Kalamazoo, Michigan, Jan. 29, 2019 (GLOBE NEWSWIRE) -- Stryker (NYSE:SYK) reported operating results for the fourth quarter and
full year of 2018 and 2019 outlook:
Fourth Quarter Highlights
• Reported net sales increased 9.4% to $3.8 billion
- Organic net sales increased 8.6%
- Reported operating income margin of 18.4%
- Adjusted operating income margin(1) expanded 50 bps (30 bps excluding ASC 606(2)) to
27.5%
- Reported EPS increased 924.2% to $5.44
- Adjusted EPS(3) increased 11.2% to $2.18, at the high end of guidance range
| |
Fourth Quarter Net Sales Growth Overview |
| |
Reported |
|
Excluding ASC 606 Adoption(2) |
|
Foreign Currency Exchange |
|
Constant Currency |
|
Acquisitions |
|
Organic |
| Orthopaedics |
5.4 |
% |
|
5.9 |
% |
|
(1.1 |
)% |
|
7.0 |
% |
|
— |
% |
|
7.0 |
% |
| MedSurg |
8.9 |
|
|
9.9 |
|
|
(1.2 |
) |
|
11.1 |
|
|
1.0 |
|
|
10.1 |
|
| Neurotechnology and Spine |
19.5 |
|
|
20.1 |
|
|
(1.3 |
) |
|
21.4 |
|
|
13.0 |
|
|
8.4 |
|
| Total |
9.4 |
% |
|
10.1 |
% |
|
(1.2 |
)% |
|
11.3 |
% |
|
2.7 |
% |
|
8.6 |
% |
Full Year Highlights
• Reported net sales increased 9.3% to $13.6 billion
- Organic net sales increased 7.9%
- Reported operating income margin of 18.7%
- Adjusted operating income margin(1) expanded 70 bps (40 bps excluding ASC 606(2)) to
25.9%
- Reported EPS increased 248.5% to $9.34
- Adjusted EPS(3) increased 12.6% to $7.31, exceeding the high end of guidance range
| |
Full Year Net Sales Growth Overview |
| |
Reported |
|
Excluding ASC 606 Adoption(2) |
|
Foreign Currency Exchange |
|
Constant Currency |
|
Acquisitions |
|
Organic |
| Orthopaedics |
5.9 |
% |
|
6.4 |
% |
|
0.5 |
% |
|
5.9 |
% |
|
— |
% |
|
5.9 |
% |
| MedSurg |
8.8 |
|
|
10.1 |
|
|
0.1 |
|
|
10.0 |
|
|
1.4 |
|
|
8.6 |
|
| Neurotechnology and Spine |
18.0 |
|
|
18.6 |
|
|
0.6 |
|
|
18.0 |
|
|
7.4 |
|
|
10.6 |
|
| Total |
9.3 |
% |
|
10.2 |
% |
|
0.4 |
% |
|
9.8 |
% |
|
1.9 |
% |
|
7.9 |
% |
"We had an excellent finish to 2018 with the best organic sales growth in a decade, and strong adjusted earnings
performance," said Kevin A. Lobo, Chairman and Chief Executive Officer. "Our multi-year momentum reflects the strength of our
diversified model, progress on globalization and outstanding people and culture. We are well positioned to deliver for our
customers, employees and shareholders in 2019 and beyond."
Sales Analysis (percentages exclude ASC 606(2) adoption impact)
Consolidated net sales of $3.8 billion and $13.6 billion increased 10.1% and 10.2% in the quarter and full year
and 11.3% and 9.8% in constant currency. Organic net sales increased 8.6% and 7.9% in the quarter and full year including 10.1% and
9.3% from increased unit volume partially offset by 1.5% and 1.4% from lower prices.
Orthopaedics net sales of $1.4 billion and $5.0 billion increased 5.9% and 6.4% in the quarter and full year and
7.0% and 5.9% in constant currency. Organic net sales increased 7.0% and 5.9% in the quarter and full year including 8.9% and 8.1%
from increased unit volume partially offset by 1.9% and 2.2% from lower prices.
MedSurg net sales of $1.7 billion and $6.0 billion increased 9.9% and 10.1% in the quarter and full year and
11.1% and 10.0% in constant currency. Organic net sales increased 10.1% and 8.6% in the quarter and full year including 11.3% and
9.3% from increased unit volume partially offset by 1.2% and 0.7% from lower prices.
