Dear shareholders,

In 2015 we continued our positive momentum and delivered another year of strong financial performance. We strengthened our position in Orthopaedics, Medical and Surgical (MedSurg) and Neurotechnology and Spine and made significant progress on globalization, innovation, collaboration and cost transformation.

“The fourth quarter marked our 11th consecutive quarter of at least five percent organic sales growth.
Kevin A. LoboChairman and Chief Executive Officer
CEO Letter Image
Kevin A. LoboChairman and Chief Executive Officer
CEO Letter Image
Financial performance

Our six percent organic sales growth (which excludes the impact of acquisitions and foreign currency exchange) was once again at the high end of the medical technology industry. In fact, the fourth quarter marked our 11th consecutive quarter of at least five percent organic sales growth, demonstrating remarkable consistency. Our reported sales growth was nearly three percent and, in spite of the strong U.S. dollar, which negatively impacted earnings per share by approximately 25 cents, we posted an improvement in adjusted net earnings per diluted share1 of eight percent.

Our businesses in the U.S. posted an impressive overall growth of 8.5 percent, while internationally our growth of 3.7 percent in constant currency was negatively impacted by a significant second-half slowdown in China and Brazil. The sales declines in China and Brazil were offset by growth in other international markets, especially the developed markets of Europe, Japan and Australia, which had strong constant currency growth in 2015.

We also continued to generate healthy operational cash flow, which contributed to a year-end cash position of $4.1 billion. With the strength of our balance sheet, we repurchased 7.4 million shares in 2015 for $700 million and were able to announce an increase in our dividend rate of 10 percent for the January 2016 payment.


net sales in 2015


employees around the world

We merged our European and U.S. businesses under the new Transatlantic Operating Model and had excellent results, with Europe growing similarly to the company average rate in constant currency. This success motivated us to bring Canada into the model in 2016. Additionally, we eliminated the role of Group President of International and shifted the reporting of four regions to our Group Presidents Lonny Carpenter, David Floyd and Tim Scannell to further strengthen our global business connections. Over time, they will work with regional leaders to assess whether additional structural changes are warranted.

With the strong U.S. dollar and the difficult macroeconomic conditions in China and Brazil, sales in emerging markets constituted less than eight percent of our total sales. Despite these immediate challenges, we expect to improve our presence in these markets and grow this percentage over time. Trauson continues to perform well in China and, while expansion outside of China is somewhat behind plan, we remain optimistic about Trauson’s long-term potential in many international markets.

In 2015 we refreshed our brand identity. You will notice this new look in all Stryker materials, including this Annual Review.

Our divisions continue to bolster their pipelines with innovative ideas and products that will drive differentiation and enable us to sustain high sales growth. For example:

  • We have developed capabilities in 3D printing, also known as additive manufacturing. This process makes it possible to produce unique porous structures, including products for our knee systems and a new interbody device for spine procedures.
  • Our Mako business received U.S. Food and Drug Administration market clearance for our Mako Total Knee application. With this, we are moving into a limited launch to prepare for the full rollout of robotic-arm assisted total knee procedures.
  • The Trevo retriever was one of the key products used in the clinical trials that support the American Heart Association and American Stroke Association’s new guidelines recommending endovascular therapy with stent retrievers for ischemic stroke patients.
  • Our Spine division revitalized its pipeline with new offerings that focus on minimally invasive procedures and orthobiologics and our Trauma & Extremities division also continued its steady launch of new products.
  • Our Instruments division began rolling out its signature line of neuro powered drills, and our Endoscopy business launched numerous sports medicine products as well as a remarkable new camera system, the 1588 AIM, that enhances visualization of patient anatomy for use across six surgical specialties. In addition, our Medical division introduced products from two acquisitions — notably low-height beds from CHG and lower-priced beds from Muka Metal for emerging markets.
Tritanium PL Posterior Lumbar Cage manufactured using 3D printing
CEO Letter Image

We continue to supplement internal innovations with acquisitions. In addition to the Medical transactions mentioned above, we announced in early 2016 agreements to acquire Sage Products, LLC, and Physio-Control International, Inc. Sage aligns with our focus on offering products and services that support a mindset of prevention, specifically in the area of “never events” such as hospital-acquired infections. Physio-Control provides lifesaving products such as defibrillators and CPR-assist devices. Both companies have long-standing leadership brands and cultures that fit very well with Stryker. They complement our acute care and emergency medical services businesses within our Medical division. We also announced an agreement to acquire the assets associated with the neuro portfolio of Synergetics USA, Inc., by our Instruments division to help fuel continued strong growth in that business.


