Stryker (NYSE:SYK) reported operating results for the first quarter
of 2021:
The response to the COVID-19 pandemic has included measures to
slow the spread of the virus taken by governments and health care
authorities globally, including the postponement of elective
medical procedures and social contact restrictions. While there is
starting to be some recovery in certain geographies, there
continues to be a negative impact on our operations and financial
results.
First Quarter Results
- Reported net sales
increased 10.2% from 2020 and 12.4% from 2019 to $4.0
billion
- Organic net sales increased
1.8% from 2020 and 4.7% from 2019
- Reported operating income
margin of 11.6%
- Adjusted operating
income
margin(1)
contracted 50 bps to 23.5%
- Reported EPS decreased
39.2% to $0.79
-
Adjusted
EPS(1)
increased 4.9% to $1.93
In addition to sales growth analysis versus 2020, we are
including sales growth versus 2019 as 2019 provides a more normal
baseline for comparison given the variability caused by the
COVID-19 pandemic throughout 2020.
|
First Quarter Net Sales Growth Overview |
|
From 2020 |
|
From 2019 |
|
Reported |
|
Foreign Currency Exchange |
|
Constant Currency |
|
Acquisitions |
|
Organic |
|
Reported |
|
Foreign Currency Exchange |
|
Constant Currency |
|
Acquisitions |
|
Organic |
Orthopaedics |
21.4 |
% |
|
2.7 |
% |
|
18.7 |
|
% |
|
18.2 |
% |
|
0.5 |
|
% |
|
18.7 |
% |
|
1.5 |
% |
|
17.2 |
% |
|
17.9 |
% |
|
(0.7 |
) |
% |
MedSurg |
— |
|
|
1.6 |
|
|
(1.6 |
) |
|
|
— |
|
|
(1.6 |
) |
|
|
6.2 |
|
|
0.9 |
|
|
5.3 |
|
|
— |
|
|
5.3 |
|
|
Neurotechnology and Spine |
14.0 |
|
|
2.7 |
|
|
11.3 |
|
|
|
— |
|
|
11.3 |
|
|
|
14.6 |
|
|
1.8 |
|
|
12.8 |
|
|
— |
|
|
12.8 |
|
|
Total |
10.2 |
% |
|
2.2 |
% |
|
8.0 |
|
% |
|
6.2 |
% |
|
1.8 |
|
% |
|
12.4 |
% |
|
1.3 |
% |
|
11.1 |
% |
|
6.4 |
% |
|
4.7 |
|
% |
"We are pleased with our results, as business picked up
meaningfully in the latter part of the first quarter," said Kevin
Lobo, Chairman and Chief Executive Officer. "We expect this
momentum to continue and are encouraged by the Wright Medical
integration, which is pacing ahead of our expectations."
Sales Analysis Compared to 2020 and 2019
Consolidated net sales of $4.0 billion increased 10.2% in the
quarter and 8.0% in constant currency from 2020. Organic net sales
increased 1.8% in the quarter including 2.7% from increased unit
volume partially offset by 0.9% from lower prices. From 2019
consolidated net sales increased 12.4% in the quarter and 11.1% in
constant currency. Organic net sales increased 4.7% in the quarter
including 6.1% from increased unit volume partially offset by 1.4%
from lower prices.
Orthopaedics net sales of $1.5 billion increased 21.4% in the
quarter and 18.7% in constant currency from 2020. Organic net sales
increased 0.5% in the quarter including 2.6% from increased unit
volume partially offset by 2.1% from lower prices. From 2019
Orthopaedics net sales increased 18.7% in the quarter and 17.2% in
constant currency. Organic net sales decreased 0.7% in the quarter
including 2.7% from increased unit volume offset by 3.4% from lower
prices.
MedSurg net sales of $1.6 billion remained flat in the quarter
and decreased 1.6% in constant currency from 2020. Organic net
sales decreased 1.6% in the quarter including 1.4% from decreased
unit volume and 0.2% from lower prices. From 2019 MedSurg net sales
increased 6.2% in the quarter and 5.3% in constant currency.