Neurotechnology and Spine net sales of $0.7 billion and $2.6 billion increased 20.1% and 18.6% in the quarter
and full year and 21.4% and 18.0% in constant currency. Organic net sales increased 8.4% and 10.6% in the quarter and full year
including 10.2% and 12.2% from increased unit volume partially offset by 1.8% and 1.6% from lower prices.
Earnings Analysis
Reported net earnings of $2.1 billion and $3.6 billion increased 930.5% and 248.3% in the quarter and full year.
Reported net earnings per diluted share of $5.44 and $9.34 increased 924.2% and 248.5% in the quarter and 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, the Rejuvenate
recall and other recall-related matters, regulatory and legal matters and tax matters. In the quarter 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 benefit of the transaction will be realized as a reduction of cash paid for taxes over a period of
nine years and a corresponding charge to tax expense, which consistent with the benefit recognized in the quarter will also be
adjusted out of reported net earnings going forward in our non-GAAP financial measure. 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 increases gross profit margin from 64.7% to 65.6% in the quarter and for the full year from
65.7% to 66.0% and increases operating income margin in the quarter from 18.4% to 27.5%(1) and for the full year from
18.7% to 25.9% including a 20 basis point favorable impact related to the adoption of the new revenue recognition
standard(2). Excluding the impact of the items described above, adjusted net earnings(4) of $0.8 billion and
$2.8 billion increased 11.0% and 12.7% in the quarter and full year. Adjusted net earnings per diluted share(3) of $2.18
and $7.31 increased 11.2% and 12.6% in the quarter and full year.
2019 Outlook
We expect 2019 organic net sales growth to be in the range of 6.5% to 7.5% and expect adjusted net earnings per
diluted share(5) to be in the range of $8.00 to $8.20. We expect adjusted net earnings per diluted share(5)
to be in the range of $1.80 to $1.85 in the first quarter.
(1) A reconciliation of operating income to adjusted operating income, a non-GAAP financial measure, and
other important information accompanies this press release.
(2) Consistent with previous press releases and financial disclosures, we adopted Accounting Standards
Update 2014-09, Revenue From Contracts with Customers, as well as related amendments (ASC 606), issued by the Financial Accounting
Standards Board on a modified retrospective basis, effective January 1, 2018. The impact of the adoption of ASC 606 related
primarily to the reclassification of certain costs previously presented as selling, general and administrative expenses to net
sales.
(3) 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 accompanies this press release.
(4) A reconciliation of reported net earnings to adjusted net earnings, a non-GAAP financial measure, and
other important information accompanies this press release.
(5) 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 upon various factors, including timing, and could be material to our Consolidated Statements of Earnings.
Conference Call on Tuesday, January 29, 2019
As previously announced, Stryker will host a conference call on Tuesday, January 29, 2019 at 4:30 p.m.,
Eastern Time, to discuss the Company's operating results for the quarter and year ended December 31, 2018 and provide an
operational update.
To participate in the conference call dial (866) 393-4306 (domestic) or (734) 385-2616 (international) and be
prepared to provide confirmation number 5365367 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 29, 2019,
until 11:59 p.m., Eastern Time, on Tuesday, February 5, 2019. To hear this recording you may dial (855) 859-2056 (domestic) or
(404) 537-3406 (international) and enter conference ID number 5365367.
