Stryker (NYSE:SYK) reported operating results for the fourth
quarter and full year of 2019 and 2020 outlook:
Fourth Quarter Highlights
- Reported net sales increased 8.8% to $4.1
billion
- Organic net sales increased 8.0%
- Reported operating income margin of 22.9%
- Adjusted operating income margin(1) expanded 80 bps
to 28.3%
- Reported EPS decreased 65.1% to $1.90
- Adjusted EPS(1) increased 14.2% to $2.49, exceeding the
high end of guidance range
|
Fourth Quarter Net Sales Growth Overview |
|
Reported |
|
Foreign Currency Exchange |
|
Constant Currency |
|
Acquisitions |
|
Organic |
Orthopaedics |
6.7 |
% |
|
(0.6 |
)% |
|
7.3 |
% |
|
— |
% |
|
7.3 |
% |
MedSurg |
6.8 |
|
|
(0.6 |
) |
|
7.4 |
|
|
0.6 |
|
|
6.8 |
|
Neurotechnology and Spine |
18.0 |
|
|
(0.2 |
) |
|
18.2 |
|
|
5.7 |
|
|
12.5 |
|
Total |
8.8 |
% |
|
(0.6 |
)% |
|
9.4 |
% |
|
1.4 |
% |
|
8.0 |
% |
Full Year Highlights
- Reported net sales increased 9.4% to $14.9
billion
- Organic net sales increased 8.1%
- Reported operating income margin of 18.2%
- Adjusted operating income margin(1) expanded 40 bps to
26.3%
- Reported EPS decreased 41.3% to $5.48
- Adjusted EPS(1) increased 13.0% to $8.26, exceeding the
high end of guidance range
|
Full Year Net Sales Growth Overview |
|
Reported |
|
Foreign Currency Exchange |
|
Constant Currency |
|
Acquisitions |
|
Organic |
Orthopaedics |
5.2 |
% |
|
(1.5 |
)% |
|
6.7 |
% |
|
— |
% |
|
6.7 |
% |
MedSurg |
8.8 |
|
|
(1.1 |
) |
|
9.9 |
|
|
1.0 |
|
|
8.9 |
|
Neurotechnology and Spine |
19.2 |
|
|
(1.3 |
) |
|
20.5 |
|
|
11.6 |
|
|
8.9 |
|
Total |
9.4 |
% |
|
(1.3 |
)% |
|
10.7 |
% |
|
2.6 |
% |
|
8.1 |
% |
"We had an excellent finish to 2019, achieving
8.1% full-year organic sales growth and 13% adjusted EPS
gains. This marks our seventh consecutive year of accelerating
organic sales growth and is a testament to our talent, culture and
durable operating model," said Kevin Lobo, Chairman and Chief
Executive Officer. "The performance was balanced across businesses
and geographies and positions us well for continued success."
Sales Analysis
Consolidated net sales of $4.1 billion and $14.9
billion increased 8.8% and 9.4% in the quarter and full year and
9.4% and 10.7% in constant currency. Organic net sales increased
8.0% and 8.1% in the quarter and full year including 8.6% and 9.0%
from increased unit volume partially offset by 0.6% and 0.9% from
lower prices.
Orthopaedics net sales of $1.5 billion and $5.3
billion increased 6.7% and 5.2% in the quarter and full year and
7.3% and 6.7% in constant currency. Organic net sales increased
7.3% and 6.7% in the quarter and full year including 8.5% and 8.2%
from increased unit volume partially offset by 1.2% and 1.5% from
lower prices.
MedSurg net sales of $1.8 billion and $6.6
billion increased 6.8% and 8.8% in the quarter and full year and
7.4% and 9.9% in constant currency. Organic net sales increased
6.8% and 8.9% in the quarter and full year including 7.2% and 9.4%
from increased unit volume partially offset by 0.4% and 0.5% from
lower prices.
Neurotechnology and Spine net sales of $827
million and $3.1 billion increased 18.0% and 19.2% in the quarter
and full year and 18.2% and 20.5% in constant currency. Organic net
sales increased 12.5% and 8.9% in the quarter and full year
including 12.5% and 9.6% from increased unit volume partially
offset by 0.7% from lower prices in the full year, with a nominal
impact from pricing in the quarter.
Earnings Analysis
Reported net earnings of $725 million and $2.1
billion decreased 64.9% and 41.4% in the quarter and full year.