Organic net sales increased 5.3% in the quarter from increased unit
volume.
Neurotechnology and Spine net sales of $0.8 billion increased
14.0% in the quarter and 11.3% in constant currency from 2020.
Organic net sales increased 11.3% in the quarter including 11.9%
from increased unit volume partially offset by 0.6% from lower
prices. From 2019 Neurotechnology and Spine net sales increased
14.6% in the quarter and 12.8% in constant currency. Organic net
sales increased 12.8% in the quarter including 13.4% from increased
unit volume partially offset by 0.6% from lower prices.
Earnings Analysis Compared to 2020
Reported net earnings of $302 million decreased 38.7% in the
quarter. Reported net earnings per diluted share of $0.79 decreased
39.2% in the quarter. Reported gross profit margin and reported
operating income margin were 63.5% and 11.6% in the quarter.
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. Excluding the aforementioned items, adjusted gross profit
margin(1) was 65.4% in the quarter, and adjusted operating income
margin(1) was 23.5% in the quarter, a decline of 50 basis points.
Adjusted net earnings(1) of $737 million increased 5.4% in the
quarter. Adjusted net earnings per diluted share(1) of $1.93
increased 4.9% in the quarter.
2021 Outlook
We continue to monitor and evaluate the impact the global
response to the COVID-19 pandemic has had, and will continue to
have, on our operations and financial results. As we recover from
the pandemic, we continue to expect 2021 organic net sales growth
to be in the range of 8% to 10% from 2019, as this is a more normal
baseline given the variability throughout 2020, and now expect
adjusted net earnings per diluted share(2) to be in the range of
$9.05 to $9.30, including the full year impact of the acquisition
of Wright Medical. Consistent with the pricing environment
experienced in both 2019 and 2020, we expect continued unfavorable
price reductions of approximately 1% in 2021. If foreign currency
exchange rates hold near current levels, we expect EPS will be
positively impacted by $0.05 to $0.10 for the full year. This
guidance assumes an ongoing recovery in our key geographies leading
to more normalized elective procedure levels during the second
quarter of 2021. As previously announced, we will not be providing
quarterly guidance.
(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, April 27,
2021
As previously announced, Stryker will host a conference call on
Tuesday, April 27, 2021 at 4:30 p.m., Eastern Time, to discuss
the company's operating results for the quarter ended
March 31, 2021 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 8988724 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, April 27, 2021, until 11:59 p.m.,
Eastern Time, on Tuesday, May 4, 2021. To hear this recording, you
may dial (800) 585-8367 (domestic) or (416) 621-4642
(international) and enter conference ID number 8988724.
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 impact on our
operations and financial results of the COVID-19 pandemic and any
related policies and actions by governments or other third parties;
unexpected liabilities, costs, charges or expenses in connection
with the acquisition of Wright Medical Group N.V. ("Wright"); the
effects of the Wright acquisition 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. We disclaim any intention or obligation to
publicly update or revise any forward-looking statement to reflect
any change in our expectations or in events, conditions or
circumstances on which those expectations may be based, or that
affect the likelihood that actual results will differ from those
contained in the forward-looking statements.
