ | 2,565 | | $ | 2,174 | | 18.0 | % | 17.4 | % | 17.3 | % | 19.4 | % | 17.6 | % | | $ | 2,174 | | $ | 2,009 | | 8.2 | % | 8.3 | % | 6.3 | % | 12.4 | % | 12.4 | % |

Consolidated net sales in 2018 increased 9.3% as reported and 9.0% in constant currency, as foreign currency exchange rates positively impacted net sales by 0.3%.

Excluding the 1.9% impact of acquisitions and the 0.9% impact from the adoption of a new revenue recognition standard (ASC 606), net sales increased in constant currency by 9.3% from increased unit volume partially offset by 1.4% due to lower prices.

The unit volume increase was primarily due to higher shipments of knees and trauma and extremities products.

Excluding the 1.4% impact of

acquisitions and the 1.3% impact from the adoption of ASC 606, net sales increased in constant currency by 9.3% from increased unit volume partially offset by 0.7% due to lower prices.

Excluding the 7.4% impact of acquisitions and the 0.6% impact from adoption of ASC 606, net sales in constant currency increased by 12.2% from increased unit volume partially offset by 1.6% due to lower prices.

The unit volume increase was primarily due to higher shipments of neurotechnology products.

STRYKER CORPORATION 2018 FORM 10-K

We adopted Accounting Standards Update 2014-09, Revenue From Contracts with Customers, as well as related amendments (ASC 606), issued by the Financial Accounting Standards Board on a modified retrospective basis, effective January 1, 2018.

Refer to Note 1 and Note 2 to our Consolidated Financial Statements for further information.

The following sales growth data and subsequent analysis have been presented to supplement our discussion and analysis of net sales by quantifying and excluding the impact of the adoption of ASC 606 for our businesses, which related primarily to the reclassification of certain costs previously presented as selling, general and administrative expenses to net sales.

| | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | |

| | Full Year | | | | | | | | | | | | | | | | | | |

Overview of 2017

Excluding the impact of acquisitions, net sales grew 7.1% in constant currency, in line with our ongoing goal to grow organic sales at the high-end of MedTech.

We expect the acquisition to close in February 2018.

In September 2017 we acquired NOVADAQ Technologies Inc. (NOVADAQ) for total consideration of approximately $716.

NOVADAQ is a leading developer of fluorescence imaging

technology that provides surgeons with visualization of blood flow in vessels and related tissue perfusion in cardiac, cardiovascular, gastrointestinal, plastic, microsurgical and reconstructive procedures.

In August 2017 we initiated a voluntary product recall involving specific lots of our Sage Products (Sage) Oral Care products.

We took this action in response to a Warning Letter received from the United States Food and Drug Administration (FDA) dated July 17, 2017, which set forth concerns regarding the potential for cross-contamination of Oral Care solutions manufactured by a third-party supplier on equipment also used to manufacture non-pharmaceutical products.

We discontinued business with the third-party supplier and the Oral Care solutions are now being manufactured in-house.

We resumed shipping Oral Care products in October and returned to full supply capacity by the end of 2017.

We also placed Sage cloth-based products on a temporary ship hold during the third quarter in response to concerns set forth in the FDA Warning Letter regarding testing methods used for all Sage products containing solutions.

We resumed shipping products manufactured in-house and tested under the testing method required by FDA in September 2017 and returned to full supply capacity by the end of 2017.

In January 2017 we issued $500 of senior unsecured notes.

| Gross profit | 8,173 | | | 7,495 | | | 6,602 | | | | 65.7 | | 66.2 | | 66.4 | | | 9.0 | | 13.5 | |

| Other income (expense), net | (227 | | ) | (245 | | ) | (126 | | ) | | (1.8 | ) | (2.2 | ) | (1.3 | ) | | (7.3 | ) | 94.4 | |

| | $ | 4,713 | | $ | 4,422 | | 6.6 | % | 6.5 | % | 7.8 | % | 4.0 | % | 3.8 | % | | $ | 4,422 | | $ | 4,223 | | 4.7 | % | 5.1 | % | 6.2 | % | 1.8 | % | 3.1 | % |

| Instruments | $ | 1,678 | | $ | 1,553 | | 8.1 | % | 8.0 | % | 8.1 | % | 7.9 | % | 7.5 | % | | $ | 1,553 | | $ | 1,466 | | 5.9 | % | 6.3 | % | 7.2 | % | 1.5 | % | 3.1 | % |

| Sustainability | 258 | | | 238 | | | 8.9 | | 8.9 | | 8.9 | | 26.2 | | 24.4 | | | 238 | | | 216 | | | 9.9 | | 9.9 | | 9.8 | | 33.3 | | 37.6 | |

| | $ | 5,557 | | $ | 4,894 | | 13.6 | % | 13.4 | % | 13.2 | % | 15.1 | % | 14.1 | % | | $ | 4,894 | | $ | 3,895 | | 25.6 | % | 26.3 | % | 26.8 | % | 21.6 | % | 24.6 | % |

| Neurotechnology | $ | 1,423 | | $ | 1,255 | | 13.4 | % | 13.4 | % | 11.2 | % | 17.4 | % | 17.3 | % | | $ | 1,255 | | $ | 1,088 | | 15.4 | % | 15.1 | % | 14.5 | % | 17.0 | % | 16.2 | % |

| Spine | 751 | | | 754 | | | (0.4 | ) | (0.4 | ) | (0.6 | ) | 0.1 | | 0.2 | | | 754 | | | 740 | | | 1.8 | | 2.0 | | 3.9 | | (4.1 | ) | (3.5 | ) |

| | $ | 2,174 | | $ | 2,009 | | 8.2 | % | 8.3 | % | 6.3 | % | 12.4 | % | 12.4 | % | | $ | 2,009 | | $ | 1,828 | | 9.9 | % | 9.8 | % | 9.8 | % | 9.9 | % | 9.6 | % |

Gross profit as a percentage of net sales decreased to 66.2% in 2016 from 66.4% in 2015 as the benefit from the suspension of the medical device excise tax and favorable productivity was more than offset by unfavorable mix, including the impact of acquisitions and the unfavorable impact of foreign currency exchange.

| Reported | $ | 8,173 | | $ | 7,495 | | $ | 6,602 | | | 65.7 | % | 66.2 | % | 66.4 | % |

| Adjusted | $ | 8,252 | | $ | 7,546 | | $ | 6,616 | | | 66.3 | % | 66.6 | % | 66.5 | % |

17.1% for 2017, 2016 and 2015.

