Kalamazoo, Michigan -
April 25, 2017 - Stryker Corporation (NYSE:SYK) reported
operating results for the first quarter of 2017:
First Quarter
Highlights
Net sales grew 18.4% to $2.96 billion (18.8%
constant currency)
MedSurg |
36.2 |
% |
or |
36.6% constant currency |
Orthopaedics |
7.4 |
% |
or |
7.8% constant currency |
Neurotechnology and Spine |
7.3 |
% |
or |
7.7% constant currency |
Reported net earnings per diluted
share increased 9.3% to $1.17
Adjusted net earnings per diluted share(1) increased
19.4% to $1.48
"Our positive momentum continued in the first
quarter, as we demonstrated our ongoing commitment to deliver
organic sales growth at the high end of med-tech and leveraged
earnings gains," said Kevin A. Lobo, Chairman and Chief
Executive Officer. "Our results were well-balanced across business
segments and geographies, and position us well for another strong
year in 2017."
Sales
Analysis
Consolidated net sales of $2.96
billion increased 18.4% in the quarter as reported and 18.8% in
constant currency, as foreign currency exchange rates negatively
impacted net sales by 0.4%. Excluding the 10.6% impact of
acquisitions, net sales in the quarter increased 8.2% in constant
currency, including 9.2% from increased unit volume partially
offset by 1.0% due to lower prices. The acquisition of Sage
Products LLC and Physio-Control International, Inc. contributed
$245 million to our consolidated net sales in the quarter.
MedSurg net sales of $1.31 billion
increased 36.2% in the quarter as reported and 36.6% in constant
currency, as foreign currency exchange rates negatively impacted
net sales by 0.4%. Excluding the 25.8% impact of acquisitions, net
sales in the quarter increased 10.8% in constant currency,
including 9.8% from increased unit volume and 1.0% due to higher
prices.
Orthopaedics net sales of $1.14
billion increased 7.4% in the quarter as reported and 7.8% in
constant currency, as foreign currency exchange rates negatively
impacted net sales by 0.4%. Excluding the 0.6% impact of
acquisitions, net sales in the quarter increased 7.2% in constant
currency, including 9.9% from increased unit volume partially
offset by 2.7% due to lower prices.
Neurotechnology and Spine net
sales of $0.52 billion increased 7.3% in the quarter as reported
and 7.7% in constant currency, as foreign currency exchange rates
negatively impacted net sales by 0.4%. Excluding the 2.4% impact of
acquisitions, net sales in the quarter increased 5.3% in constant
currency, including 6.3% from increased unit volume partially
offset by 1.0% due to lower prices.
Earnings
Analysis
Reported net earnings of $444
million increased 10.4% in the quarter. Reported net earnings per
diluted share of $1.17 increased 9.3% in the quarter. Reported net
earnings include certain charges for the amortization of purchased
intangible assets, Rejuvenate and ABG II and other recall matters,
restructuring-related activities and acquisition and integration
related activities. The effect of each of these matters on reported
net earnings and net earnings per diluted share appears in the
reconciliation of actual results to adjusted results below.
Excluding the impact of these charges increases gross profit margin
in the quarter from 66.4% to 66.5% and increases operating income
margin from 18.7% to 24.2%. Excluding the impact of the items
described above, adjusted net earnings(2) of $560
million increased 19.7% in the quarter. Adjusted net earnings per
diluted share(1) of $1.48
increased 19.4% in the quarter.
2017
Outlook
We continue to expect 2017 organic
sales growth to be in the range of 5.5% - 6.5% and adjusted net
earnings per diluted share(3) to be in
the range of $6.35 - $6.45. For the second quarter we expect
adjusted net earnings per diluted share(3) to be in
the range of $1.48 - $1.52. If foreign currency exchange rates hold
near current levels, we expect net sales in the second quarter and
full year to be negatively impacted by approximately 1.0% and
adjusted net earnings per diluted share to be negatively impacted
by approximately $0.03 to $0.04 in the second quarter and $0.10 to
$0.12 in the full year.