Reported net earnings per diluted share of $1.90 and $5.48
decreased 65.1% and 41.3% in the quarter and full year. Reported
gross profit margin and reported operating income margin were 65.4%
and 22.9% in the quarter and 65.1% and 18.2% in the full year.
Reported net earnings include certain items, such as charges for
acquisition and integration-related activities, the amortization of
purchased intangible assets, restructuring-related and other
charges, costs to comply with certain medical device regulations,
recall-related matters, regulatory and legal matters and tax
matters. In the fourth quarter 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 effect of each of these matters on reported
net earnings and net earnings per diluted share appear in the
reconciliation of GAAP to non-GAAP financial measures. Excluding
the aforementioned items, adjusted gross profit margin(1) and
adjusted operating income margin(1) were 66.3% and 28.3%, an
improvement of 80 basis points, in the quarter and were 65.9% and
26.3%, an improvement of 40 basis points, for the full year.
Adjusted net earnings(1) of $948 million and $3.1 billion increased
14.5% and 13.0% in the quarter and full year. Adjusted net earnings
per diluted share(1) of $2.49 and $8.26 increased 14.2% and 13.0%
in the quarter and full year.
2020 Outlook
We expect 2020 organic net sales growth to be in
the range of 6.5% to 7.5% and expect adjusted net earnings per
diluted share(2) to be in the range of $9.00 to $9.20. We expect
adjusted net earnings per diluted share(2) to be in the range of
$2.05 to $2.10 in the first quarter. If foreign currency exchange
rates hold near current levels, we expect sales and EPS will be
nominally impacted in 2020.
(1) A reconciliation of the non-GAAP financial
measures: adjusted gross profit margin, adjusted operating income
and adjusted operating income margin, adjusted net earnings and
adjusted net earnings per diluted share, to the most directly
comparable GAAP measures: gross profit margin, operating income and
operating income margin, net earnings and net earnings per diluted
share, and other important information accompanies this press
release.
(2) We are unable to present a quantitative
reconciliation of our expected net earnings per diluted share to
expected adjusted net earnings per diluted share as we are unable
to predict with reasonable certainty and without unreasonable
effort the impact and timing of restructuring-related and other
charges, acquisition-related expenses and fair value adjustments to
inventory and the outcome of certain regulatory, legal and tax
matters. The financial impact of these items is uncertain and is
dependent on various factors, including timing, and could be
material to our Consolidated Statements of Earnings.
Conference Call on Tuesday,
January 28, 2020
As previously announced, Stryker will host a
conference call on Tuesday, January 28, 2020 at 4:30 p.m.,
Eastern Time, to discuss the company's operating results for the
quarter and year ended December 31, 2019 and provide an
operational update.
To participate in the conference call dial (877)
702-4565 (domestic) or (647) 689-5532 (international) and be
prepared to provide conference ID number 3198166 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 Investor Relations page of this site.
A recording of the call will also be available
from 8:00 p.m., Eastern Time, on Tuesday, January 28, 2020,
until 11:59 p.m., Eastern Time, on Tuesday, February 4, 2020. To
hear this recording, you may dial (800) 585-8367 (domestic) or
(416) 621-4642 (international) and enter conference ID number
3198166.
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: the
failure to satisfy any of the closing conditions to the acquisition
of Wright Medical Group N.V. ("Wright"), including the receipt of
any required regulatory clearances (and the risk that such
clearances may result in the imposition of conditions that could
adversely affect the expected benefits of the transaction); timing
of the closing of the acquisition of Wright; unexpected
liabilities, costs, charges or expenses in connection with the
acquisition of Wright; the effects of the proposed Wright
transaction (or the announcement thereof) on the parties
relationships with employees, customers, other business partners or
governmental entities; 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, including Wright 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 recall-related
matters; 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;
costs to comply with medical device regulations; changes in
financial markets; changes in the competitive environment; our
ability to integrate and realize the anticipated benefits of
acquisitions in full or at all or within the expected timeframes,
including the acquisition of Wright; 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 its customers, is
driven to make healthcare better. The company offers innovative
products and services in Orthopaedics, Medical and
Surgical, and Neurotechnology and Spine that help
improve patient and hospital outcomes. More information is
available at www.stryker.com.