The effective income tax rate for 2017 includes the impact of complying with the Tax Cuts and Jobs Act of 2017 signed into law in December 2017, partially offset by the benefits from the adoption of ASU 2016-09 Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting on January 1, 2017 and continued lower effective income tax rates as a result of the European regional headquarters.

affect the comparability and trend of sales.

minimum of the range of probable loss to resolve certain regulatory matters and other legal settlements.

| Reported | $ | 6,602 | | $ | 3,610 | | $ | 210 | | $ | 1,861 | | $ | 1,439 | | 17.1 | % | $ | 3.78 | |

| Amortization of purchased intangible assets | — | | | — | | | (210 | | ) | 210 | | | 147 | | | 1.5 | | 0.39 | | |

| Restructuring-related and other charges | 7 | | | (125 | | ) | — | | | 132 | | | 97 | | | 0.7 | | 0.26 | | |

| Rejuvenate and other recall matters | — | | | — | | | — | | | 296 | | | 210 | | | 2.0 | | 0.55 | | |

| Tax Matters | — | | | — | | | — | | | — | | | 78 | | | (4.4 | ) | 0.20 | | |

| Adjusted | $ | 6,616 | | $ | 3,510 | | $ | — | | $ | 2,481 | | $ | 1,949 | | 17.3 | % | $ | 5.12 | |

The decrease in cash from operations in 2017 was primarily due to higher Rejuvenate and ABG II recall-related payments compared to 2016 and the unfavorable impact of foreign currency remeasurement.

Acquisitions, Net of Cash Acquired: Acquisitions resulted in cash consumption of $831, $4,332 and $153 in 2017, 2016 and 2015.

In 2015 the primary acquisition was CHG Hospital Beds, Inc.

Purchases of Property, Plant and Equipment: Purchases of property, plant and equipment were $598, $490 and $270 in 2017, 2016 and 2015.

Capital expenditures in 2017 were primarily due to capital expenditures associated with the development of our global ERP system and investments in new and existing plants and equipment to support sales growth.

Refer to Notes 1, [removed: 3 and] 4 [added: and 5] to our Consolidated Financial Statements for information regarding our use of derivative instruments to mitigate these risks.

A hypothetical 10% change in foreign currencies relative to the United States Dollar would change the December 31, [removed: 2017] [added: 2018] fair value [added: of these instruments] by approximately [removed: $349.][added: $334.]

STRYKER CORPORATION [removed: 2017] [added: 2018] FORM 10-K

[removed: ][added: ]

Our products are sold in over [removed: 85] [added: 80] 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.

Financial information regarding our reportable business segments and certain geographic information is included under [removed: "Results] [added: "Consolidated Results] of Operations" in Item 7 of this report and Note [removed: 13] [added: 14] to our Consolidated Financial Statements.

| | [removed: 2017] [added: 2018] | | | | | | [removed: 2016] [added: 2017] | | | | | | [removed: 2015] [added: 2016] | | | | |

| Orthopaedics | $ | [removed: 4,713] [added: 4,991] | | [removed: 38] [added: 37] | % | | $ | [removed: 4,422] [added: 4,713] | | [removed: 39] [added: 38] | % | | $ | [removed: 4,223] [added: 4,422] | | [removed: 43] [added: 39] | % |

| MedSurg | [removed: 5,557] [added: 6,045] | | | [removed: 45] [added: 44] | | | [removed: 4,894] [added: 5,557] | | | [removed: 43] [added: 45] | | | [removed: 3,895] [added: 4,894] | | | [removed: 39] [added: 43] | |

| Neurotechnology and Spine | [removed: 2,174] [added: 2,565] | | | [removed: 17] [added: 19] | | | [removed: 2,009] [added: 2,174] | | | [removed: 18] [added: 17] | | | [removed: 1,828] [added: 2,009] | | | 18 | |

| Total | $ | [removed: 12,444] [added: 13,601] | | 100 | % | | $ | [removed: 11,325] [added: 12,444] | | 100 | % | | $ | [removed: 9,946] [added: 11,325] | | 100 | % |

| Knees | $ | [removed: 1,595] [added: 1,701] | | 34 | % | | $ | [removed: 1,490] [added: 1,595] | | 34 | % | | $ | [removed: 1,403] [added: 1,490] | | [removed: 33] [added: 34] | % |

| Hips | [removed: 1,303] [added: 1,336] | | | [removed: 28] [added: 27] | | | [removed: 1,283] [added: 1,303] | | | [removed: 29] [added: 28] | | | [removed: 1,263] [added: 1,283] | | | [removed: 30] [added: 29] | |

| Trauma and Extremities | [removed: 1,478] [added: 1,580] | | | [removed: 31] [added: 32] | | | [removed: 1,364] [added: 1,478] | | | 31 | | | [removed: 1,291] [added: 1,364] | | | 31 | |

| Other | [removed: 337] [added: 374] | | | 7 | | | [removed: 285] [added: 337] | | | [removed: 6] [added: 7] | | | [removed: 266] [added: 285] | | | 6 | |

| Total | $ | [removed: 4,713] [added: 4,991] | | 100 | % | | $ | [removed: 4,422] [added: 4,713] | | 100 | % | | $ | [removed: 4,223] [added: 4,422] | | 100 | % |

| Instruments | $ | [removed: 1,678] [added: 1,822] | | 30 | % | | $ | [removed: 1,553] [added: 1,678] | | [removed: 32] [added: 30] | % | | $ | [removed: 1,466] [added: 1,553] | | [removed: 38] [added: 32] | % |