(1) A
reconciliation of reported net earnings per diluted share to
adjusted net earnings per diluted share, a non-GAAP financial
measure, and other important information appears
below.
(2) A reconciliation of reported net earnings to
adjusted net earnings, a non-GAAP financial measure, and other
important information appears below.
(3) A reconciliation of expected net earnings per
diluted share to expected adjusted net earnings per diluted share
for the second quarter and full year and other important
information appears below.
Conference Call
on Tuesday, April 25, 2017
As previously announced, the
Company will host a conference call on Tuesday, April 25, 2017
at 4:30 p.m., Eastern Time, to discuss the Company's operating
results for the quarter ended March 31, 2017 and provide an
operational update.
To participate in the conference
call dial (844) 826-0610 (domestic) or (973) 453-3249
(international) and be prepared to provide conference ID number
26016220 to the operator.
A simultaneous webcast of the call
will be accessible via the Company's website at www.stryker.com.
The call will be archived on the Investors page of this site.
A recording of the call will also
be available from 8:00 p.m., Eastern Time, on Tuesday,
April 25, 2017, until 11:59 p.m., Eastern Time, on Tuesday,
May 2, 2017. To hear this recording you may dial (855) 859-2056
(domestic) or (404) 537-3406 (international) and enter conference
ID number 26016220.
Caution
Concerning Forward-Looking Statements
This press release contains
information that includes or is based on forward-looking statements
within the meaning of the federal securities laws that are subject
to various risks and uncertainties that could cause our actual
results to differ materially from those expressed or implied in
such statements. Such factors include, but are not limited to:
weakening of economic conditions that could adversely affect the
level of demand for our products; pricing pressures generally,
including cost-containment measures that could adversely affect the
price of or demand for our products; changes in foreign exchange
markets; legislative and regulatory actions; unanticipated issues
arising in connection with clinical studies and otherwise that
affect U.S. Food and Drug Administration approval of new products;
potential supply disruptions; changes in reimbursement levels from
third-party payors; a significant increase in product liability
claims; the ultimate total cost with respect to the Rejuvenate and
ABG II matter; the impact of investigative and legal proceedings
and compliance risks; resolution of tax audits; the impact of the
federal legislation to reform the United States healthcare system;
changes in financial markets; changes in the competitive
environment; our ability to integrate acquisitions; and our ability
to realize anticipated cost savings. Additional information
concerning these and other factors is contained in our filings with
the U.S. Securities and Exchange Commission, including our Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q.
Stryker is one of the world's
leading medical technology companies and, together with our
customers, we are driven to make healthcare better. The Company
offers a diverse array of innovative products and services
in Orthopaedics, Medical and Surgical, and
Neurotechnology and Spine that help improve patient and
hospital outcomes. Stryker is active in over 100 countries around
the world. Please contact us for more information
at www.stryker.com.