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
recall and other 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 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 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 A. Owen, Vice President, Strategy and 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 Ended December 31
(Unaudited - Millions of Dollars, Except Per Share Amounts)
CONDENSED STATEMENTS OF EARNINGS |
| |
Three Months |
|
Full Year |
| |
2018 |
|
2017 |
|
% Change |
|
2018 |
|
2017 |
|
% Change |
| Net sales |
$ |
3,796 |
|
|
$ |
3,471 |
|
|
9.4 |
% |
|
$ |
13,601 |
|
|
$ |
12,444 |
|
|
9.3 |
% |
| Cost of sales |
1,340 |
|
|
1,230 |
|
|
8.9 |
|
|
4,663 |
|
|
4,264 |
|
|
9.4 |
|
| Gross profit |
$ |
2,456 |
|
|
$ |
2,241 |
|
|
9.6 |
% |
|
$ |
8,938 |
|
|
$ |
8,180 |
|
|
9.3 |
% |
| % of sales |
64.7 |
% |
|
64.6 |
% |
|
|
|
65.7 |
% |
|
65.7 |
% |
|
|
| Research, development and engineering expenses |
221 |
|
|
205 |
|
|
7.8 |
|
|
862 |
|
|
787 |
|
|
9.5 |
|
| Selling, general and administrative expenses |
1,431 |
|
|
1,217 |
|
|
17.6 |
|
|
5,099 |
|
|
4,552 |
|
|
12.0 |
|
| Recall charges, net of insurance proceeds |
13 |
|
|
9 |
|
|
44.4 |
|
|
23 |
|
|
173 |
|
|
(86.7 |
) |
| Amortization of intangible assets |
93 |
|
|
96 |
|
|
(3.1 |
) |
|
417 |
|
|
371 |
|
|
12.4 |
|
| Total operating expenses |
$ |
1,758 |
|
|
$ |
1,527 |
|
|
15.1 |
% |
|
$ |
6,401 |
|
|
$ |
5,883 |
|
|
8.8 |
% |
| Operating income |
$ |
698 |
|
|
$ |
714 |
|
|
(2.2 |
)% |
|
$ |
2,537 |
|
|
$ |
2,297 |
|
|
10.4 |
% |
| % of sales |
18.4 |
% |
|
20.6 |
% |
|
|
|
18.7 |
% |
|
18.5 |
% |
|
|
| Other income (expense), net |
(41 |
) |
|
(65 |
) |
|
(36.9 |
) |
|
(181 |
) |
|
(234 |
) |
|
(22.6 |
) |
| Earnings before income taxes |
$ |
657 |
|
|
$ |
649 |
|
|
1.2 |
% |
|
$ |
2,356 |
|
|
$ |
2,063 |
|
|
14.2 |
% |
| Income taxes |
(1,411 |
) |
|
898 |
|
|
(257.1 |
) |
|
(1,197 |
) |
|
1,043 |
|
|
(214.8 |
) |
| Net earnings (loss) |
$ |
2,068 |
|
|
$ |
(249 |
) |
|
930.5 |
% |
|
$ |
3,553 |
|
|
$ |
1,020 |
|
|
248.3 |
% |
| Net earnings (loss) per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
| Basic |
$ |
5.52 |
|
|
$ |
(0.66 |
) |
|
936.4 |
% |
|
$ |
9.50 |
|
|
$ |
2.73 |
|
|
248.0 |
% |
| Diluted |
$ |
5.44 |
|
|
$ |
(0.66 |
) |
|
924.2 |
% |
|
$ |
9.34 |
|
|
$ |
2.68 |
|
|
248.5 |
% |
| Weighted-average shares outstanding - in millions: |
|
|
|
|
|
|
|
|
|
|
|
| Basic |
374.3 |
|
|
374.4 |
|
|
|
|
374.1 |
|
|
374.0 |
|
|
|
| Diluted |
380.2 |
|
|
380.9 |
|
|
|
|
380.3 |
|
|
380.1 |
|
|
|
| CONDENSED BALANCE SHEETS |
| |
December |
| |
2018 |
|
2017 |
| Assets |
|
|
|
| Cash and cash equivalents |
$ |
3,616 |
|
|
$ |
2,542 |
|
| Marketable securities |
83 |
|
|
251 |
|
| Accounts receivable, net |
2,332 |
|
|
2,198 |
|
| Inventories |
2,955 |
|
|
2,465 |
|
| Prepaid expenses and other current assets |
747 |
|
|
537 |
|
| Total current assets |
$ |
9,733 |
|
|
$ |
7,993 |
|
| Property, plant and equipment, net |
2,291 |
|
|
1,975 |