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:
Preston Wells, Vice President, Investor Relations at
269-385-2600 or preston.wells@stryker.com
For media inquiries please contact:
Yin Becker, Vice President, Chief Corporate Affairs Officer at
269-385-2600 or yin.becker@stryker.com
STRYKER CORPORATION |
For the Three Months March 31 |
(Unaudited - Millions of Dollars, Except Per Share
Amounts) |
CONSOLIDATED STATEMENTS OF EARNINGS |
|
|
|
|
|
|
|
Three Months |
|
2021 |
|
2020 |
|
% Change |
Net
sales |
$ |
3,953 |
|
|
|
$ |
3,588 |
|
|
|
10.2 |
|
% |
Cost of sales |
1,444 |
|
|
|
1,257 |
|
|
|
14.9 |
|
|
Gross
profit |
$ |
2,509 |
|
|
|
$ |
2,331 |
|
|
|
7.6 |
|
% |
% of sales |
63.5 |
|
% |
|
65.0 |
|
% |
|
|
Research, development and engineering expenses |
288 |
|
|
|
254 |
|
|
|
13.4 |
|
|
Selling, general and administrative expenses |
1,575 |
|
|
|
1,330 |
|
|
|
18.4 |
|
|
Recall charges |
6 |
|
|
|
(6 |
) |
|
|
nm |
Amortization of intangible assets |
181 |
|
|
|
118 |
|
|
|
53.4 |
|
|
Total operating expenses |
$ |
2,050 |
|
|
|
$ |
1,696 |
|
|
|
20.9 |
|
% |
Operating
income |
$ |
459 |
|
|
|
$ |
635 |
|
|
|
(27.7 |
) |
% |
% of sales |
11.6 |
|
% |
|
17.7 |
|
% |
|
|
Other income (expense), net |
(92 |
) |
|
|
(45 |
) |
|
|
104.4 |
|
|
Earnings before income
taxes |
$ |
367 |
|
|
|
$ |
590 |
|
|
|
(37.8 |
) |
% |
Income taxes |
65 |
|
|
|
97 |
|
|
|
(33.0 |
) |
|
Net
earnings |
$ |
302 |
|
|
|
$ |
493 |
|
|
|
(38.7 |
) |
% |
Net earnings per share
of common stock: |
|
|
|
|
|
Basic |
$ |
0.80 |
|
|
|
$ |
1.32 |
|
|
|
(39.4 |
) |
% |
Diluted |
$ |
0.79 |
|
|
|
$ |
1.30 |
|
|
|
(39.2 |
) |
% |
Weighted-average
shares outstanding (in millions): |
|
|
|
|
|
Basic |
376.3 |
|
374.8 |
|
|
Diluted |
381.7 |
|
379.7 |
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
March 31 |
|
December 31 |
|
2021 |
|
2020 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
2,238 |
|
|
$ |
2,943 |
|
Marketable securities |
74 |
|
|
81 |
|
Accounts receivable, net |
2,616 |
|
|
2,701 |
|
Inventories |
3,473 |
|
|
3,494 |
|
Prepaid expenses and other current assets |
578 |
|
|
488 |
|
Total current assets |
$ |
8,979 |
|
|
$ |
9,707 |
|
Property, plant and equipment, net |
2,710 |
|
|
2,752 |
|
Goodwill and other intangibles, net |
18,181 |
|
|
18,332 |
|
Noncurrent deferred income tax assets |
1,519 |
|
|
1,530 |
|
Other noncurrent assets |
2,066 |
|
|
2,009 |
|
Total
assets |
$ |
33,455 |
|
|
$ |
34,330 |
|
Liabilities and
shareholders' equity |
|
|
|
Current liabilities |
$ |
3,953 |
|
|
$ |
5,041 |
|
Long-term debt, excluding current maturities |
13,059 |
|
|
13,230 |
|
Income taxes |
986 |
|
|
990 |
|
Other noncurrent liabilities |
1,955 |
|
|
1,985 |
|
Shareholders' equity |
13,502 |
|
|
13,084 |
|
Total liabilities and