For investor
inquiries please contact:
Katherine A. Owen, Stryker
Corporation, 269-385-2600 or katherine.owen@stryker.com
For media
inquiries please contact:
Yin Becker, Stryker Corporation,
269-385-2600 or yin.becker@stryker.com
STRYKER
CORPORATION
For the Three Months March 31
(Unaudited - Millions of Dollars, Except Per Share
Amounts)
CONDENSED STATEMENTS OF EARNINGS |
|
Three
Months |
|
2017 |
|
2016 |
|
% Change |
Net sales |
$ |
2,955 |
|
|
$ |
2,495 |
|
|
18.4 |
% |
Cost of
sales |
993 |
|
|
801 |
|
|
24.0 |
|
Gross profit |
$ |
1,962 |
|
|
$ |
1,694 |
|
|
15.8 |
% |
% of
sales |
66.4 |
% |
|
67.9 |
% |
|
|
Research, development and engineering expenses |
192 |
|
|
159 |
|
|
20.8 |
|
Selling,
general and administrative expenses |
1,102 |
|
|
944 |
|
|
16.7 |
|
Recall charges |
26 |
|
|
19 |
|
|
36.8 |
|
Intangible asset amortization |
88 |
|
|
53 |
|
|
66.0 |
|
Total operating expenses |
$ |
1,408 |
|
|
$ |
1,175 |
|
|
19.8 |
% |
Operating income |
$ |
554 |
|
|
$ |
519 |
|
|
6.7 |
% |
% of sales |
18.7 |
% |
|
20.8 |
% |
|
|
Other
income (expense), net |
(55 |
) |
|
(38 |
) |
|
44.7 |
|
Earnings before income taxes |
$ |
499 |
|
|
$ |
481 |
|
|
3.7 |
% |
Income
taxes |
55 |
|
|
79 |
|
|
(30.4 |
) |
Net earnings |
$ |
444 |
|
|
$ |
402 |
|
|
10.4 |
% |
Net earnings per share of common stock: |
|
|
|
|
|
Basic |
$ |
1.19 |
|
|
$ |
1.08 |
|
|
10.2 |
% |
Diluted |
$ |
1.17 |
|
|
$ |
1.07 |
|
|
9.3 |
% |
Weighted-average shares outstanding -
in millions: |
|
|
|
|
|
Basic |
373.4 |
|
373.2 |
|
|
Diluted |
379.3 |
|
377.4 |
|
|
CONDENSED
BALANCE SHEETS |
|
March |
|
December |
|
2017 |
|
2016 |
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
3,213 |
|
|
$ |
3,316 |
|
Marketable securities |
66 |
|
|
68 |
|
Accounts receivable, net |
1,875 |
|
|
1,967 |
|
Inventories |
2,172 |
|
|
2,030 |
|
Other current assets |
563 |
|
|
480 |
|
Total current assets |
$ |
7,889 |
|
|
$ |
7,861 |
|
Property, plant and equipment, net |
1,655 |
|
|
1,569 |
|
Goodwill and other intangibles, net |
9,839 |
|
|
9,864 |
|
Other noncurrent assets |
1,134 |
|
|
1,141 |
|
Total assets |
$ |
20,517 |
|
|
$ |
20,435 |
|
LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
|
Current liabilities |
$ |
2,033 |
|
|
$ |
2,554 |
|
Accrued recall expenses |
521 |
|
|
594 |
|
Other
noncurrent liabilities |
1,075 |
|
|
1,051 |
|
Long-term debt, excluding current maturities |
7,184 |
|
|
6,686 |
|
Shareholders' equity |
9,704 |
|
|
9,550 |
|
Total liabilities and
shareholders' equity |
$ |
20,517 |
|
|
$ |
20,435 |
|
CONDENSED
STATEMENTS OF CASH FLOWS |
|
Three
Months |
|
2017 |
|
2016 |
Operating activities |
|
|
|
Net earnings |
$ |
444 |
|
|
$ |
402 |
|
Depreciation |
62 |
|
|
49 |
|
Amortization of intangible assets |
88 |
|
|
53 |
|
Changes in operating assets and liabilities and other, net |
(443 |
) |
|
(242 |
) |
Net cash provided by operating
activities |
$ |
151 |
|
|
$ |
262 |
|
Investing activities |
|
|
|
Acquisitions, net of cash acquired |
$ |
(9 |
) |
|
$ |
(23 |
) |
Change
in marketable securities, net |
2 |
|
|
195 |
|
Purchases of property, plant and equipment |
(139 |
) |
|
(115 |
) |
Net cash (used in) provided by investing