| Endoscopy | [removed: 1,652] [added: 1,846] | | | [removed: 30] [added: 31] | | | [removed: 1,470] [added: 1,652] | | | 30 | | | [removed: 1,390] [added: 1,470] | | | [removed: 36] [added: 30] | |

| Medical | [removed: 1,969] [added: 2,118] | | | 35 | | | [removed: 1,633] [added: 1,969] | | | [removed: 33] [added: 35] | | | [removed: 823] [added: 1,633] | | | [removed: 21] [added: 33] | |

| Sustainability | [removed: 258] [added: 259] | | | [removed: 5] [added: 4] | | | [removed: 238] [added: 258] | | | 5 | | | [removed: 216] [added: 238] | | | 5 | |

| Total | $ | [removed: 5,557] [added: 6,045] | | 100 | % | | $ | [removed: 4,894] [added: 5,557] | | 100 | % | | $ | [removed: 3,895] [added: 4,894] | | 100 | % |

STRYKER CORPORATION [removed: 2017] [added: 2018] FORM 10-K

[added: Our spinal] implant offering includes cervical, thoracolumbar and interbody systems used in spinal injury, deformity and degenerative therapies.

| Neurotechnology | $ | [removed: 1,423] [added: 1,737] | | [removed: 65] [added: 68] | % | | $ | [removed: 1,255] [added: 1,423] | | [removed: 62] [added: 65] | % | | $ | [removed: 1,088] [added: 1,255] | | [removed: 60] [added: 62] | % |

| Spine | [removed: 751] [added: 828] | | | [removed: 35] [added: 32] | | | [removed: 754] [added: 751] | | | [removed: 38] [added: 35] | | | [removed: 740] [added: 754] | | | [removed: 40] [added: 38] | |

| Total | $ | [removed: 2,174] [added: 2,565] | | 100 | % | | $ | [removed: 2,009] [added: 2,174] | | 100 | % | | $ | [removed: 1,828] [added: 2,009] | | 100 | % |

On December 31, [removed: 2017] [added: 2018] we owned approximately [removed: 2,674] [added: 3,068] United States patents and approximately [removed: 3,886] [added: 4,716] international patents.

[removed: In addition,] [added: Finally,] we [added: are required to] comply with the unique regulatory requirements of each of the countries in Europe and other [removed: countries] [added: countries, including China,] in which we market our products.

[added: We believe our policies, practices and] procedures are properly designed to comply, in all material respects, with applicable environmental laws and regulations.

On December 31, [removed: 2017] [added: 2018] we had approximately [removed: 33,000] [added: 36,000] employees globally.

| Kevin A. Lobo | [removed: 52] [added: 53] | Chairman and Chief Executive Officer | 2011 |

| Yin C. Becker | [removed: 54] [added: 55] | Vice [removed: President of Communication and] [added: President, Communications,] Public Affairs [added: and Corporate Marketing] | 2016 |

| William E. Berry Jr. | [removed: 52] [added: 53] | Vice President, Corporate Controller and Principal Accounting Officer | 2014 |

| Glenn S. Boehnlein | [removed: 56] [added: 57] | Vice President, Chief Financial Officer | 2016 |

| [removed: Lonny J. Carpenter] [added: Viju Menon] | [removed: 56] [added: 51] | Group President, Global Quality and [removed: Business] Operations | [removed: 2008] [added: 2018] |

| M. Kathryn Fink | [removed: 48] [added: 49] | Vice President, Chief Human Resources Officer | 2016 |

| Katherine A. Owen | [removed: 47] [added: 48] | Vice President, Strategy and Investor Relations | 2007 |

| Bijoy S.N. Sagar | [removed: 49] [added: 50] | Vice President, Chief [removed: Information] [added: Digital Technology] Officer | 2014 |

| Timothy J. Scannell | [removed: 53] [added: 54] | [removed: Group President, MedSurg] [added: President] and [removed: Neurotechnology] [added: Chief Operating Officer] | 2008 |

Each of our executive officers was elected by our Board of Directors to serve in the office indicated until the first meeting of the Board of Directors following the annual meeting of shareholders in [removed: 2018] [added: 2019] or until a successor is chosen and qualified or until his or her resignation or removal.

Each of our executive officers held the position above or served Stryker in various executive or administrative capacities for at least five years, except for [removed: Ms. Fink] [added: Mr. Menon] and Mr. Sagar.

The Mako Robotic-Arm Assisted Surgical System was designed to help surgeons provide patients with a personalized surgical experience based on their specific diagnosis and anatomy.

The Mako System currently offers three applications supporting Partial Knee, Total Hip and Total Knee procedures.

| | 2018 | | | | | | 2017 | | | | | | 2016 | | | | |

| | 2018 | | | | | | 2017 | | | | | | 2016 | | | | |

| | 2018 | | | | | | 2017 | | | | | | 2016 | | | | |

Certain of our products also fall under the FDA's drug classification, as well as other FDA classifications.

In addition, the EU enacted the EU Medical Device Regulation (EU MDR) in May 2017 with an effective date of May 2020, which imposes stricter requirements for the marketing and sale of medical devices, including in the areas of clinical evaluation requirements, quality systems, labeling and post-market surveillance.

STRYKER CORPORATION 2018 FORM 10-K

| As of January 31, 2019 | | | |

| Michael D. Hutchinson | 48 | Vice President, Chief Legal Officer | 2014 |

Prior to joining Stryker in April 2018, Mr. Menon held various senior supply chain leadership roles with Verizon Communications Inc. for the previous eight years, most recently as the Chief Supply Chain Officer.

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.

Our spinal

Research and Development

Continued investment in research and development activities is critical to drive future growth and supports our strategy to make healthcare better through development of products and services that improve patient outcomes.

Most of our products and product improvements were developed internally at research facilities in the United States, China, France, Germany, India, Ireland, Puerto Rico, Sweden, Switzerland and United Kingdom.