|
| Goodwill and other intangible assets (net) |
12,726 |
|
|
10,645 |
|
| Other noncurrent assets |
2,479 |
|
|
1,584 |
|
| Total assets |
$ |
27,229 |
|
|
$ |
22,197 |
|
| Liabilities and shareholders' equity |
|
|
|
| Current liabilities |
$ |
4,807 |
|
|
$ |
3,485 |
|
| Long-term debt, excluding current maturities |
8,486 |
|
|
6,590 |
|
| Income taxes |
1,228 |
|
|
1,261 |
|
| Other noncurrent liabilities |
978 |
|
|
881 |
|
| Shareholders' equity |
11,730 |
|
|
9,980 |
|
| Total liabilities & shareholders' equity |
$ |
27,229 |
|
|
$ |
22,197 |
|
| CONDENSED STATEMENTS OF CASH FLOWS |
| |
2018 |
|
2017 |
| Operating activities |
|
|
|
| Net earnings |
$ |
3,553 |
|
|
$ |
1,020 |
|
| Depreciation |
306 |
|
|
271 |
|
| Amortization of intangible assets |
417 |
|
|
371 |
|
| Changes in operating assets, liabilities, income taxes payable and other, net |
(1,666 |
) |
|
(103 |
) |
| Net cash provided by operating activities |
$ |
2,610 |
|
|
$ |
1,559 |
|
| Investing activities |
|
|
|
| Acquisitions, net of cash acquired |
(2,451 |
) |
|
$ |
(831 |
) |
| Purchases of property, plant and equipment |
(572 |
) |
|
(598 |
) |
| Change in marketable securities, net |
168 |
|
|
(183 |
) |
| Other investing, net |
(2 |
) |
|
(1 |
) |
| Net cash used in investing activities |
$ |
(2,857 |
) |
|
$ |
(1,613 |
) |
| Financing activities |
|
|
|
| Borrowings/repayments of debt, net |
$ |
2,456 |
|
|
$ |
299 |
|
| Dividends paid |
(703 |
) |
|
(636 |
) |
| Repurchase of common stock |
(300 |
) |
|
(230 |
) |
| Payments to purchase noncontrolling interest |
(14 |
) |
|
(99 |
) |
| Other financing |
(110 |
) |
|
(128 |
) |
| Net cash provided by (used in) financing activities |
$ |
1,329 |
|
|
$ |
(794 |
) |
| Effect of exchange rate changes on cash and cash equivalents |
(8 |
) |
|
74 |
|
| Change in cash and cash equivalents |
$ |
1,074 |
|
|
$ |
(774 |
) |
STRYKER CORPORATION
Three Months and Full Year Ended December 31
(Unaudited - Millions of Dollars)
SALES GROWTH ANALYSIS |
| |
Three Months |
|
Full Year |
| |
|
Percentage Change |
|
Percentage Change
Ex-ASC 606(2) |
|
|
Percentage Change |
Percentage Change
Ex-ASC 606(2) |
| |
2018 |
2017 |
As Reported |
|
Ex-ASC 606(2) |
Constant
Currency |
|
2018 |
2017 |
As Reported |
Ex-ASC 606(2) |
|
Constant
Currency |
| Geographic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| United States |
$ |
2,768 |
|
$ |
2,513 |
|
10.1 |
% |
|
11.1 |
% |
11.1 |
% |
|
$ |
9,848 |
|
$ |
9,059 |
|
8.7 |
% |
9.8 |
% |
|
9.8 |
% |
| International |
1,028 |
|
958 |
|
7.3 |
|
|
7.6 |
|
12.0 |
|
|
3,753 |
|
3,385 |
|
10.9 |
|
11.1 |
|
|
9.9 |
|
| Total |
$ |
3,796 |
|
$ |
3,471 |
|
9.4 |
% |
|
10.1 |
% |
11.3 |
% |
|
$ |
13,601 |
|
$ |
12,444 |
|
9.3 |
% |
10.2 |
% |
|
9.8 |
% |
| Segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Orthopaedics |
$ |
1,376 |
|
$ |
1,305 |
|
5.4 |
% |
|
5.9 |
% |
7.0 |
% |
|
$ |
4,991 |
|
$ |
4,713 |
|
5.9 |
% |
6.4 |
% |
|
5.9 |
% |
| MedSurg |
1,720 |
|
1,580 |
|
8.9 |
|
|
9.9 |