Together with our customers,
we are driven
to make healthcare better.

Stryker is a trusted brand with a strong reputation for quality. In 2015 we refreshed our brand identity by introducing a gold accent to the historic black-and-white and defined consistent standards of use for all divisions. You will notice this new look in all Stryker materials, including this Annual Review.

Along with our new, consistent branding we are finding new ways to increase collaboration across divisions, without detracting from our decentralized business unit approach. Our customers see this in areas such as neurotechnology, where many of our divisions are selling to this specialty, and in our new Regional European Headquarters where colocated employees are sharing best practices and identifying logical cross-divisional collaborations. We are also seeing it in new product development, with 3D printing as one example.

Cost transformation

Over the course of 2015 we developed a multiyear road map for cost transformation that includes (1) product line rationalization, (2) indirect procurement optimization, (3) global enterprise resource planning (ERP) system commonization, (4) shared services expansion and (5) manufacturing site consolidation. This transformation is being led by Group President Lonny Carpenter and is an excellent opportunity to capture savings that can help drive growth and enable consistent delivery of leveraged earnings.

The Stryker culture

After three years as CEO, I see more clearly than ever how our unique culture defines us and sets us apart. It begins with a deep commitment to our Mission: Together with our customers, we are driven to make healthcare better, and to our Values: Integrity, Accountability, People and Performance.


Our culture is driven by growth and hard work, balanced with humility. We continue to win many accolades as a preferred place to work around the world. In 2015 we were honored by both Great Place to Work and FORTUNE for the fifth time as one of the best places to work in the United States, an acknowledgment that bodes well for our future. As Stryker continues to grow and evolve, we are committed to maintaining our strong, dynamic culture, built on decentralized businesses and sales forces that align closely with our customers.

We have also made some changes to the Stryker Leadership Team. I would like to thank Steve Benscoter, previously head of Human Resources, for accepting the role of Vice President responsible for implementation of our global ERP system, and to welcome Katy Fink as the newly promoted Vice President of Human Resources. I also want to thank Ramesh Subrahmanian, our former Group President of International for his contributions. Finally, I would like to thank Bill Jellison for his leadership of our finance function, and congratulate him on his retirement on March 31, 2016, and to welcome Glenn Boehnlein, who has been promoted as his successor.

Looking ahead

While the healthcare landscape continues to change rapidly, and macroeconomic conditions remain volatile, we remain confident in our ability to continue to grow and drive leveraged earnings.

For 2016 our current guidance, which assumes the closing of the previously announced acquisitions, includes constant currency sales growth in the five to six percent range and adjusted net earnings per diluted share in the range of $5.57 to $5.77, an improvement of 9 to 13 percent including an expected 2.5 percent negative foreign currency impact per share. This positive outlook reflects our unwavering commitment to strong financial performance and to our ability — and flexibility — to meet new challenges in changing times.

For all of our success in 2015 and our optimism about the future, I would like to thank our management teams, our Board of Directors and our 26,000+ employees around the world who continue to drive results while staying true to our Mission and Values. Change always provides opportunities, and Stryker stands ready to seize them.

CEO Letter Image Kevin A. Lobo

Chairman and Chief Executive Officer

  1. A non-GAAP financial measure. The most comparable GAAP financial measure is diluted net earnings per share, which were $3.19, $3.45, $3.39, $2.63, $1.34 and $3.78 in 2010, 2011, 2012, 2013, 2014 and 2015, respectively.
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