We also invest through acquisitions in technologies developed by third parties that have the potential to expand the markets in which we operate.

We maintain close working relationships with physicians and medical personnel in hospitals and universities who assist us in product development efforts.

The total cost of research, development and engineering activities were $787, $715 and $625 in 2017, 2016 and 2015.

We believe our policies, practices and

| As of January 31, 2018 | | | |

| David K. Floyd | 57 | Group President, Orthopaedics | 2012 |

| Michael D. Hutchinson | 47 | General Counsel | 2014 |

| Graham A. McLean | 53 | President, Asia-Pacific | 2017 |

Prior to joining Stryker in October 2013, Ms. Fink held a variety of senior level human resources roles for the previous six years at Johnson & Johnson, most recently as the Worldwide Vice President, Human Resources of Ethicon.

While at Stryker, Ms. Fink held two different senior level Human Resource roles.

Mr. McLean was appointed to the position of President, Asia-Pacific, effective January 1, 2017.

Prior to this role, Mr. McLean held a variety of senior level leadership roles at Stryker since 2005.

We are involved in various proceedings, legal actions and claims arising in the normal course of business, including proceedings related to product, labor and intellectual property, and the matters described in more detail in Note [removed: 6] [added: 7] to our Consolidated Financial Statements.

For the fiscal year ended December 31, [removed: 2017][added: 2018]

[removed: ][added: ]

| [removed: (Title] [added: Title] of each [removed: class)] [added: class] | | [removed: (Name] [added: Name] of each exchange on which [removed: registered)] [added: registered] |

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Website, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

| Large accelerated filer | \[X\] | [removed: |] Accelerated filer | \[ \] | [added: Emerging growth company | \[ \] |]

| Non-accelerated filer | \[ \] | [removed: (Do not check if a smaller reporting company) |] Small reporting company | \[ \] | [added: | |]

[removed: Based on the closing sales price of June 30, 2017, the] [added: The] aggregate market value of the voting stock held by non-affiliates of the registrant was approximately [removed: $48,322,392,325.][added: $58,918,371,156 at June 30, 2018.]

There were [removed: 374,642,060] [added: 372,664,636] shares outstanding of the registrant’s common stock, $.10 par value, on January 31, [removed: 2018.][added: 2019.]

Portions of the proxy statement to be filed with the U.S. Securities and Exchange Commission relating to the [removed: 2018] [added: 2019] Annual Meeting of Shareholders (the [removed: 2018] [added: 2019] proxy statement) are incorporated by reference into Part III.

STRYKER CORPORATION [removed: 2017] [added: 2018] FORM 10-K

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure [removed: 31][added: 33]

Controls and Procedures [removed: 31][added: 33]

Other Information [removed: 33][added: 34]

Directors, Executive Officers and Corporate Governance [removed: 33][added: 34]

Executive Compensation [removed: 33][added: 35]

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters [removed: 33][added: 35]

Certain Relationships and Related Transactions, and Director Independence [removed: 33][added: 35]

Principal Accounting Fees and Services [removed: 33][added: 35]

Exhibits, Financial Statement Schedules [removed: 34][added: 36]

Form 10-K Summary [removed: 37][added: 39]

10-K 1 syk10k123118.htm 10-K

| Floating Rate Notes due 2020 | | New York Stock Exchange |

| 1.125% Notes due 2023 | | New York Stock Exchange |

| 2.125% Notes due 2027 | | New York Stock Exchange |

| 2.625% Notes due 2030 | | New York Stock Exchange |

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| | | | | | |

STRYKER CORPORATION 2018 FORM 10-K

10-K 1 syk10k123117.htm 10-K

| | | | | |

| --- | --- | --- | --- | --- |

| | | | Emerging growth company | \[ \] |

We have approximately [removed: 24] [added: 23] company-owned and [removed: 251] [added: 273] leased locations worldwide including [removed: 42] [added: 43] manufacturing locations.

On January 31, [removed: 2018] [added: 2019] there were [removed: 2,833] [added: 2,729] shareholders of record of our common stock.

We did not repurchase any shares in the three months ended December 31, [removed: 2017] [added: 2018] and the total dollar value of shares that could be acquired under our authorized repurchase program at December 31, [removed: 2017] [added: 2018] was [removed: $1,640.][added: $1,340.]

We issued [removed: 100] [added: 150] shares of our common stock in the fourth quarter of [removed: 2017] [added: 2018] as performance incentive awards.

The graph assumes $100 (not in millions) invested on December 31, [removed: 2012] [added: 2013] in our common stock and each of the indices.

[removed: ][added: ]

| Company / Index | [removed: 2012 | | |] 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | | [added: 2018 | | |]

STRYKER CORPORATION [removed: 2017] [added: 2018] FORM 10-K

| Stryker Corporation | $ | 100.00 | | $ | 127.41 | | $ | 127.44 | | $ | 166.51 | | $ | 217.86 | | $ | 223.13 | |

| S&P 500 Index | $ | 100.00 | | $ | 113.69 | | $ | 115.26 | | $ | 129.05 | | $ | 157.22 | | $ | 150.33 | |

| S&P 500 Health Care Index | $ | 100.00 | | $ | 125.34 | | $ | 133.97 | | $ | 130.37 | | $ | 159.15 | | $ | 169.44 | |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Quarterly Stock Price and Dividend Information | | | | | | | | | | | | |

| 2017 Quarter | Mar 31 | | | Jun 30 | | | Sep 30 | | | Dec 31 | | |

| Dividends declared per share of common stock | $ | 0.425 | | $ | 0.425 | | $ | 0.425 | | $ | 0.470 | |

| Market price of common stock: | | | | | | | | | | | | |

| High | $ | 133.59 | | $ | 145.62 | | $ | 148.84 | | $ | 160.62 | |

| Low | $ | 116.50 | | $ | 129.82 | | $ | 137.70 | | $ | 141.68 | |

| 2016 Quarter | | | | | | | | | | | | |

| Dividends declared per share of common stock | $ | 0.380 | | $ | 0.380 | | $ | 0.380 | | $ | 0.425 | |