For investor inquiries please
contact:
Katherine Owen, Vice President, Strategy &
Investor Relations at 269-385-2600 or
katherine.owen@stryker.com
For media inquiries please
contact:
Yin Becker, Vice President, Communications,
Public Affairs and Corporate Marketing at 269-385-2600 or
yin.becker@stryker.com
STRYKER CORPORATION |
For the Three Months and Full Year December
31 |
(Unaudited - Millions of Dollars, Except Per Share
Amounts) |
CONSOLIDATED STATEMENTS OF EARNINGS |
|
|
|
|
|
|
|
|
|
Three Months |
|
Full Year |
|
2019 |
|
2018 |
|
% Change |
|
2019 |
|
2018 |
|
% Change |
Net
sales |
$ |
4,131 |
|
|
$ |
3,796 |
|
|
8.8 |
% |
|
$ |
14,884 |
|
|
$ |
13,601 |
|
|
9.4 |
% |
Cost of sales |
1,428 |
|
|
1,340 |
|
|
6.6 |
|
|
5,188 |
|
|
4,663 |
|
|
11.3 |
|
Gross
profit |
$ |
2,703 |
|
|
$ |
2,456 |
|
|
10.1 |
% |
|
$ |
9,696 |
|
|
$ |
8,938 |
|
|
8.5 |
% |
% of sales |
65.4 |
% |
|
64.7 |
% |
|
|
|
65.1 |
% |
|
65.7 |
% |
|
|
Research, development and engineering expenses |
254 |
|
|
221 |
|
|
14.9 |
|
|
971 |
|
|
862 |
|
|
12.6 |
|
Selling, general and administrative expenses |
1,380 |
|
|
1,431 |
|
|
(3.6 |
) |
|
5,356 |
|
|
5,099 |
|
|
5.0 |
|
Recall charges |
13 |
|
|
13 |
|
|
nm |
|
192 |
|
|
23 |
|
|
nm |
Amortization of intangible assets |
112 |
|
|
93 |
|
|
20.4 |
|
|
464 |
|
|
417 |
|
|
11.3 |
|
Total operating expenses |
$ |
1,759 |
|
|
$ |
1,758 |
|
|
0.1 |
% |
|
$ |
6,983 |
|
|
$ |
6,401 |
|
|
9.1 |
% |
Operating
income |
$ |
944 |
|
|
$ |
698 |
|
|
35.2 |
% |
|
$ |
2,713 |
|
|
$ |
2,537 |
|
|
6.9 |
% |
% of sales |
22.9 |
% |
|
18.4 |
% |
|
|
|
18.2 |
% |
|
18.7 |
% |
|
|
Other income (expense), net |
(8 |
) |
|
(41 |
) |
|
(80.5 |
) |
|
(151 |
) |
|
(181 |
) |
|
(16.6 |
) |
Earnings before income
taxes |
$ |
936 |
|
|
$ |
657 |
|
|
42.5 |
% |
|
$ |
2,562 |
|
|
$ |
2,356 |
|
|
8.7 |
% |
Income taxes |
211 |
|
|
(1,411 |
) |
|
nm |
|
479 |
|
|
(1,197 |
) |
|
nm |
Net
earnings |
$ |
725 |
|
|
$ |
2,068 |
|
|
(64.9 |
)% |
|
$ |
2,083 |
|
|
$ |
3,553 |
|
|
(41.4 |
)% |
Net earnings per share
of common stock: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
1.94 |
|
|
$ |
5.52 |
|
|
(64.9 |
)% |
|
$ |
5.57 |
|
|
$ |
9.50 |
|
|
(41.4 |
)% |
Diluted |
$ |
1.90 |
|
|
$ |
5.44 |
|
|
(65.1 |
)% |
|
$ |
5.48 |
|
|
$ |
9.34 |
|
|
(41.3 |
)% |
Weighted-average
shares outstanding (in millions): |
|
|
|
|
|
|
|
|
|
|
|
Basic |
374.4 |
|
374.3 |
|
|
|
374.0 |
|
374.1 |
|
|
Diluted |
380.1 |
|
380.2 |
|
|
|
379.9 |
|
380.3 |
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
December 31 |
|
2019 |
|
2018 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
4,337 |
|
|
$ |
3,616 |
|
Marketable securities |
88 |
|
|
83 |
|
Accounts receivable, net |
2,893 |
|
|
2,332 |
|
Inventories |
3,282 |
|
|
2,955 |
|
Prepaid expenses and other current assets |
760 |
|
|
747 |
|
Total current assets |