|
11.1 |
|
|
6,045 |
|
5,557 |
|
8.8 |
|
10.1 |
|
|
10.0 |
|
| Neurotechnology and Spine |
700 |
|
586 |
|
19.5 |
|
|
20.1 |
|
21.4 |
|
|
2,565 |
|
2,174 |
|
18.0 |
|
18.6 |
|
|
18.0 |
|
| Total |
$ |
3,796 |
|
$ |
3,471 |
|
9.4 |
% |
|
10.1 |
% |
11.3 |
% |
|
$ |
13,601 |
|
$ |
12,444 |
|
9.3 |
% |
10.2 |
% |
|
9.8 |
% |
| SUPPLEMENTAL SALES GROWTH ANALYSIS |
| |
Three Months |
| |
|
|
|
|
Percentage Change Ex-ASC 606(2) |
| |
|
Percentage Change |
|
|
|
International |
| |
2018 |
2017 |
As Reported |
Ex-ASC 606(2) |
|
Constant Currency |
United States |
Ex-ASC 606(2) |
Constant Currency |
| Orthopaedics: |
|
|
|
|
|
|
|
|
|
| Knees |
$ |
465 |
|
$ |
446 |
|
4.3 |
% |
4.6 |
% |
|
5.5 |
% |
5.8 |
% |
0.9 |
% |
4.6 |
% |
| Hips |
353 |
|
348 |
|
1.4 |
|
1.5 |
|
|
2.8 |
|
4.0 |
|
(2.6 |
) |
0.8 |
|
| Trauma and Extremities |
428 |
|
408 |
|
4.9 |
|
6.0 |
|
|
7.2 |
|
7.1 |
|
4.1 |
|
7.5 |
|
| Other |
130 |
|
103 |
|
26.2 |
|
25.9 |
|
|
27.0 |
|
19.1 |
|
58.8 |
|
64.8 |
|
| |
$ |
1,376 |
|
$ |
1,305 |
|
5.4 |
% |
5.9 |
% |
|
7.0 |
% |
7.0 |
% |
3.4 |
% |
7.1 |
% |
| MedSurg: |
|
|
|
|
|
|
|
|
|
| Instruments |
$ |
530 |
|
$ |
488 |
|
8.6 |
% |
10.3 |
% |
|
11.4 |
% |
12.1 |
% |
4.2 |
% |
9.0 |
% |
| Endoscopy |
511 |
|
469 |
|
9.0 |
|
8.8 |
|
|
10.6 |
|
5.3 |
|
20.4 |
|
28.2 |
|
| Medical |
610 |
|
556 |
|
9.7 |
|
11.0 |
|
|
12.2 |
|
12.3 |
|
6.9 |
|
11.8 |
|
| Sustainability |
69 |
|
67 |
|
3.0 |
|
4.8 |
|
|
4.9 |
|
4.7 |
|
27.1 |
|
32.1 |
|
| |
$ |
1,720 |
|
$ |
1,580 |
|
8.9 |
% |
9.9 |
% |
|
11.1 |
% |
9.8 |
% |
10.2 |
% |
16.0 |
% |
| Neurotechnology and Spine: |
|
|
|
|
|
|
|
|
|
| Neurotechnology |
$ |
455 |
|
$ |
387 |
|
17.6 |
% |
18.5 |
% |
|
19.8 |
% |
24.4 |
% |
8.9 |
% |
12.6 |
% |
| Spine |
245 |
|
199 |
|
23.1 |
|
23.4 |
|
|
24.5 |
|
24.7 |
|
19.8 |
|
23.8 |
|
| |
$ |
700 |
|
$ |
586 |
|
19.5 |
% |
20.1 |
% |
|
21.4 |
% |
24.5 |
% |
11.7 |
% |
15.5 |
% |
| Total |
$ |
3,796 |
|
$ |
3,471 |
|
9.4 |
% |
10.1 |
% |
|
11.3 |
% |
11.1 |
% |
7.6 |
% |
12.0 |
% |
| SUPPLEMENTAL SALES GROWTH ANALYSIS |
| |
Full Year |
| |
|
|
|
|
Percentage Change Ex-ASC 606(2) |
| |
|
Percentage Change |
|
|
|
International |
| |
2018 |
2017 |
As Reported |
Ex-ASC 606(2) |
|
Constant Currency |
United States |
Ex-ASC 606(2) |
Constant Currency |
| Orthopaedics: |
|
|
|
|
|
|
|
|
|
| Knees |
$ |
1,701 |
|
$ |
1,595 |
|
6.6 |
% |
7.0 |
% |
|
6.7 |
% |
6.9 |
% |
7.4 |
% |
6.1 |
% |
| Hips |
1,336 |
|
1,303 |
|
2.5 |
|
2.8 |
|
|
2.3 |
|
2.5 |
|
3.3 |
|
2.2 |
|
| Trauma and Extremities |
1,580 |
|
1,478 |
|
6.9 |
|
7.8 |
|
|
7.0 |
|
6.5 |
|
10.1 |
|
7.8 |
|
| Other |
374 |
|
337 |
|
11.0 |
|
10.8 |
|
|
11.0 |
|
8.6 |
|
20.9 |
|
21.5 |
|
| |
$ |
4,991 |
|
$ |
4,713 |
|
5.9 |
% |
6.4 |
% |
|
5.9 |
% |
5.8 |
% |
7.6 |
% |
6.1 |
% |
| MedSurg: |
|
|
|
|
|
|
|
|
|
| Instruments |
$ |
1,822 |
|
$ |
1,678 |
|
8.6 |
% |
10.2 |
% |
|
10.0 |
% |
11.2 |
% |
6.9 |
% |
6.2 |
% |
| Endoscopy |
1,846 |
|
1,652 |
|
11.7 |
|
12.1 |
|
|
12.3 |
|
11.5 |
|
14.3 |
|
14.9 |
|