| High | $ | 107.95 | | $ | 119.83 | | $ | 123.55 | | $ | 121.84 | |

| Low | $ | 86.68 | | $ | 106.26 | | $ | 109.75 | | $ | 106.48 | |

| Stryker Corporation | $ | 100.00 | | $ | 139.29 | | $ | 177.47 | | $ | 177.51 | | $ | 231.94 | | $ | 303.46 | |

| S&P 500 Index | $ | 100.00 | | $ | 132.39 | | $ | 150.51 | | $ | 152.59 | | $ | 170.84 | | $ | 208.14 | |

| S&P 500 Health Care Index | $ | 100.00 | | $ | 141.46 | | $ | 177.30 | | $ | 189.52 | | $ | 184.42 | | $ | 225.13 | |

| Statement of Earnings Data | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Net sales | | $ | [removed: 12,444] [added: 13,601] | | | $ | [removed: 11,325] [added: 12,444] | | | $ | [removed: 9,946] [added: 11,325] | | | $ | [removed: 9,675] [added: 9,946] | | | $ | [removed: 9,021] [added: 9,675] | |

| Research, development and engineering expenses | | [removed: 787] [added: 862] | | | | [removed: 715] [added: 787] | | | | [removed: 625] [added: 715] | | | | [removed: 614] [added: 625] | | | | [removed: 536] [added: 614] | | |

| Selling, general and administrative expenses | | [removed: 4,552] [added: 5,099] | | | | [removed: 4,137] [added: 4,552] | | | | [removed: 3,610] [added: 4,137] | | | | [removed: 3,547] [added: 3,610] | | | | [removed: 3,467] [added: 3,547] | | |

| Recall charges, net of insurance proceeds | | [removed: 173] [added: 23] | | | | [removed: 158] [added: 173] | | | | [removed: 296] [added: 158] | | | | [removed: 761] [added: 296] | | | | [removed: 622] [added: 761] | | |

| Amortization of intangible assets | | [removed: 371] [added: 417] | | | | [removed: 319] [added: 371] | | | | [removed: 210] [added: 319] | | | | [removed: 188] [added: 210] | | | | [removed: 138] [added: 188] | | |

| Total operating expenses | | $ | [removed: 5,883] [added: 6,401] | | | $ | [removed: 5,329] [added: 5,883] | | | $ | [removed: 4,741] [added: 5,329] | | | $ | [removed: 5,110] [added: 4,741] | | | $ | [removed: 4,763] [added: 5,110] | |

| Earnings before income taxes | | $ | [removed: 2,063] [added: 2,356] | | | $ | [removed: 1,921] [added: 2,063] | | | $ | [removed: 1,735] [added: 1,921] | | | $ | [removed: 1,160] [added: 1,735] | | | $ | [removed: 1,212] [added: 1,160] | |

| Income taxes | | [removed: 1,043] [added: (1,197] | | [added: )] | | [removed: 274] [added: 1,043] | | | | [removed: 296] [added: 274] | | | | [removed: 645] [added: 296] | | | | [removed: 206] [added: 645] | | |

| Net earnings | | $ | [removed: 1,020] [added: 3,553] | | | $ | [removed: 1,647] [added: 1,020] | | | $ | [removed: 1,439] [added: 1,647] | | | $ | [removed: 515] [added: 1,439] | | | $ | [removed: 1,006] [added: 515] | |

| Basic net earnings per share of common stock | | $ | [removed: 2.73] [added: 9.50] | | | $ | [removed: 4.40] [added: 2.73] | | | $ | [removed: 3.82] [added: 4.40] | | | $ | [removed: 1.36] [added: 3.82] | | | $ | [removed: 2.66] [added: 1.36] | |

| Diluted net earnings per share of common stock | | $ | [removed: 2.68] [added: 9.34] | | | $ | [removed: 4.35] [added: 2.68] | | | $ | [removed: 3.78] [added: 4.35] | | | $ | [removed: 1.34] [added: 3.78] | | | $ | [removed: 2.63] [added: 1.34] | |

| Dividends declared per share of common stock | | $ | [removed: 1.745] [added: 1.93] | | | $ | [removed: 1.565] [added: 1.745] | | | $ | [removed: 1.415] [added: 1.565] | | | $ | [removed: 1.26] [added: 1.415] | | | $ | [removed: 1.10] [added: 1.26] | |

| Cash, cash equivalents and current marketable securities | | $ | [removed: 2,793] [added: 3,699] | | | $ | [removed: 3,384] [added: 2,793] | | | $ | [removed: 4,079] [added: 3,384] | | | $ | [removed: 5,000] [added: 4,079] | | | $ | [removed: 3,980] [added: 5,000] | |

| Accounts receivable, less allowance | | [removed: 2,198] [added: 2,332] | | | | [removed: 1,967] [added: 2,198] | | | | [removed: 1,662] [added: 1,967] | | | | [removed: 1,572] [added: 1,662] | | | | [removed: 1,518] [added: 1,572] | | |

| Inventories | | [removed: 2,465] [added: 2,955] | | | | [removed: 2,030] [added: 2,465] | | | | [removed: 1,639] [added: 2,030] | | | | [removed: 1,588] [added: 1,639] | | | | [removed: 1,422] [added: 1,588] | | |

| Property, plant and equipment, net | | [removed: 1,975] [added: 2,291] | | | | [removed: 1,569] [added: 1,975] | | | | [removed: 1,199] [added: 1,569] | | | | [removed: 1,098] [added: 1,199] | | | | [removed: 1,081] [added: 1,098] | | |

| Total assets | | [removed: 22,197] [added: 27,229] | | | | [removed: 20,435] [added: 22,197] | | | | [removed: 16,223] [added: 20,435] | | | | [removed: 17,258] [added: 16,223] | | | | [removed: 15,383] [added: 17,258] | | |