$ |
11,360 |
|
|
$ |
9,733 |
|
Property, plant and equipment, net |
2,567 |
|
|
2,291 |
|
Goodwill and other intangibles, net |
13,296 |
|
|
12,726 |
|
Noncurrent deferred income tax assets |
1,575 |
|
|
1,678 |
|
Other noncurrent assets |
1,369 |
|
|
801 |
|
Total
assets |
$ |
30,167 |
|
|
$ |
27,229 |
|
Liabilities and
shareholders' equity |
|
|
|
Current liabilities |
$ |
4,400 |
|
|
$ |
4,807 |
|
Long-term debt, excluding current maturities |
10,231 |
|
|
8,486 |
|
Income taxes |
1,068 |
|
|
1,228 |
|
Other noncurrent liabilities |
1,661 |
|
|
978 |
|
Shareholders' equity |
12,807 |
|
|
11,730 |
|
Total liabilities and
shareholders' equity |
$ |
30,167 |
|
|
$ |
27,229 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
December 31 |
|
2019 |
|
2018 |
Operating
activities |
|
|
|
Net earnings |
$ |
2,083 |
|
|
$ |
3,553 |
|
Depreciation |
314 |
|
|
306 |
|
Amortization of intangible assets |
464 |
|
|
417 |
|
Changes in operating assets, liabilities, income taxes payable and
other, net |
(670 |
) |
|
(1,666 |
) |
Net cash provided by
operating activities |
$ |
2,191 |
|
|
$ |
2,610 |
|
Investing
activities |
|
|
|
Acquisitions, net of cash acquired |
$ |
(802 |
) |
|
$ |
(2,451 |
) |
Change in marketable securities, net |
(5 |
) |
|
168 |
|
Purchases of property, plant and equipment |
(649 |
) |
|
(572 |
) |
Other investing, net |
1 |
|
|
(2 |
) |
Net cash used in
investing activities |
$ |
(1,455 |
) |
|
$ |
(2,857 |
) |
Financing
activities |
|
|
|
Borrowings (payments) of debt, net |
$ |
1,293 |
|
|
$ |
2,456 |
|
Dividends paid |
(778 |
) |
|
(703 |
) |
Repurchases of common stock |
(307 |
) |
|
(300 |
) |
Other financing, net |
(205 |
) |
|
(124 |
) |
Net cash provided by
(used in) financing activities |
$ |
3 |
|
|
$ |
1,329 |
|
Effect of exchange rate changes on cash and cash equivalents |
(18 |
) |
|
(8 |
) |
Change in cash and
cash equivalents |
$ |
721 |
|
|
$ |
1,074 |
|
nm - not meaningful
STRYKER CORPORATION |
For the Three Months and Full Year December
31 |
(Unaudited - Millions of Dollars) |
SALES GROWTH ANALYSIS |
|
Three Months |
|
Full Year |
|
|
Percentage Change |
|
|
Percentage Change |
|
2019 |
2018 |
As Reported |
|
Constant Currency |
|
2019 |
2018 |
As Reported |
|
Constant Currency |
Geographic: |
|
|
|
|
|
|
|
|
|
|
|
United States |
$ |
3,039 |
|
$ |
2,768 |
|
9.8 |
% |
|
9.8 |
% |
|
$ |
10,957 |
|
$ |
9,848 |
|
11.3 |
% |
|
11.3 |
% |
International |
1,092 |
|
1,028 |
|
6.2 |
|
|
8.4 |
|
|
3,927 |
|
3,753 |
|
4.6 |
|
|
9.3 |
|
Total |
$ |
4,131 |
|
$ |
3,796 |
|
8.8 |
% |
|
9.4 |
% |
|
$ |
14,884 |
|
$ |
13,601 |
|
9.4 |
% |
|
10.7 |
% |
Segment: |
|
|
|
|
|
|
|
|
|
|
|
Orthopaedics |
$ |
1,467 |
|
$ |
1,376 |
|
6.7 |
% |
|
7.3 |
% |
|
$ |
5,252 |
|
$ |
4,991 |
|
5.2 |
% |
|
6.7 |
% |
MedSurg |
1,837 |
|
1,720 |
|
6.8 |
|
|
7.4 |
|
|
6,574 |