| Medical |
2,118 |
|
1,969 |
|
7.6 |
|
9.1 |
|
|
9.0 |
|
8.8 |
|
10.2 |
|
9.6 |
|
| Sustainability |
259 |
|
258 |
|
0.4 |
|
3.1 |
|
|
3.1 |
|
3.0 |
|
19.7 |
|
19.5 |
|
| |
$ |
6,045 |
|
$ |
5,557 |
|
8.8 |
% |
10.1 |
% |
|
10.0 |
% |
10.0 |
% |
10.4 |
% |
10.1 |
% |
| Neurotechnology and Spine: |
|
|
|
|
|
|
|
|
|
| Neurotechnology |
$ |
1,737 |
|
$ |
1,423 |
|
22.1 |
% |
22.8 |
% |
|
22.1 |
% |
25.0 |
% |
19.1 |
% |
17.3 |
% |
| Spine |
828 |
|
751 |
|
10.3 |
|
10.7 |
|
|
10.3 |
|
7.2 |
|
21.5 |
|
19.8 |
|
| |
$ |
2,565 |
|
$ |
2,174 |
|
18.0 |
% |
18.6 |
% |
|
18.0 |
% |
18.1 |
% |
19.7 |
% |
17.9 |
% |
| Total |
$ |
13,601 |
|
$ |
12,444 |
|
9.3 |
% |
10.2 |
% |
|
9.8 |
% |
9.8 |
% |
11.1 |
% |
9.9 |
% |
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 excluding the
impact of the adoption of ASC 606; percentage sales growth in constant currency; percentage sales growth in constant currency and
excluding the impact of the adoption of ASC 606; percentage organic sales growth; adjusted gross profit; adjusted selling, general
and administrative 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 and excludes the impact of the adoption of
ASC 606. To measure percentage organic sales growth, we remove the impact of changes in foreign currency exchange rates,
acquisitions and the impact of the adoption of ASC 606, 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 and the adoption of ASC 606. 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. 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
Three Months and 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 2018 |
Gross Profit |
Selling, General & Administrative Expenses |
Amortization of Intangible Assets |
Operating Income |
Net Earnings |
Effective
Tax Rate |
Diluted EPS |
| Reported |
$ |
2,456 |
|
$ |
1,431 |
|
$ |
93 |
|
$ |
698 |
|
$ |
2,068 |
|
(214.8 |
)% |
$ |
5.44 |
|
| Reported percent net sales |
64.7 |
% |
37.7 |
% |
2.4 |
% |
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 |
) |
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 |
|
— |
|
— |
|
7 |
|
6 |
|
0.1 |
|
0.02 |
|
| Rejuvenate and other 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 |
|
$ |
— |
|
$ |
1,045 |
|
$ |
828 |
|
17.6 |
% |
$ |
2.18 |
|
| Adjusted percent net sales |
65.6 |
% |
32.4 |
% |
— |
% |
27.5 |
% |
21.8 |
% |
|
|
| Three Months 2017 |
Gross Profit |
Selling, General & Administrative Expenses |
Amortization of Intangible Assets |
Operating Income |
Net Earnings |
Effective
Tax Rate |
Diluted EPS |
| Reported |
$ |
2,241 |
|
$ |
1,217 |
|
$ |
96 |
|
$ |
714 |
|
$ |
(249 |
) |
138.4 |
% |
$ |
(0.66 |
) |
| Reported percent net sales |
64.6 |
% |
35.1 |
% |
2.8 |
% |
20.6 |
% |
(7.2 |
)% |
|
|
| Acquisition and integration-related charges (a) |
|
|
|
|
|
|
|
| Inventory stepped-up to fair value |
20 |
|
— |
|
— |
|
20 |
|
18 |
|
(0.2 |
) |
0.04 |
|
| Other acquisition and integration-related |
— |
|
(15 |
) |
— |
|
15 |
|
11 |
|
0.3 |
|
0.04 |
|