shareholders' equity |
$ |
33,455 |
|
|
$ |
34,330 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
Three Months |
|
2021 |
|
2020 |
Operating
activities |
|
|
|
Net earnings |
$ |
302 |
|
|
|
$ |
493 |
|
|
Depreciation |
95 |
|
|
|
80 |
|
|
Amortization of intangible assets |
181 |
|
|
|
118 |
|
|
Changes in operating assets, liabilities, income taxes payable and
other, net |
(126 |
) |
|
|
(100 |
) |
|
Net cash provided by
operating activities |
$ |
452 |
|
|
|
$ |
591 |
|
|
Investing
activities |
|
|
|
Acquisitions, net of cash acquired |
$ |
(27 |
) |
|
|
$ |
(23 |
) |
|
Purchases of property, plant and equipment |
(83 |
) |
|
|
(144 |
) |
|
Change in marketable securities, net |
7 |
|
|
|
4 |
|
|
Other investing, net |
7 |
|
|
|
— |
|
|
Net cash used in
investing activities |
$ |
(96 |
) |
|
|
$ |
(163 |
) |
|
Financing
activities |
|
|
|
Borrowings (payments) of debt, net |
$ |
(743 |
) |
|
|
$ |
(496 |
) |
|
Dividends paid |
(238 |
) |
|
|
(215 |
) |
|
Repurchases of common stock |
— |
|
|
|
— |
|
|
Other financing, net |
(72 |
) |
|
|
(57 |
) |
|
Net cash provided by
(used in) financing activities |
$ |
(1,053 |
) |
|
|
$ |
(768 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
(8 |
) |
|
|
(33 |
) |
|
Change in cash and
cash equivalents |
$ |
(705 |
) |
|
|
$ |
(373 |
) |
|
nm - not meaningful
STRYKER CORPORATION |
For the Three Months March 31 |
(Unaudited - Millions of Dollars) |
SALES GROWTH ANALYSIS |
|
Three Months |
|
|
|
|
|
Percentage Change |
|
|
|
|
|
From 2020 |
|
From 2019 |
|
2021 |
2020 |
2019 |
|
As Reported |
ConstantCurrency |
|
As Reported |
ConstantCurrency |
Geographic: |
|
|
|
|
|
|
|
|
|
United States |
$ |
2,784 |
|
$ |
2,643 |
|
$ |
2,579 |
|
|
5.3 |
% |
5.3 |
|
% |
|
8.0 |
% |
8.0 |
% |
International |
1,169 |
|
945 |
|
937 |
|
|
23.7 |
|
15.2 |
|
|
|
24.7 |
|
19.8 |
|
Total |
$ |
3,953 |
|
$ |
3,588 |
|
$ |
3,516 |
|
|
10.2 |
% |
8.0 |
|
% |
|
12.4 |
% |
11.1 |
% |
Segment: |
|
|
|
|
|
|
|
|
|
Orthopaedics |
$ |
1,484 |
|
$ |
1,222 |
|
$ |
1,250 |
|
|
21.4 |
% |
18.7 |
|
% |
|
18.7 |
% |
17.2 |
% |
MedSurg |
|
1,621 |
|
|
1,622 |
|
|
1,527 |
|
|
— |
|
(1.6 |
) |
|
|
6.2 |
|
5.3 |
|
Neurotechnology and Spine |
|
848 |
|
|
744 |
|
|
739 |
|
|
14.0 |
|
11.3 |
|
|
|
14.6 |
|
12.8 |
|
Total |
$ |
3,953 |
|
$ |
3,588 |
|
$ |
3,516 |
|
|
10.2 |
% |
8.0 |
|
% |
|
12.4 |
% |
11.1 |
% |
SUPPLEMENTAL SALES GROWTH ANALYSIS |
|
Three Months |
|
|
|
|
|
|
|
|
|
|
United States |
|
International |
|
|
|
|
Percentage Change |
|
|
|
|
|
From 2020 |
|
From 2019 |
|
From 2020 |
|
From 2019 |
|
From 2020 |
|
From 2019 |
|
2021 |
2020 |
2019 |
|
As Reported |
Constant Currency |
|
As Reported |
Constant Currency |
|
As Reported |
|
As Reported |
|
As Reported |
Constant Currency |
|
