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Stryker reports first quarter 2019 operating results
By: Nasdaq / GlobenewsWire - 23 Apr 2019Back to overview list

Kalamazoo, Michigan, April 23, 2019 (GLOBE NEWSWIRE) -- Stryker (NYSE:SYK) reported operating results for the first quarter of 2019:

First Quarter Highlights

  • Reported net sales increased 8.5% to $3.5 billion
  • Organic net sales increased 7.3%
  • Reported operating income margin of 15.0%
  • Adjusted operating income margin(1) expanded 10 bps to 25.1%
  • Reported EPS decreased 6.0% to $1.09
  • Adjusted EPS(1) increased 11.9% to $1.88, exceeding the high end of guidance range
 First Quarter Net Sales Growth Overview
 Reported Foreign Currency Exchange Constant Currency Acquisitions Organic
Orthopaedics2.8% (2.3)% 5.1% % 5.0%
MedSurg8.2  (1.8) 10.0  1.1  8.9 
Neurotechnology and Spine20.7  (2.5) 23.2  15.4  7.8 
Total8.5% (2.1)% 10.6% 3.3% 7.3%

"With over 7% organic sales growth in the first quarter, our multi-year momentum continued across our businesses and regions," said Kevin A. Lobo, Chairman and Chief Executive Officer. "We remain committed to providing compelling value to our customers through innovative products and services, both internally developed and acquired, which translate to strong financial results for our shareholders."

Sales Analysis

Consolidated net sales of $3.5 billion increased 8.5% in the quarter and 10.6% in constant currency. Organic net sales increased 7.3% in the quarter including 8.7% from increased unit volume partially offset by 1.4% from lower prices.
Orthopaedics net sales of $1.3 billion increased 2.8% in the quarter and 5.1% in constant currency. Organic net sales increased 5.0% in the quarter including 7.1% from increased unit volume partially offset by 2.1% from lower prices.
MedSurg net sales of $1.5 billion increased 8.2% in the quarter and 10.0% in constant currency. Organic net sales increased 8.9% in the quarter including 9.9% from increased unit volume partially offset by 1.0% from lower prices.
Neurotechnology and Spine net sales of $0.7 billion increased 20.7% in the quarter and 23.2% in constant currency. Organic net sales increased 7.8% in the quarter including 8.9% from increased unit volume partially offset by 1.1% from lower prices.

Earnings Analysis

Reported net earnings of $412 million decreased 7.0% in the quarter. Reported net earnings per diluted share of $1.09 decreased 6.0% in the quarter. Reported gross profit margin and reported operating income margin were 64.9% and 15.0% in the quarter.  Adjusted gross profit margin(1) and adjusted operating income margin(1) were 65.8% and 25.1%, an improvement of 10 basis points in the quarter. Adjusted net earnings(1) of $714 million increased 11.9% in the quarter. Adjusted net earnings per diluted share(1) of $1.88 increased 11.9% in the quarter.

2019 Outlook

Based on our first quarter performance we now expect 2019 organic net sales growth to be in the range of 6.8% to 7.5% and expect adjusted net earnings per diluted share(2) to be in the range of $8.05 to $8.20. For the second quarter we expect adjusted net earnings per diluted share(2) to be in the range of $1.90 to $1.95. If foreign currency exchange rates hold near current levels, we expect net sales in the second quarter will be negatively impacted by approximately 1.5% and full year will be negatively impacted by approximately 1.0%, and net earnings per diluted share will be negatively impacted by $0.01 to $0.03 in the second quarter and negatively impacted by $0.05 to $0.10 in the full year.

(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 23, 2019

As previously announced, Stryker will host a conference call on Tuesday, April 23, 2019 at 4:30 p.m., Eastern Time, to discuss the Company's operating results for the quarter ended March 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 4854803 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 23, 2019, until 11:59 p.m., Eastern Time, on Tuesday, April 30, 2019. To hear this recording, you may dial (800) 585-8367 (domestic) or (416) 621-4642 (international) and enter conference ID number 4854803.