| Amortization of purchased intangible assets |
— |
|
— |
|
(96 |
) |
96 |
|
60 |
|
3.1 |
|
0.17 |
|
| Restructuring-related and other charges (b) |
45 |
|
(30 |
) |
— |
|
75 |
|
60 |
|
0.4 |
|
0.16 |
|
| Medical device regulations (c) |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
| Rejuvenate and other recall-related matters (d) |
— |
|
— |
|
— |
|
9 |
|
8 |
|
(0.1 |
) |
0.01 |
|
| Regulatory and legal matters (e) |
— |
|
(9 |
) |
— |
|
9 |
|
5 |
|
0.3 |
|
0.01 |
|
| Tax matters (f) |
— |
|
— |
|
— |
|
— |
|
833 |
|
(126.1 |
) |
2.19 |
|
| Adjusted |
$ |
2,306 |
|
$ |
1,163 |
|
$ |
— |
|
$ |
938 |
|
$ |
746 |
|
16.1 |
% |
$ |
1.96 |
|
| Adjusted percent net sales |
66.4 |
% |
33.5 |
% |
— |
% |
27.0 |
% |
21.5 |
% |
|
|
| Full Year 2018 |
Gross Profit |
Selling, General & Administrative Expenses |
Amortization of Intangible Assets |
Operating Income |
Net Earnings |
Effective
Tax Rate |
Diluted EPS |
| Reported |
$ |
8,938 |
|
$ |
5,099 |
|
$ |
417 |
|
$ |
2,537 |
|
$ |
3,553 |
|
(50.8 |
)% |
$ |
9.34 |
|
| Reported percent net sales |
65.7 |
% |
37.5 |
% |
3.1 |
% |
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 |
) |
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 |
|
— |
|
— |
|
12 |
|
10 |
|
— |
|
0.03 |
|
| Rejuvenate and other 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 |
|
$ |
— |
|
$ |
3,517 |
|
$ |
2,779 |
|
16.7 |
% |
$ |
7.31 |
|
| Adjusted percent net sales |
66.0 |
% |
33.9 |
% |
— |
% |
25.9 |
% |
20.4 |
% |
|
|
| Full Year 2017 |
Gross Profit |
Selling, General & Administrative Expenses |
Amortization of Intangible Assets |
Operating Income |
Net Earnings |
Effective
Tax Rate |
Diluted EPS |
| Reported |
$ |
8,180 |
|
$ |
4,552 |
|
$ |
371 |
|
$ |
2,297 |
|
$ |
1,020 |
|
50.6 |
% |
$ |
2.68 |
|
| Reported percent net sales |
65.7 |
% |
36.6 |
% |
3.0 |
% |
18.5 |
% |
8.2 |
% |
|
|
| Acquisition and integration-related charges (a) |
|
|
|
|
|
|
|
| Inventory stepped-up to fair value |
22 |
|
— |
|
— |
|
22 |
|
20 |
|
(0.1 |
) |
0.05 |
|
| Other acquisition and integration-related |
— |
|
(42 |
) |
— |
|
42 |
|
31 |
|
0.2 |
|
0.09 |
|
| Amortization of purchased intangible assets |
— |
|
— |
|
(371 |
) |
371 |
|
250 |
|
3.0 |
|
0.67 |
|
| Restructuring-related and other charges (b) |
57 |
|
(137 |
) |
— |
|
194 |
|
155 |
|
0.4 |
|
0.41 |
|
| Medical device regulations (c) |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
| Rejuvenate and other recall-related matters (d) |
— |
|
— |
|
— |
|
173 |
|
131 |
|
0.7 |
|
0.34 |
|
| Regulatory and legal matters (e) |
— |
|
(39 |
) |
— |
|
39 |
|
25 |
|
0.4 |
|
0.06 |
|
| Tax matters (f) |
— |
|
— |
|
— |
|
— |
|
833 |
|
(39.6 |
) |
2.19 |
|
| Adjusted |
$ |
8,259 |
|
$ |
4,334 |
|
$ |
— |
|
$ |
3,138 |
|
$ |
2,465 |
|
15.6 |
% |
$ |
6.49 |
|
| Adjusted percent net sales |
66.4 |
% |
34.8 |
% |
— |
% |
25.2 |
% |
19.8 |
% |
|
|
| (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
the Rejuvenate recall and other 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. |