activities |
$ |
(146 |
) |
|
$ |
57 |
|
Financing activities |
|
|
|
Borrowings/repayments of debt, net |
$ |
304 |
|
|
$ |
3,455 |
|
Dividends paid |
(159 |
) |
|
(142 |
) |
Repurchase of common stock |
(230 |
) |
|
(13 |
) |
Other financing |
(52 |
) |
|
(41 |
) |
Net cash (used in) provided by financing
activities |
$ |
(137 |
) |
|
$ |
3,259 |
|
Effect of exchange rate changes on cash and cash
equivalents |
29 |
|
|
19 |
|
Change in cash and cash equivalents |
$ |
(103 |
) |
|
$ |
3,597 |
|
STRYKER
CORPORATION
For the Three Months Ended March 31
(Unaudited - Millions of Dollars)
CONDENSED SALES ANALYSIS |
|
Three
Months |
|
|
|
Percentage Change |
|
2016 |
2015 |
|
As Reported |
Constant
Currency |
Geographic: |
|
|
|
|
|
United States |
$ |
2,166 |
|
$ |
1,822 |
|
|
18.9 |
% |
18.9 |
% |
International |
789 |
|
673 |
|
|
17.2 |
|
18.5 |
|
Total |
$ |
2,955 |
|
$ |
2,495 |
|
|
18.4 |
% |
18.8 |
% |
Segment: |
|
|
|
|
|
MedSurg |
$ |
1,305 |
|
$ |
958 |
|
|
36.2 |
% |
36.6 |
% |
Orthopaedics |
1,135 |
|
1,057 |
|
|
7.4 |
|
7.8 |
|
Neurotechnology and Spine |
515 |
|
480 |
|
|
7.3 |
|
7.7 |
|
Total |
$ |
2,955 |
|
$ |
2,495 |
|
|
18.4 |
% |
18.8 |
% |
SUPPLEMENTAL
SALES GROWTH ANALYSIS |
|
Three
Months |
|
|
|
|
|
|
United States |
|
International |
|
|
|
Percentage
Change |
|
2017 |
2016 |
|
As Reported |
Constant Currency |
|
As Reported |
|
As Reported |
Constant Currency |
MedSurg: |
|
|
|
|
|
|
|
|
|
|
Instruments |
$ |
394 |
|
$ |
365 |
|
|
7.8 |
% |
8.2 |
% |
|
7.8 |
% |
|
8.1 |
% |
9.8 |
% |
Endoscopy |
373 |
|
328 |
|
|
13.6 |
|
13.8 |
|
|
14.6 |
|
|
10.5 |
|
11.1 |
|
Medical |
475 |
|
207 |
|
|
130.4 |
|
131.7 |
|
|
118.6 |
|
|
186.4 |
|
193.5 |
|
Sustainability |
63 |
|
58 |
|
|
7.5 |
|
7.5 |
|
|
7.4 |
|
|
52.6 |
|
47.8 |
|
Total MedSurg |
$ |
1,305 |
|
$ |
958 |
|
|
36.2 |
% |
36.6 |
% |
|
34.6 |
% |
|
42.9 |
% |
44.7 |
% |
Orthopaedics: |
|
|
|
|
|
|
|
|
|
|
Knees |
$ |
391 |
|
$ |
361 |
|
|
8.5 |
% |
8.7 |
% |
|
7.4 |
% |
|
11.6 |
% |
12.3 |
% |
Hips |
320 |
|
316 |
|
|
1.2 |
|
2.0 |
|
|
2.0 |
|
|
(0.1 |
) |
2.0 |
|
Trauma and Extremities |
352 |
|
327 |
|
|
7.6 |
|
8.3 |
|
|
10.0 |
|
|
3.6 |
|
5.5 |
|
Other |
72 |
|
53 |
|
|
34.2 |
|
34.0 |
|
|
25.7 |
|
|
79.3 |
|
76.0 |
|
Total Orthopaedics |
$ |
1,135 |
|
$ |
1,057 |
|
|
7.4 |
% |
7.8 |
% |
|
7.8 |
% |
|
6.4 |
% |
7.9 |
% |
Neurotechnology and Spine: |
|
|
|
|
|
|
|
|
|
|
Neurotechnology |
$ |
331 |
|
$ |
301 |
|
|
9.8 |
% |
10.1 |
% |
|
9.7 |
% |
|
9.8 |
% |
10.7 |
% |
Spine |
184 |
|
179 |
|
|
3.2 |
|
3.5 |
|
|
2.3 |
|
|
5.9 |
|
7.5 |
|
Total Neurotechnology and
Spine |
$ |
515 |
|
$ |
480 |
|
|
7.3 |
% |
7.7 |
% |
|
6.7 |
% |
|
8.8 |
% |
9.8 |
% |
Total |
$ |
2,955 |
|
$ |
2,495 |
|
|
18.4 |
% |
18.8 |
% |
|
18.9 |
% |
|
17.2 |
% |
18.5 |
% |
SUPPLEMENTAL INFORMATION -
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
We supplement the reporting of our
financial information determined under accounting principles
generally accepted in the United States (GAAP) with certain
non-GAAP financial measures, including percentage sales growth in
constant currency; percentage organic sales growth; adjusted gross