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 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 our customers, we are 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 & 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 March 31
(Unaudited - Millions of Dollars, Except Per Share Amounts)
CONSOLIDATED STATEMENTS OF EARNINGS
  
 Three Months
 2019 2018 % Change
Net sales$3,516  $3,241  8.5%
Cost of sales1,233  1,104  11.7 
Gross profit$2,283  $2,137  6.8%
% of sales64.9% 65.9%  
Research, development and engineering expenses225  204  10.3 
Selling, general and administrative expenses1,403  1,236  13.5 
Recall charges13  4  225.0 
Amortization of intangible assets114  102  11.8 
Total operating expenses$1,755  $1,546  13.5%
Operating income$528  $591  (10.7)%
% of sales15.0% 18.2%  
Other income (expense), net(48) (49) (2.0)
Earnings before income taxes$480  $542  (11.4)%
Income taxes68  99  (31.3)
Net earnings$412  $443  (7.0)%
Net earnings per share of common stock:     
Basic$1.10  $1.18  (6.8)%
Diluted$1.09  $1.16  (6.0)%
Weighted-average shares outstanding (in millions):     
Basic373.3 374.0  
Diluted379.3 380.7  


CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31 December 31
 2019 2018
Assets   
Cash and cash equivalents$1,674  $3,616 
Marketable securities84  83 
Accounts receivable, net2,284  2,332 
Inventories3,064  2,955 
Prepaid expenses and other current assets782  747 
Total current assets$7,888  $9,733 
Property, plant and equipment, net2,297  2,291 
Goodwill and other intangibles, net12,950  12,726 
Noncurrent deferred income tax assets1,631  1,678 
Other noncurrent assets1,171  801 
Total assets$25,937  $27,229 
Liabilities and shareholders' equity   
Current liabilities$3,713  $4,807 
Long-term debt, excluding current maturities7,950  8,486 
Income taxes1,218  1,228 
Other noncurrent liabilities1,363  978 
Shareholders' equity11,693  11,730 
Total liabilities and shareholders' equity$25,937  $27,229 


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months
 2019 2018
Operating activities   
Net earnings$412  $443 
Depreciation76  74 
Amortization of intangible assets114  102 
Changes in operating assets and liabilities and other, net(289) (322)
Net cash provided by operating activities$313  $297 
Investing activities   
Acquisitions, net of cash acquired$(180) $(704)
Change in marketable securities, net(1) (24)
Purchases of property, plant and equipment(122) (121)
Net cash used in investing activities$(303) $(849)
Financing activities   
(Payments) borrowings of debt, net$(1,353) $694 
Dividends paid(195) (176)
Repurchases of common stock(307) (300)
Other financing, net(92) (73)
Net cash (used in) provided by financing activities$(1,947) $145 
Effect of exchange rate changes on cash and cash equivalents(5) 44 
Change in cash and cash equivalents$(1,942) $(363)


STRYKER CORPORATION
For the Three Months March 31
(Unaudited - Millions of Dollars)


SALES GROWTH ANALYSIS
 Three Months
   Percentage Change
 20192018 As Reported Constant
Currency
Geographic:      
United States$2,579 $2,314  11.5% 11.5%
International937 927  1.1  8.3 
Total$3,516 $3,241  8.5% 10.6%
Segment:      
Orthopaedics$1,250 $1,216  2.8% 5.1%
MedSurg1,544 1,427  8.2  10.0 
Neurotechnology and Spine722 598  20.7  23.2 
Total$3,516 $3,241  8.5% 10.6%


SUPPLEMENTAL SALES GROWTH ANALYSIS
 Three Months
       United States International
   Percentage Change
 20192018 As Reported Constant Currency As Reported As ReportedConstant Currency
Orthopaedics:           
Knees$439 $419  4.9% 7.0% 6.6% 0.5%8.1%
Hips336 331  1.5  4.1  4.0  (2.4)4.4 
Trauma and Extremities396 389  1.7  4.1
Related companies:Stryker
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