|
6,045 |
|
8.8 |
|
|
9.9 |
|
Neurotechnology and Spine |
827 |
|
700 |
|
18.0 |
|
|
18.2 |
|
|
3,058 |
|
2,565 |
|
19.2 |
|
|
20.5 |
|
Total |
$ |
4,131 |
|
$ |
3,796 |
|
8.8 |
% |
|
9.4 |
% |
|
$ |
14,884 |
|
$ |
13,601 |
|
9.4 |
% |
|
10.7 |
% |
SUPPLEMENTAL SALES GROWTH ANALYSIS |
|
Three Months |
|
|
|
|
|
|
|
United States |
|
International |
|
|
|
Percentage Change |
|
2019 |
2018 |
|
As Reported |
|
Constant Currency |
|
As Reported |
|
As Reported |
Constant Currency |
Orthopaedics: |
|
|
|
|
|
|
|
|
|
|
|
Knees |
$ |
510 |
|
$ |
465 |
|
|
9.8 |
% |
|
10.5 |
% |
|
10.5 |
% |
|
7.8 |
% |
10.3 |
% |
Hips |
372 |
|
353 |
|
|
5.2 |
|
|
6.0 |
|
|
5.2 |
|
|
5.3 |
|
7.4 |
|
Trauma and Extremities |
442 |
|
428 |
|
|
3.4 |
|
|
4.0 |
|
|
3.8 |
|
|
2.5 |
|
4.2 |
|
Other |
143 |
|
130 |
|
|
10.1 |
|
|
10.6 |
|
|
9.1 |
|
|
14.0 |
|
16.2 |
|
|
$ |
1,467 |
|
$ |
1,376 |
|
|
6.7 |
% |
|
7.3 |
% |
|
7.2 |
% |
|
5.5 |
% |
7.6 |
% |
MedSurg: |
|
|
|
|
|
|
|
|
|
|
|
Instruments |
$ |
567 |
|
$ |
530 |
|
|
6.8 |
% |
|
7.3 |
% |
|
5.5 |
% |
|
11.8 |
% |
14.1 |
% |
Endoscopy |
559 |
|
511 |
|
|
9.8 |
|
|
10.2 |
|
|
15.5 |
|
|
(7.4 |
) |
(5.2 |
) |
Medical |
637 |
|
610 |
|
|
4.4 |
|
|
5.3 |
|
|
5.7 |
|
|
(0.3 |
) |
3.8 |
|
Sustainability |
74 |
|
69 |
|
|
6.6 |
|
|
6.6 |
|
|
6.1 |
|
|
nm |
nm |
|
$ |
1,837 |
|
$ |
1,720 |
|
|
6.8 |
% |
|
7.4 |
% |
|
8.4 |
% |
|
1.1 |
% |
4.0 |
% |
Neurotechnology and
Spine: |
|
|
|
|
|
|
|
|
|
|
|
Neurotechnology |
$ |
537 |
|
$ |
455 |
|
|
17.6 |
% |
|
18.0 |
% |
|
17.7 |
% |
|
17.4 |
% |
18.6 |
% |
Spine |
290 |
|
245 |
|
|
18.6 |
|
|
18.6 |
|
|
20.2 |
|
|
14.1 |
|
14.0 |
|
|
$ |
827 |
|
$ |
700 |
|
|
18.0 |
% |
|
18.2 |
% |
|
18.7 |
% |
|
16.4 |
% |
17.3 |
% |
Total |
$ |
4,131 |
|
$ |
3,796 |
|
|
8.8 |
% |
|
9.4 |
% |
|
9.8 |
% |
|
6.2 |
% |
8.4 |
% |
SUPPLEMENTAL SALES GROWTH ANALYSIS |
|
Full Year |
|
|
|
|
|
|
|
United States |
|
International |
|
|
|
Percentage Change |
|
2019 |
2018 |
|
As Reported |
|
Constant Currency |
|
As Reported |
|
As Reported |
Constant Currency |
Orthopaedics: |
|
|
|
|
|
|
|
|
|
|
|
Knees |
$ |
1,815 |
|
$ |
1,701 |
|
|
6.7 |
% |
|
8.1 |
% |
|
8.2 |
% |
|
2.6 |
% |
7.6 |
% |
Hips |
1,383 |
|
1,336 |
|
|
3.5 |
|
|
5.2 |
|
|
5.4 |
|
|
0.3 |
|
4.8 |
|
Trauma and Extremities |
1,639 |
|
1,580 |
|
|
3.7 |
|
|
5.2 |
|
|
4.9 |
|
|
1.6 |
|
5.8 |
|
Other |
415 |
|
374 |
|
|
11.2 |
|
|
12.0 |
|
|
11.5 |
|
|
10.0 |
|
14.2 |
|
|
$ |
5,252 |
|
$ |
4,991 |
|
|
5.2 |
% |
|
6.7 |
% |
|
6.8 |
% |
|
1.9 |
% |
6.4 |
% |
MedSurg: |
|
|
|
|
|
|
|
|
|
|
|
Instruments |
$ |
2,041 |
|
$ |
1,822 |
|
|
12.0 |
% |
|
13.1 |
% |
|
12.9 |
% |
|
8.7 |
% |
13.8 |
% |
Endoscopy |
1,983 |
|
1,846 |
|
|
7.5 |
|
|
8.6 |
|
|
10.1 |
|
|
(1.8 |
) |
3.4 |
|
Medical |
2,264 |
|
2,118 |
|
|
6.9 |
|
|
8.1 |
|
|
9.6 |
|
|
(2.4 |
) |
2.9 |
|
Sustainability |
286 |
|
259 |
|