As Reported |
Constant Currency |
Orthopaedics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Knees |
$ |
412 |
|
$ |
432 |
|
$ |
439 |
|
|
(4.5 |
) |
% |
(6.5 |
) |
% |
|
(6.1 |
) |
% |
(7.3 |
) |
% |
|
(8.8 |
) |
% |
|
(8.3 |
) |
% |
|
8.0 |
% |
0.1 |
|
% |
|
(0.4 |
) |
% |
(4.6 |
) |
% |
Hips |
309 |
|
316 |
|
336 |
|
|
(2.2 |
) |
|
(4.7 |
) |
|
|
(8.0 |
) |
|
(9.4 |
) |
|
|
(7.3 |
) |
|
|
(12.6 |
) |
|
|
6.8 |
|
(0.1 |
) |
|
|
(0.1 |
) |
|
(3.9 |
) |
|
Trauma and Extremities |
640 |
|
392 |
|
396 |
|
|
63.1 |
|
|
59.2 |
|
|
|
61.8 |
|
|
59.6 |
|
|
|
69.2 |
|
|
|
73.8 |
|
|
|
50.9 |
|
40.1 |
|
|
|
40.5 |
|
|
34.6 |
|
|
Other |
123 |
|
82 |
|
79 |
|
|
48.6 |
|
|
46.7 |
|
|
|
55.5 |
|
|
54.5 |
|
|
|
36.2 |
|
|
|
49.0 |
|
|
|
|
111.4 |
|
98.1 |
|
|
|
81.2 |
|
|
76.2 |
|
|
|
$ |
1,484 |
|
$ |
1,222 |
|
$ |
1,250 |
|
|
21.4 |
|
% |
18.7 |
|
% |
|
18.7 |
|
% |
17.2 |
|
% |
|
19.0 |
|
% |
|
19.4 |
|
% |
|
26.7 |
% |
18.0 |
|
% |
|
17.5 |
|
% |
12.8 |
|
% |
MedSurg: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruments |
$ |
469 |
|
$ |
513 |
|
$ |
461 |
|
|
(8.5 |
) |
% |
(10.0 |
) |
% |
|
1.9 |
|
% |
0.8 |
|
% |
|
(13.4 |
) |
% |
|
(3.0 |
) |
% |
|
11.1 |
% |
2.8 |
|
% |
|
20.8 |
|
% |
15.7 |
|
% |
Endoscopy |
469 |
|
455 |
|
470 |
|
|
3.1 |
|
|
1.6 |
|
|
|
(0.1 |
) |
|
(0.7 |
) |
|
|
(2.9 |
) |
|
|
(5.7 |
) |
|
|
27.4 |
|
19.0 |
|
|
|
22.1 |
|
|
19.5 |
|
|
Medical |
622 |
|
587 |
|
531 |
|
|
5.9 |
|
|
4.0 |
|
|
|
17.0 |
|
|
15.9 |
|
|
|
4.1 |
|
|
|
13.6 |
|
|
|
11.8 |
|
3.6 |
|
|
|
29.1 |
|
|
23.8 |
|
|
Sustainability |
61 |
|
67 |
|
65 |
|
|
(8.6 |
) |
|
(8.7 |
) |
|
|
(6.0 |
) |
|
(6.1 |
) |
|
|
(9.1 |
) |
|
|
(6.4 |
) |
|
|
54.1 |
|
47.1 |
|
|
|
21.7 |
|
|
14.6 |
|
|
|
$ |
1,621 |
|
$ |
1,622 |
|
$ |
1,527 |
|
|
— |
|
|
(1.6 |
) |
% |
|
6.2 |
|
% |
5.3 |
|
% |
|
(4.1 |
) |
% |
|
1.6 |
|
% |
|
16.0 |
% |
7.6 |
|
% |
|
24.3 |
|
% |
19.9 |
|
% |
Neurotechnology and
Spine: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neurotechnology |
$ |
570 |
|
$ |
483 |
|
$ |
469 |
|
|
18.1 |
|
% |
15.0 |
|
% |
|
21.7 |
|
% |
19.5 |
|
% |
|
11.7 |
|
% |
|
12.0 |
|
% |
|
28.6 |
% |
20.3 |
|
% |
|
38.9 |
|
% |
32.9 |
|
% |
Spine |
278 |
|
261 |
|
270 |
|
|
6.5 |
|
|
4.4 |
|
|
|
2.5 |
|
|
1.1 |
|
|
|
(1.9 |
) |
|
|
(7.3 |
) |
|
|
31.7 |
|
22.6 |
|
|
|
34.7 |
|
|
28.5 |
|
|
|
$ |
848 |
|
$ |
744 |
|
$ |
739 |
|
|
14.0 |
|
% |
11.3 |
|
% |
|
14.6 |
|
% |
12.8 |
|
% |
|
6.3 |
|
% |
|
4.1 |
|
% |
|
29.4 |
% |
20.9 |
|
% |
|
37.8 |
|
% |
31.7 |
|
% |
Total |
$ |
3,953 |
|
$ |
3,588 |
|
$ |
3,516 |
|
|
10.2 |
|
% |
8.0 |
|
% |
|
12.4 |
|
% |
11.1 |
|
% |
|
5.3 |
|
% |
|
8.0 |
|
% |
|
23.7 |
% |
15.2 |
|
% |
|
24.7 |
|
% |
19.8 |
|
% |
Note: 2021 had one less selling
day than 2020 and the same number of selling days as 2019.