| Accounts payable | | [removed: 487] [added: 646] | | | | [removed: 437] [added: 487] | | | | [removed: 410] [added: 437] | | | | [removed: 329] [added: 410] | | | | [removed: 314] [added: 329] | | |

| Total debt | | [removed: 7,222] [added: 9,859] | | | | [removed: 6,914] [added: 7,222] | | | | [removed: 3,998] [added: 6,914] | | | | [removed: 3,952] [added: 3,998] | | | | [removed: 2,748] [added: 3,952] | | |

| Shareholders’ equity | | $ | [removed: 9,980] [added: 11,730] | | | $ | [removed: 9,550] [added: 9,980] | | | $ | [removed: 8,511] [added: 9,550] | | | $ | [removed: 8,595] [added: 8,511] | | | $ | [removed: 9,047] [added: 8,595] | |

| Net cash provided by operating activities | | $ | [removed: 1,559] [added: 2,610] | | | $ | [removed: 1,915] [added: 1,559] | | | $ | [removed: 981] [added: 1,915] | | | $ | [removed: 1,858] [added: 981] | | | $ | [removed: 1,930] [added: 1,858] | |

| Purchases of property, plant and equipment | | [removed: 598] [added: 572] | | | | [removed: 490] [added: 589] | | | | [removed: 270] [added: 490] | | | | [removed: 233] [added: 270] | | | | [removed: 195] [added: 233] | | |

| Depreciation | | [removed: 271] [added: 306] | | | | [removed: 227] [added: 271] | | | | [removed: 187] [added: 227] | | | | [removed: 190] [added: 187] | | | | [removed: 169] [added: 190] | | |

| Acquisitions, net of cash acquired | | [removed: 831] [added: 2,451] | | | | [removed: 4,332] [added: 831] | | | | [removed: 153] [added: 4,332] | | | | [removed: 916] [added: 153] | | | | [removed: 2,320] [added: 916] | | |

| Dividends paid | | [removed: 636] [added: 703] | | | | [removed: 568] [added: 636] | | | | [removed: 521] [added: 568] | | | | [removed: 462] [added: 521] | | | | [removed: 401] [added: 462] | | |

| Repurchase of common stock | | $ | [removed: 230] [added: 300] | | | $ | [removed: 13] [added: 230] | | | $ | [removed: 700] [added: 13] | | | $ | [removed: 100] [added: 700] | | | $ | [removed: 317] [added: 100] | |

| Number of shareholders of record | | [removed: 2,850] [added: 2,732] | | | | [removed: 3,010] [added: 2,850] | | | | [removed: 3,118] [added: 3,010] | | | | [removed: 3,305] [added: 3,118] | | | | [removed: 3,612] [added: 3,305] | | |

| Approximate number of employees | | [removed: 33,000] [added: 36,000] | | | | 33,000 | | | | [removed: 27,000] [added: 33,000] | | | | [removed: 26,000] [added: 27,000] | | | | [removed: 25,000] [added: 26,000] | | |

STRYKER CORPORATION [removed: 2017] [added: 2018] FORM 10-K

| Cost of sales | | 4,663 | | | | 4,264 | | | | 3,821 | | | | 3,333 | | | | 3,310 | | |

| Gross profit | | $ | 8,938 | | | $ | 8,180 | | | $ | 7,504 | | | $ | 6,613 | | | $ | 6,365 | |

| Operating income | | $ | 2,537 | | | $ | 2,297 | | | $ | 2,175 | | | $ | 1,872 | | | $ | 1,255 | |

| Other income (expense), net | | (181 | | ) | | (234 | | ) | | (254 | | ) | | (137 | | ) | | (95 | | ) |

| Amortization of intangible assets | | 417 | | | | 371 | | | | 319 | | | | 210 | | | | 188 | | |

| Cost of sales | | 4,271 | | | | 3,830 | | | | 3,344 | | | | 3,319 | | | | 3,002 | | |

| Gross profit | | $ | 8,173 | | | $ | 7,495 | | | $ | 6,602 | | | $ | 6,356 | | | $ | 6,019 | |

| Operating income | | $ | 2,290 | | | $ | 2,166 | | | $ | 1,861 | | | $ | 1,246 | | | $ | 1,256 | |

| Other income (expense), net | | (227 | | ) | | (245 | | ) | | (126 | | ) | | (86 | | ) | | (44 | | ) |

Certain prior year amounts on the Consolidated Statements of Cash Flows have been reclassified as a result of the adoption of Accounting Standards Update (ASU) 2016-09, Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting, adopted January 1, 2017.

We have audited the accompanying consolidated balance sheets of Stryker Corporation and subsidiaries (the Company) as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the related consolidated statements of earnings and comprehensive income, shareholder’s equity, and cash flows, for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the [removed: "financial statements").][added: “consolidated financial statements“).]

In our opinion, the [added: consolidated] financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February [removed: 8, 2018] [added: 7, 2019] expressed an unqualified opinion thereon.

STRYKER CORPORATION [removed: 2017] [added: 2018] FORM 10-K

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |

| Net sales | $ | [removed: 12,444] [added: 13,601] | | | $ | [removed: 11,325] [added: 12,444] | | | $ | [removed: 9,946] [added: 11,325] | |

| Cost of sales | [removed: 4,271 | |] [added: $] | [added: 7] | [removed: 3,830] | [added: $] | [added: (6] | [added: )] | [removed: 3,344] [added: $] | [added: —] | |

| Research, development and engineering expenses | [removed: 787] [added: 862] | | | | [removed: 715] [added: 787] | | | | [removed: 625] [added: 715] | | |

| Selling, general and administrative expenses | [removed: 4,552] [added: 5,099] | | | | [removed: 4,137] [added: 4,552] | | | | [removed: 3,610] [added: 4,137] | | |

| Recall charges, net of insurance proceeds | [removed: 173] [added: 23] | | | | [removed: 158] [added: 173] | | | | [removed: 296] [added: 158] | | |

| Amortization of intangible assets | [removed: 371] [added: 417] | | | | [removed: 319] [added: 371] | | | | [removed: 210] [added: 319] | | |