|
10.4 |
|
|
10.4 |
|
|
9.9 |
|
|
nm |
nm |
|
$ |
6,574 |
|
$ |
6,045 |
|
|
8.8 |
% |
|
9.9 |
% |
|
10.8 |
% |
|
1.3 |
% |
6.5 |
% |
Neurotechnology and
Spine: |
|
|
|
|
|
|
|
|
|
|
|
Neurotechnology |
$ |
1,973 |
|
$ |
1,737 |
|
|
13.5 |
% |
|
14.9 |
% |
|
13.9 |
% |
|
12.7 |
% |
16.7 |
% |
Spine |
1,085 |
|
828 |
|
|
31.1 |
|
|
32.3 |
|
|
34.7 |
|
|
21.3 |
|
25.4 |
|
|
$ |
3,058 |
|
$ |
2,565 |
|
|
19.2 |
% |
|
20.5 |
% |
|
21.3 |
% |
|
14.9 |
% |
18.9 |
% |
Total |
$ |
14,884 |
|
$ |
13,601 |
|
|
9.4 |
% |
|
10.7 |
% |
|
11.3 |
% |
|
4.6 |
% |
9.3 |
% |
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; percentage
sales growth in constant currency; percentage organic sales
growth; adjusted gross profit; adjusted selling, general and
administrative expenses; adjusted research, development and
engineering expenses; adjusted operating income; adjusted effective
income tax rate; adjusted net earnings; and adjusted net earnings
per diluted share (Diluted EPS). We believe that these non-GAAP
financial measures provide meaningful information to assist
investors and 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, which affect the comparability and trend of
sales. Percentage organic sales growth is calculated by translating
current year results at prior year average foreign currency
exchange rates 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, research, development and engineering 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. The weighted-average diluted shares outstanding
used in the calculation of non-GAAP earnings per share are the same
as those used in the calculation of reported earnings per share for
the respective period.
STRYKER CORPORATION |
For the Three Months and Full Year December
31 |
(Unaudited - Millions of Dollars, Except Per Share
Amounts) |
Reconciliation of Non-GAAP Financial Measures to the Most
Directly Comparable GAAP Financial Measures |
Three Months 2019 |
Gross Profit |
Selling, General & Administrative
Expenses |
Research, Development & Engineering
Expenses |
Operating Income |
Net Earnings |
Effective Tax Rate |
Diluted EPS |
Reported |
$ |
2,703 |
|
$ |
1,380 |
|
$ |
254 |
|
$ |
944 |
|
$ |
725 |
|
22.5 |
% |
$ |
1.90 |
|
Reported percent net
sales |
65.4 |
% |
33.4 |
% |
6.1 |
% |
22.9 |
% |
17.6 |
% |
|
|
Acquisition and
integration-related charges (a) |
|
|
|
|
|
|
|
Inventory stepped-up to fair value |
12 |
|
— |
|
— |
|
12 |
|
9 |
|
0.1 |
|
0.02 |
|
Other acquisition and integration-related |
— |
|
(40 |
) |
— |
|
40 |
|
34 |
|
— |
|
0.09 |
|
Amortization of purchased
intangible assets |
— |
|
— |
|
— |
|
112 |
|
81 |
|
1.3 |
|
0.21 |
|
Restructuring-related and
other charges (b) |
17 |
|
(63 |
) |
— |
|
80 |
|
58 |
|
0.9 |
|
0.15 |
|
Medical device regulations
(c) |
5 |
|
— |
|
(23 |
) |
28 |
|
20 |
|
0.3 |
|
0.06 |
|