profit; cost of sales excluding specified items; adjusted selling,
general and administrative expenses; adjusted operating income;
adjusted effective income tax rate; adjusted net earnings; and
adjusted net earnings per diluted share. We believe that these
non-GAAP measures provide meaningful information to assist
shareholders in understanding our financial results and assessing
our prospects for future performance. Management believes
percentage sales growth in constant currency and the other adjusted
measures described above are important indicators of our operations
because they exclude items that may not be indicative of or are
unrelated to our core operating results and provide a baseline for
analyzing trends in our underlying businesses. Management uses
these non-GAAP financial measures for reviewing the operating
results of reportable business segments and analyzing potential
future business trends in connection with our budget process and
bases certain management incentive compensation on these non-GAAP
financial measures.
To measure percentage sales growth
in constant currency, we remove the impact of changes in foreign
currency exchange rates that affect the comparability and trend of
sales. Percentage sales growth in constant currency is calculated
by translating current and prior year results at the same foreign
currency exchange rate. To measure percentage organic sales growth,
we remove the impact of changes in foreign currency exchange rates
and acquisitions that affect the comparability and trend of sales.
Percentage organic sales growth is calculated by translating
current and prior year results at the same foreign currency
exchange rate excluding the impact of acquisitions. To measure
earnings performance on a consistent and comparable basis, we
exclude certain items that affect the comparability of operating
results and the trend of earnings.
Because non-GAAP financial
measures are not standardized, it may not be possible to compare
these financial measures with other companies' non-GAAP financial
measures having the same or similar names. These adjusted financial
measures should not be considered in isolation or as a substitute
for reported sales growth, gross profit, selling, general and
administrative expenses, operating income, effective income tax
rate, net earnings and net earnings per diluted share, the most
directly comparable GAAP financial measures. These non-GAAP
financial measures are an additional way of viewing aspects of our
operations that, when viewed with our GAAP results and the
reconciliations to corresponding GAAP financial measures below,
provide a more complete understanding of our business. We strongly
encourage investors and shareholders to review our financial
statements and publicly-filed reports in their entirety and not to
rely on any single financial measure. The following reconciles the
non-GAAP financial measures discussed above with the most directly
comparable GAAP financial measures:
STRYKER
CORPORATION
For the Three Months March 31
(Unaudited - Millions of Dollars, Except Per Share
Amounts)
RECONCILIATION OF REPORTED RESULTS TO ADJUSTED
RESULTS |
2017 |
Gross Profit |