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 other income (expense), net; adjusted
effective income tax rate; adjusted net earnings; adjusted net
earnings per diluted share (Diluted EPS); free cash flow; and free
cash flow conversion. We believe 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. To measure free cash flow, we adjust cash provided by
operating activities by the amount of purchases of property, plant
and equipment and proceeds from long-lived asset disposals and
remove the impact of certain legal settlements and recall payments.
To measure free cash flow conversion we divide free cash flow by
adjusted net 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, other
income (expense), net, 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 net earnings per diluted share are the
same as those used in the calculation of reported net earnings per
diluted share for the respective period.
STRYKER CORPORATION |
For the Three Months March 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 2021 |
Gross Profit |
Selling, General & Administrative
Expenses |
Research, Development & Engineering
Expenses |
Operating Income |
Other income (expense), net |
Net Earnings |
EffectiveTax Rate |
Diluted EPS |
Reported |
$ |
2,509 |
|
|
$ |
1,575 |
|
|
$ |
288 |
|
|
$ |
459 |
|
$ |
(92 |
) |
|
$ |
302 |
|
17.7 |
|
% |
$ |
0.79 |
|
Reported percent net
sales |
63.5 |
|
% |
39.8 |
|
% |
7.3 |
|
% |
11.6 |
% |
(2.3 |
) |
% |
7.6 |
% |
|
|
Acquisition and
integration-related charges (a) |
|
|
|
|
|
|
|
|
Inventory stepped-up to fair value |
79 |
|
|
— |
|
|
— |
|
|
79 |
|
— |
|
|
60 |
|
2.3 |
|
|
0.16 |
|
Other acquisition and integration-related |
— |
|
|
(170 |
) |
|
— |
|
|
170 |
|
— |
|
|
129 |
|
5.1 |
|
|
0.34 |
|
Amortization of purchased
intangible assets |
— |
|
|
— |
|
|
— |
|
|
181 |
|
— |
|
|
151 |
|
2.2 |
|
|
0.40 |
|
Restructuring-related and
other charges (b) |
(2 |
) |
|
(15 |
) |
|
— |
|
|
14 |
|
11 |
|
|
18 |
|
1.0 |
|
|
0.05 |
|
Medical device regulations
(c) |
1 |
|
|
— |
|
|
(18 |
) |
|
19 |
|
— |
|
|
16 |
|
0.3 |
|
|
0.04 |
|
Recall-related matters
(d) |
— |
|
|
— |
|
|
— |
|
|
6 |
|
— |
|
|
5 |
|
(0.5 |
) |
|
0.01 |
|
Regulatory and legal matters
(e) |
— |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
— |
|
|
— |
|
Tax matters (f) |
— |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
56 |
|
(15.1 |
) |
|
0.14 |
|
Adjusted |
$ |
2,587 |
|
|
$ |
1,390 |
|
|
$ |
270 |
|
|
$ |
928 |
|
$ |
(81 |
) |
|
$ |
737 |
|
13.0 |
|
% |
$ |
1.93 |
|
Adjusted percent net
sales |
65.4 |
|
% |
35.2 |
|
% |
6.8 |
|
% |
23.5 |
% |
(2.0 |
) |
% |
18.6 |
% |
|
|