Recall-related matters
(d) |
— |
|
— |
|
— |
|
13 |
|
10 |
|
0.2 |
|
0.03 |
|
Regulatory and legal matters
(e) |
— |
|
59 |
|
— |
|
(59 |
) |
(52 |
) |
0.4 |
|
(0.14 |
) |
Tax matters (f) |
— |
|
— |
|
— |
|
— |
|
63 |
|
(9.4 |
) |
0.17 |
|
Adjusted |
$ |
2,737 |
|
$ |
1,336 |
|
$ |
231 |
|
$ |
1,170 |
|
$ |
948 |
|
16.3 |
% |
$ |
2.49 |
|
Adjusted percent net
sales |
66.3 |
% |
32.3 |
% |
5.6 |
% |
28.3 |
% |
22.9 |
% |
|
|
Three Months 2018 |
Gross Profit |
Selling, General & Administrative
Expenses |
Research, Development & Engineering
Expenses |
Operating Income |
Net Earnings |
Effective Tax Rate |
Diluted EPS |
Reported |
$ |
2,456 |
|
$ |
1,431 |
|
$ |
221 |
|
$ |
698 |
|
$ |
2,068 |
|
(214.8 |
)% |
$ |
5.44 |
|
Reported percent net
sales |
64.7 |
% |
37.7 |
% |
5.8 |
% |
18.4 |
% |
54.5 |
% |
|
|
Acquisition and
integration-related charges (a) |
|
|
|
|
|
|
|
Inventory stepped-up to fair value |
16 |
|
— |
|
— |
|
15 |
|
13 |
|
(0.1 |
) |
0.03 |
|
Other acquisition and integration-related |
— |
|
(59 |
) |
— |
|
59 |
|
49 |
|
(0.1 |
) |
0.13 |
|
Amortization of purchased
intangible assets |
— |
|
— |
|
— |
|
93 |
|
75 |
|
0.1 |
|
0.20 |
|
Restructuring-related and
other charges (b) |
18 |
|
(77 |
) |
— |
|
96 |
|
81 |
|
(0.2 |
) |
0.21 |
|
Medical device regulations
(c) |
1 |
|
— |
|
(5 |
) |
7 |
|
6 |
|
0.1 |
|
0.02 |
|
Recall-related matters
(d) |
— |
|
— |
|
— |
|
13 |
|
11 |
|
— |
|
0.03 |
|
Regulatory and legal matters
(e) |
— |
|
(64 |
) |
— |
|
64 |
|
49 |
|
0.6 |
|
0.13 |
|
Tax matters (f) |
— |
|
— |
|
— |
|
— |
|
(1,524 |
) |
232.0 |
|
(4.01 |
) |
Adjusted |
$ |
2,491 |
|
$ |
1,231 |
|
$ |
216 |
|
$ |
1,045 |
|
$ |
828 |
|
17.6 |
% |
$ |
2.18 |
|
Adjusted percent net
sales |
65.7 |
% |
32.4 |
% |
5.7 |
% |
27.5 |
% |
21.8 |
% |
|
|
Full Year 2019 |
Gross Profit |
Selling, General & Administrative
Expenses |
Research, Development & Engineering
Expenses |
Operating Income |
Net Earnings |
Effective Tax Rate |
Diluted EPS |
Reported |
$ |
9,696 |
|
$ |
5,356 |
|
$ |
971 |
|
$ |
2,713 |
|
$ |
2,083 |
|
18.7 |
% |
$ |
5.48 |
|
Reported percent net
sales |
65.1 |
% |
36.0 |
% |
6.5 |
% |
18.2 |
% |
14.0 |
% |
|
|
Acquisition and
integration-related charges (a) |
|
|
|
|
|
|
|
Inventory stepped-up to fair value |
67 |
|
— |
|
— |
|
67 |
|
51 |
|
0.2 |
|
0.13 |
|
Other acquisition and integration-related |
— |
|
(208 |
) |
— |
|
208 |
|
160 |
|
0.6 |
|
0.42 |
|
Amortization of purchased
intangible assets |
— |
|
— |
|
— |
|
464 |
|
375 |
|
0.6 |
|
0.99 |
|
Restructuring-related and
other charges (b) |
38 |
|
(188 |
) |
— |
|
226 |
|
180 |
|
0.4 |
|
0.47 |
|
Medical device regulations
(c) |
6 |
|
— |
|
(56 |
) |
62 |
|
48 |
|
0.2 |
|
0.13 |
|
Recall-related matters
(d) |
— |
|
— |
|
— |
|
192 |
|
154 |
|
0.3 |
|
0.41 |
|
Regulatory and legal matters
(e) |
— |
|
24 |
|
— |
|
(24 |
) |
(33 |