| Total operating expenses | $ | [removed: 5,883] [added: 6,401] | | | $ | [removed: 5,329] [added: 5,883] | | | $ | [removed: 4,741] [added: 5,329] | |

| Other income (expense), net | [removed: (227] [added: (6] | | ) | [removed: | (245] [added: (9] | | ) | [removed: | (126] [added: (19] | | ) |

| Earnings before income taxes | $ | [removed: 2,063] [added: 2,356] | | | $ | [removed: 1,921] [added: 2,063] | | | $ | [removed: 1,735] [added: 1,921] | |

| Income taxes | [removed: 1,043] [added: (1,197] | | [added: )] | | [removed: 274] [added: 1,043] | | | | [removed: 296] [added: 274] | | |

| Net earnings | [removed: $] | [removed: 1,020] | [added: 3,553] | | [removed: $] | [removed: 1,647] | | | [removed: $] [added: 1,020] | [removed: 1,439] | | [added: | | | 1,647 | | |]

| Net earnings [added: (loss)] per share of common stock: | | | | | | | | | | | |

| Basic | [removed: 374.0] [added: 374.1] | | | | [removed: 374.1] [added: 374.0] | | | | [removed: 376.6] [added: 374.1] | | |

| Effect of dilutive employee stock options | [removed: 6.1] [added: 6.2] | | | | [removed: 4.4] [added: 6.1] | | | | [removed: 4.3] [added: 4.4] | | |

| Diluted | [removed: 380.1] [added: 380.3] | | | | [removed: 378.5] [added: 380.1] | | | | [removed: 380.9] [added: 378.5] | | |

| Marketable securities | [removed: (4] [added: —] | | [removed: )] | | [removed: —] [added: (4] | | [added: )] | | [removed: (3] [added: —] | | [removed: )] |

| Pension plans | [removed: (2] [added: (3] | | ) | | [removed: (13] [added: (2] | | ) | | [removed: 17] [added: (13] | | [added: )] |

| Unrealized gains (losses) on designated hedges | [removed: 4] [added: 22] | | | | [removed: 20] [added: 4] | | | | [removed: (9] [added: 20] | | [removed: )] |

| Financial statement translation | [removed: 210] [added: (97] | | [added: )] | | [removed: (129] [added: 210] | | [removed: )] | | [removed: (390] [added: (129] | | ) |

| Total other comprehensive income (loss), net of tax | $ | [removed: 208] [added: (78] | [added: )] | | $ | [removed: (122] [added: 208] | [removed: )] | | $ | [removed: (385] [added: (122] | ) |

| Comprehensive income | $ | [removed: 1,228] [added: 3,475] | | | $ | [removed: 1,525] [added: 1,228] | | | $ | [removed: 1,054] [added: 1,525] | |

| | [added: 2018 | | | |] 2017 | | | | 2016 | | |

| Cash and cash equivalents | $ | [removed: 2,542] [added: 3,616] | | | $ | [removed: 3,316] [added: 2,542] | |

| Marketable securities | [removed: 251] [added: 83] | | | | [removed: 68] [added: 251] | | |

| Accounts receivable, less allowance of [removed: $59 ($56] [added: $64 ($59] in [removed: 2016)] [added: 2017)] | [removed: 2,198] [added: 2,332] | | | | [removed: 1,967] [added: 2,198] | | |

| Materials and supplies | [removed: 528] [added: 606] | | | | [removed: 425] [added: 528] | | |

| Work in process | [removed: 148] [added: 149] | | | | [removed: 130] [added: 148] | | |

| Finished goods | [removed: 1,789] [added: 2,200] | | | | [removed: 1,475] [added: 1,789] | | |

| Total inventories | $ | [removed: 2,465] [added: 2,955] | | | $ | [removed: 2,030] [added: 2,465] | |

| Prepaid expenses and other current assets | [removed: 537] [added: 747] | | | | [removed: 480] [added: 537] | | |

| Total current assets | $ | [removed: 7,993] [added: 9,733] | | | $ | [removed: 7,861] [added: 7,993] | |

| Land, buildings and improvements | [removed: 936] [added: 1,041] | | | | [removed: 820] [added: 936] | | |

| Machinery and equipment | [removed: 2,864] [added: 3,236] | | | | [removed: 2,341] [added: 2,864] | | |

| Total property, plant and equipment | [removed: 3,800] [added: 4,277] | | | | [removed: 3,161] [added: 3,800] | | |

| Less allowance for depreciation | [removed: 1,825] [added: 1,986] | | | | [removed: 1,592] [added: 1,825] | | |

Adoption of ASU No. 2016-16

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for the income tax consequences of intercompany transfers of assets other than inventory in 2018 due to the adoption of Accounting Standards Update (ASU) No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.

February 7, 2019

| Gross profit | $ | 8,938 | | | $ | 8,180 | | | $ | 7,504 | |

| Operating income | $ | 2,537 | | | $ | 2,297 | | | $ | 2,175 | |

| Net earnings (loss) | $ | 3,553 | | | $ | 1,020 | | | $ | 1,647 | |

| Basic | $ | 9.50 | | | $ | 2.73 | | | $ | 4.40 | |

| Diluted | $ | 9.34 | | | $ | 2.68 | | | $ | 4.35 | |

| Net earnings (loss) | $ | 3,553 | | | $ | 1,020 | | | $ | 1,647 | |

STRYKER CORPORATION 2018 FORM 10-K

| | 2018 | | | | 2017 | | |

| Noncurrent deferred income tax assets | 1,678 | | | | 283 | | |

STRYKER CORPORATION 2018 FORM 10-K

| Cumulative effect of accounting changes | | | (759 | | ) | | | | — | | | | | | — | | |

STRYKER CORPORATION 2018 FORM 10-K

| Proceeds and payments on short-term borrowings, net | (1 | | ) | | (200 | | ) | | 209 | | |

STRYKER CORPORATION 2018 FORM 10-K

Revenue Recognition: Sales are recognized as the performance obligations to deliver products or services are satisfied and are recorded based on the amount of consideration we expect to receive in exchange for satisfying the performance obligations.