Selling, General &
Administrative Expenses |
Amortization of Intangible
Assets |
Operating Income |
Net Earnings |
Effective
Tax Rate |
Diluted EPS |
Reported |
$ |
1,962 |
|
$ |
1,102 |
|
$ |
88 |
|
$ |
554 |
|
$ |
444 |
|
11.1 |
% |
$ |
1.17 |
|
Acquisition and integration related charges: (a) |
|
|
|
|
|
|
|
Inventory stepped up to fair value |
(1 |
) |
- |
|
- |
|
(1 |
) |
- |
|
(0.2 |
) |
- |
|
Other
acquisition and integration related |
- |
|
(10 |
) |
- |
|
10 |
|
7 |
|
0.3 |
|
0.02 |
|
Amortization of purchased intangible assets |
- |
|
- |
|
(88 |
) |
88 |
|
61 |
|
2.9 |
|
0.16 |
|
Restructuring-related charges (b) |
5 |
|
(33 |
) |
- |
|
38 |
|
27 |
|
1.0 |
|
0.07 |
|
Rejuvenate and other recall matters (c) |
- |
|
- |
|
- |
|
26 |
|
21 |
|
0.2 |
|
0.06 |
|
Adjusted |
$ |
1,966 |
|
$ |
1,059 |
|
$ |
- |
|
$ |
715 |
|
$ |
560 |
|
15.3 |
% |
$ |
1.48 |
|
2016 |
Gross Profit |
Selling, General & Administrative
Expenses |
Amortization of Intangible
Assets |
Operating Income |
Net Earnings |
Effective
Tax Rate |
Diluted EPS |
Reported |
$ |
1,694 |
|
$ |
944 |
|
$ |
53 |
|
$ |
519 |
|
$ |
402 |
|
16.4 |
% |
$ |
1.07 |
|
Acquisition and integration related charges: (a) |
|
|
|
|
|
|
|
Other acquisition and integration related |
- |
|
(5 |
) |
- |
|
5 |
|
3 |
|
0.1 |
|
0.01 |
|
Amortization of purchased intangible assets |
- |
|
- |
|
(53 |
) |
53 |
|
39 |
|
1.1 |
|
0.10 |
|
Restructuring-related charges (b) |
3 |
|
(17 |
) |
- |
|
20 |
|
15 |
|
0.4 |
|
0.04 |
|
Rejuvenate and other recall matters (c) |
- |
|
- |
|
- |
|
19 |
|
17 |
|
- |
|
0.04 |
|
Legal matters (d) |
- |
|
12 |
|
- |
|
(12 |
) |
(8 |
) |
(0.6 |
) |
(0.02 |
) |
Adjusted |
$ |
1,697 |
|
$ |
934 |
|
$ |
- |
|
$ |
604 |
|
$ |
468 |
|
17.4 |
% |
$ |
1.24 |
|
(a) |
Charges represent certain acquisition and integration
related costs associated with acquisitions. |
(b) |
Charges represent the cost associated with certain
restructuring-related charges associated with workforce reductions,
facility rationalizations and other restructuring-related
activities. |
(c) |
Charges represent changes in our best estimate of the
minimum end of the range of probable loss to resolve the Rejuvenate
recall and other recall matters. |
(d) |
Amount represents a gain associated with a legal
settlement in 2016. |
STRYKER
CORPORATION
For the Three Months June 30, 2017 and Full Year
December 31, 2017
RECONCILIATION OF EXPECTED NET EARNINGS PER
DILUTED SHARE TO EXPECTED ADJUSTED NET EARNINGS PER DILUTED
SHARE |
|
Three
Months |
|
Full
Year |
|
Low |
High |
|
Low |
High |
Expected - Reported |
$ |
1.23 |
|
$ |
1.33 |
|
|
$ |
5.44 |
|
$ |
5.69 |
|
Acquisition and integration related charges |
0.05 |
|
0.02 |
|
|
0.10 |
|
0.05 |
|
Amortization of purchased intangible assets |
0.15 |
|
0.15 |
|
|
0.61 |
|
0.61 |
|
Restructuring-related charges |
0.05 |
|
0.02 |
|
|
0.20 |
|
0.10 |
|
Rejuvenate and other recall matters |
- |
|
- |
|
|
- |
|
- |
|
Expected - Adjusted |
$ |
1.48 |
|
$ |
1.52 |
|
|
$ |
6.35 |
|
$ |
6.45 |
|
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Stryker Corporation via Globenewswire
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