Three Months 2020 |
Gross Profit |
Selling, General & Administrative
Expenses |
Research, Development & Engineering
Expenses |
Operating Income |
Other income (expense), net |
Net Earnings |
EffectiveTax Rate |
Diluted EPS |
Reported |
$ |
2,331 |
|
$ |
1,330 |
|
|
$ |
254 |
|
|
$ |
635 |
|
|
$ |
(45 |
) |
|
$ |
493 |
|
|
16.4 |
|
% |
$ |
1.30 |
|
|
Reported percent net
sales |
65.0 |
% |
37.1 |
|
% |
7.1 |
|
% |
17.7 |
|
% |
(1.3 |
) |
% |
13.7 |
|
% |
|
|
Acquisition and
integration-related charges (a) |
|
|
|
|
|
|
|
|
Inventory stepped-up to fair value |
6 |
|
— |
|
|
— |
|
|
6 |
|
|
— |
|
|
5 |
|
|
0.1 |
|
|
0.01 |
|
|
Other acquisition and integration-related |
— |
|
(31 |
) |
|
— |
|
|
31 |
|
|
— |
|
|
24 |
|
|
0.3 |
|
|
0.06 |
|
|
Amortization of purchased
intangible assets |
— |
|
— |
|
|
— |
|
|
118 |
|
|
— |
|
|
96 |
|
|
0.9 |
|
|
0.25 |
|
|
Restructuring-related and
other charges (b) |
4 |
|
(49 |
) |
|
— |
|
|
54 |
|
|
— |
|
|
42 |
|
|
0.6 |
|
|
0.11 |
|
|
Medical device regulations
(c) |
1 |
|
— |
|
|
(23 |
) |
|
24 |
|
|
— |
|
|
18 |
|
|
0.3 |
|
|
0.05 |
|
|
Recall-related matters
(d) |
— |
|
— |
|
|
— |
|
|
(6 |
) |
|
— |
|
|
(4 |
) |
|
(0.1 |
) |
|
(0.01 |
) |
|
Regulatory and legal matters
(e) |
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Tax matters (f) |
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
25 |
|
|
(4.2 |
) |
|
0.07 |
|
|
Adjusted |
$ |
2,342 |
|
$ |
1,250 |
|
|
$ |
231 |
|
|
$ |
862 |
|
|
$ |
(45 |
) |
|
$ |
699 |
|
|
14.3 |
|
% |
$ |
1.84 |
|
|
Adjusted percent net
sales |
65.3 |
% |
34.8 |
|
% |
6.4 |
|
% |
24.0 |
|
% |
(1.3 |
) |
% |
19.5 |
|
% |
|
|
Three Months |
2021 |
|
2020 |
Cash provided by operating activities |
$ |
452 |
|
|
|
$ |
591 |
|
|
Net earnings |
$ |
302 |
|
|
|
$ |
493 |
|
|
Conversion |
149.7 |
|
% |
|
119.9 |
|
% |
|
|
|
|
Cash provided by
operating activities |
$ |
452 |
|
|
|
$ |
591 |
|
|
Purchases of property, plant
and equipment |
(83 |
) |
|
|
(144 |
) |
|
Proceeds from long-lived asset
disposals |
7 |
|
|
|
— |
|
|
Recall payments |
8 |
|
|
|
4 |
|
|
Free cash
flow |
$ |
384 |
|
|
|
$ |
451 |
|
|
Adjusted net earnings |
737 |
|
|
|
699 |
|
|
Free cash flow
conversion |
52.1 |
|
% |
|
64.5 |
|
% |
(a) |
Charges represent certain acquisition and integration-related costs
associated with acquisitions. |
(b) |
Charges represent the costs associated with the termination of
sales relationships in certain countries, workforce reductions,
elimination of product lines, certain long-lived asset impairments
and associated costs 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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