Our sales continue to be recognized primarily when we transfer control to the customer, which can be on the date of shipment, the date of receipt by the customer or, for most Orthopaedics products, when we have received a purchase order and appropriate notification the product has been used or implanted.

Products and services are primarily transferred to customers at a point in time, with some transfers of services taking place over time.

Our estimate of the provision for sales returns has been established based on contract terms with our customers and historical business practices and current trends.

STRYKER CORPORATION 2018 FORM 10-K

income (expense), net.

From time to time, we designate derivative and non-derivative financial instruments as net investment hedges of our investments in certain international subsidiaries.

and qualifies as a cash flow hedge is reported as a component of AOCI.

At December 31, 2018, there were no open cash flow or fair value interest rate hedges.

For asset acquisitions IPRD is expensed immediately unless there is an alternative future use.

STRYKER CORPORATION 2018 FORM 10-K

fair value of the related asset or asset group as determined by an appropriate market appraisal or other valuation technique.

We evaluate all Accounting Standards Updates (ASUs) issued by

the Financial Accounting Standards Board (FASB) for consideration of their applicability.

ASUs not included in our disclosures were assessed and determined to be either not applicable or are not expected to have a material impact on our Consolidated Financial Statements.

In August 2018 the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal Use Software - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which amends the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract to align with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The update is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

We are in the process of evaluating the impact on our Consolidated Financial Statements and the timing of adoption of this update.

Early adoption is permitted.

We will adopt this ASU and related amendments on January 1, 2019 and expect to elect certain practical expedients permitted under the transition guidance.

Additionally, we will elect the optional transition method that allows for a cumulative-effect adjustment in the period of adoption and will not restate prior periods.

We are substantially complete in assessing the transitional impact from adopting the standard; however, we are still assessing the lessor provisions under the standard but do not expect any material adjustments to the estimated right of use asset and/or lease liability.

We currently estimate the impact of the adoption will result in the recognition of right of use assets and lease liabilities of approximately $350 as of January 1, 2019.

February 8, 2018

| Gross profit | $ | 8,173 | | | $ | 7,495 | | | $ | 6,602 | |

| Operating income | $ | 2,290 | | | $ | 2,166 | | | $ | 1,861 | |

| Basic net earnings per share of common stock | $ | 2.73 | | | $ | 4.40 | | | $ | 3.82 | |

| Diluted net earnings per share of common stock | $ | 2.68 | | | $ | 4.35 | | | $ | 3.78 | |

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| Accrued recall expenses | 196 | | | | 594 | | |

| Proceeds from borrowings | 733 | | | | 1,094 | | | | 1,576 | | |

| Payments on borrowings | (933 | | ) | | (1,635 | | ) | | (2,272 | | ) |

Revenue Recognition: Sales are recognized when revenue is realized or realizable and has been earned.

The resulting losses from

We designated certain long-term intercompany loans payable and forward exchange contracts as net investment hedges of our investments in certain international subsidiaries that use the Euro as their functional currency.

statements.

We are currently evaluating our timing of adopting this standard.

In February 2016 the FASB issued ASU 2016-02, Leases.

We are in the process of evaluating the impact on our Consolidated Financial Statements and anticipate most of our current operating leases, as well as some service contracts, will result in the recognition of right to use assets and corresponding lease liabilities in our Consolidated Balance Sheets.

We also anticipate changes in classification between financial statement line items in our Consolidated Statements of Earnings and Consolidated Statements of Cash Flows, but do not anticipate adoption of the update will have a material impact on net earnings and cash flows.

We will adopt this update on January 1, 2018.

This update outlines a single, comprehensive model for accounting for revenue from contracts with customers.

The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method).

We have finalized our assessment of the impact from this update and have recorded a cumulative-effect adjustment to decrease retained earnings in the amount of $55 as of January 1, 2018.

We expect the impact from adoption of this standard will be recognized in our Consolidated Statements of Earnings in 2018.

On January 1, 2017 we adopted ASU 2016-09, Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting.

The impact on our Consolidated Statements of Earnings in 2017 was a tax benefit of $57.

In our prior year

Consolidated Statements of Cash Flow we reclassified $36 from other financing to income taxes within operating activities to conform to current year presentation.

On January 1, 2017 we adopted ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments.

| Total | 182 | $ | 223 | |

| 2016 | | | | | | | | | |

| Gross notional amount | $ | 1,058 | | $ | 2,841 | | $ | 3,899 | |

On December 31, 2017 we had interest rate swaps with notional amounts of $600 designated as forward starting interest rate swaps in anticipation of future debt issuances.

The market value of outstanding interest rate swap agreements on December 31, 2017 was $44, which was recorded in other current assets with an offsetting amount recorded in AOCI.

Upon the probable issuance of the debt, these amounts will be released to interest expense over the term of the debt.

The cash flow effect of this hedge is recorded in cash flow from operations.

| Fair Value Interest Rate Hedge Instruments | | | | | | | |

| Fair value: | | | | | | | |

| 2015 | $ | — | | $ | (119 | ) | $ | 4 | | $ | (524 | ) | $ | (639 | ) |

| OCI | 3 | | | (20 | | ) | 35 | | | (112 | | ) | (94 | | ) |

Entellus, which had net sales of approximately $75 in 2016, will be integrated into the Instruments business within MedSurg.

The Company's management, with the participation of the Chief Executive Officer and Chief Financial Officer (the Certifying Officers), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) (Exchange Act) [removed: at] [added: as of] December 31, [removed: 2017.][added: 2018.]

Based on that evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures were effective as of December 31, [removed: 2017.][added: 2018.]

There was no change to our internal control over financial reporting during the fourth quarter of [removed: 2017] [added: 2018] that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

| Dollar amounts in millions except per share amounts or as otherwise specified. | [removed: 31] [added: 33] |