) |
0.5 |
|
(0.09 |
) |
Tax matters (f) |
— |
|
— |
|
— |
|
— |
|
121 |
|
(5.7 |
) |
0.32 |
|
Adjusted |
$ |
9,807 |
|
$ |
4,984 |
|
$ |
915 |
|
$ |
3,908 |
|
$ |
3,139 |
|
15.8 |
% |
$ |
8.26 |
|
Adjusted percent net
sales |
65.9 |
% |
33.5 |
% |
6.1 |
% |
26.3 |
% |
21.1 |
% |
|
|
Full Year 2018 |
Gross Profit |
Selling, General & Administrative
Expenses |
Research, Development & Engineering
Expenses |
Operating Income |
Net Earnings |
Effective Tax Rate |
Diluted EPS |
Reported |
$ |
8,938 |
|
$ |
5,099 |
|
$ |
862 |
|
$ |
2,537 |
|
$ |
3,553 |
|
(50.8 |
)% |
$ |
9.34 |
|
Reported percent net
sales |
65.7 |
% |
37.5 |
% |
6.3 |
% |
18.7 |
% |
26.1 |
% |
|
|
Acquisition and
integration-related charges (a) |
|
|
|
|
|
|
|
Inventory stepped-up to fair value |
16 |
|
— |
|
— |
|
15 |
|
9 |
|
0.2 |
|
0.02 |
|
Other acquisition and integration-related |
— |
|
(108 |
) |
— |
|
108 |
|
90 |
|
— |
|
0.24 |
|
Amortization of purchased
intangible assets |
— |
|
— |
|
— |
|
417 |
|
338 |
|
0.4 |
|
0.89 |
|
Restructuring-related and
other charges (b) |
27 |
|
(192 |
) |
— |
|
220 |
|
179 |
|
0.1 |
|
0.47 |
|
Medical device regulations
(c) |
2 |
|
— |
|
(10 |
) |
12 |
|
10 |
|
— |
|
0.03 |
|
Recall-related matters
(d) |
— |
|
— |
|
— |
|
23 |
|
18 |
|
— |
|
0.05 |
|
Regulatory and legal matters
(e) |
— |
|
(185 |
) |
— |
|
185 |
|
141 |
|
0.6 |
|
0.37 |
|
Tax matters (f) |
— |
|
— |
|
— |
|
— |
|
(1,559 |
) |
66.2 |
|
(4.10 |
) |
Adjusted |
$ |
8,983 |
|
$ |
4,614 |
|
$ |
852 |
|
$ |
3,517 |
|
$ |
2,779 |
|
16.7 |
% |
$ |
7.31 |
|
Adjusted percent net
sales |
66.1 |
% |
33.9 |
% |
6.3 |
% |
25.9 |
% |
20.4 |
% |
|
|
(a) |
Charges represent certain
acquisition and integration-related costs associated with
acquisitions. |
(b) |
Charges represent the costs associated with certain
restructuring-related activities associated with workforce
reductions and other restructuring-related activities. |
(c) |
Charges represent the costs specific to updating our quality
system, product labeling, asset write-offs and product
remanufacturing to comply with the medical device reporting
regulations and other requirements of the new medical device
regulations in the European Union and China. |
(d) |
Charges represent changes in our
best estimate of the minimum end of the range of probable loss to
resolve certain recall-related matters. |
(e) |
Our best estimate of the minimum of the range of probable loss to
resolve certain regulatory or other legal matters and the amount of
favorable awards from settlements. |
(f) |
Benefits and charges represent the accounting impact of certain
significant and discrete tax items, including adjustments related
to the Tax Cuts and Jobs Act of 2017, and the transfer of certain
intellectual properties between tax jurisdictions. |
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