ABOUT STRYKER
Stryker Corporation ("we" or "our") is one of the world's leading medical
technology companies and, together with our customers, we are driven to make
healthcare better. We offer innovative products and services in Orthopaedics,
Medical and Surgical, and Neurotechnology and Spine that help improve patient
and hospital outcomes.
We segregate our operations into three reportable business segments:
Orthopaedics, MedSurg, and Neurotechnology and Spine. Orthopaedics products
consist primarily of implants used in hip and knee joint replacements and trauma
and extremities surgeries. MedSurg products include surgical equipment and
surgical 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. Neurotechnology and Spine products include neurosurgical,
neurovascular and spinal implant devices.
COVID-19 Pandemic
The COVID-19 outbreak, which has been declared a global pandemic, has led to
severe disruptions in the market and the global and United States economies that
may continue for a prolonged duration and trigger a recession or a period of
economic slowdown. In response, various governmental authorities and private
enterprises have implemented numerous measures to contain the pandemic, such as
travel bans and restrictions, quarantines, shelter-in-place orders and
shutdowns. A significant number of our global suppliers, vendors, distributors
and manufacturing facilities are located in regions that have been affected by
the pandemic, such as, among others, the United States, China, France, Germany,
Switzerland and the United Kingdom. Those operations have been, and will
continue to be, materially adversely affected by restrictive government and
private enterprise measures implemented in response to the pandemic.
Some of our products are particularly sensitive to reductions in elective
medical procedures. Elective medical procedures were suspended in the first
quarter of 2020 in many of the markets where our products are marketed and sold,
which negatively affected our business, cash flows, financial condition and
results of operations. To the extent individuals are required to continue to
de-prioritize or delay elective procedures as a result of the COVID-19 pandemic
or otherwise, our business, cash flows, financial condition and results of
operations could be negatively affected.
In addition, certain of our MedSurg products, such as emergency relief beds and
personal protective equipment, have experienced, and could continue to
experience, higher demand as our customers focus on treating COVID-19 patients.
Unpredictable increases in demand for certain of our products could exceed our
capacity to meet such demand timely, which could adversely affect our customer
relationships and result in negative publicity. In this regard, the accelerated
development and production of products and services in an effort to address
medical and other requirements as a result of the pandemic could increase the
risk of regulatory enforcement actions, product defects or related claims.
Further, in an effort to increase the wider availability of needed medical and
other supplies and products in response to the

pandemic, governments may require us (such as under the United States Defense
Production Act) to allocate manufacturing capacity in a way that adversely
affects our regular operations, results in differential treatment of customers
and/or adversely affects our reputation and customer relationships. It is also
possible that certain of our operations are deemed non-essential and thus
subject to suspension or other restrictions by government orders. We cannot
predict how these changes in operations, if implemented, would affect our future
operations and commercial activities as the impact of the pandemic begins to
subside.
In addition, in March 2020 the Coronavirus Aid, Relief and Economic Security Act
(the "CARES Act") was signed into law in the United States. We do not expect the
provisions of the CARES Act to have a material impact on our annual effective
tax rate or Consolidated Financial Statements in 2020.
Finally, the COVID-19 pandemic's significant disruption on global financial
markets may limit our ability to access capital, and the terms on which we are
able to access capital may be substantially less favorable than those existing
prior to the pandemic.
Overview of the Three Months
The response to the COVID-19 pandemic has included unprecedented measures to
slow the spread of the virus taken by local governments and health care
authorities globally, including the deferral of elective medical procedures and
social contact restrictions, which have had, and we expect will continue to
have, a significant negative impact on Stryker's operations and financial
results. While we reported an overall increase in unit volumes in the quarter,
most of our businesses saw significant declines in the month of March 2020.
In the three months 2020 we achieved sales growth of 2.0%. Excluding the impact
of acquisitions sales grew 2.4% in constant currency. We reported operating
income margin of 17.7%, net earnings of $493 and net earnings per diluted share
of $1.30. Excluding the impact of certain items, adjusted operating income
margin contracted by 110 basis points to 24.0%, with adjusted net earnings(1) of
$699 and a reduction of 2.1% in adjusted net earnings per diluted share(1).
Recent Developments
In January 2020 we repaid $500 of our senior unsecured notes with a coupon of
4.375% that were due on January 15, 2020.
In the three months 2020 we did not repurchase any shares of our common stock
under our authorized repurchase program. The total dollar value of shares of our
common stock that could be acquired under our authorized repurchase program was
$1,033 as of March 31, 2020. As previously announced we intend to suspend our
share repurchase program for 2020 and 2021.
On April 30, 2020 we amended our primary credit facility. The principal change
was to increase the leverage ratio financial covenant from 3.5:1 to 4.5:1 at the
end of each fiscal quarter ending on or prior to June 30, 2021.
On April 30, 2020 we entered into a credit agreement that provides for up to
$1,500 of borrowings in U.S. Dollars pursuant to a 364-day revolving credit
facility, which matures on April 29, 2021 and is available for working capital
and general corporate purposes.
(1) Refer to "Non-GAAP Financial Measures" for a discussion of non-GAAP
financial measures used in this report and a reconciliation to the most directly
comparable GAAP financial measure.

Dollar amounts are in millions except per share amounts or as otherwise specified.

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STRYKER CORPORATION 2020 First Quarter Form 10-Q

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