Full Press Release Details
Kalamazoo, Michigan - January 22, 2014 - Stryker Corporation (NYSE:SYK) reported operating results for the fourth quarter and full year 2013:
Fourth Quarter Highlights
Net sales growth of 5.6% to $2.5 billion
Reconstructive 5.8% or 8.0% constant currency
MedSurg 5.4% or 6.6% constant currency
Neurotechnology and Spine 5.4% or 7.5% constant currency
Reported diluted net earnings per share increased 42.3% to $1.01
Adjusted diluted net earnings per share(1) increased 7.9% to $1.23
Full Year Highlights
Net sales growth of 4.2% to $9.0 billion
Reconstructive 4.8% or 6.9% constant currency
MedSurg 2.9% or 3.8% constant currency
Neurotechnology and Spine 5.6% or 7.7% constant currency
Reported diluted net earnings per share decreased 22.4% to $2.63
Adjusted diluted net earnings per share(1) increased 3.9% to $4.23
Cash flow from operations increased 13.8% to $1.9 billion
"We are pleased with our organic sales growth and operational earnings achieved in 2013. With our broad based product portfolio and commitment to innovation and globalization we are well positioned to build on this momentum in 2014," stated Kevin A. Lobo, President and Chief Executive Officer.
Consolidated net sales of $2.5 billion and $9.0 billion increased 5.6% and 4.2% in the quarter and full year, respectively. Net sales in the quarter grew by 7.3% due to increased unit volume and changes in product mix and 1.5% as a result of acquisitions. Net sales in the quarter were unfavorably impacted by 1.4% due to changes in price and 1.8% due to the unfavorable impact of foreign currency exchange rates on net sales. Excluding the impact of acquisitions, net sales in the quarter increased 5.8% in constant currency.
Reconstructive net sales of $1.1 billion increased 5.8% in the quarter, as reported, and 8.0% in constant currency. Net sales grew by 7.1% due to increased unit volume and changes in product mix and 2.8% as a result of acquisitions. Net sales were unfavorably impacted by 2.0% due to changes in price and 2.2% due to the unfavorable impact of foreign currency exchange rates on net sales. Excluding the impact of acquisitions, Reconstructive net sales increased 5.2% in constant currency.
MedSurg net sales of $924 million increased 5.4% in the quarter, as reported, and 6.6% in constant currency. Net sales grew by 7.3% due to increased unit volume and changes in product mix. Net sales were unfavorably impacted by 0.7% due to changes in price and 1.2% due to the unfavorable impact of foreign currency exchange rates on net sales.
Neurotechnology and Spine net sales of $437 million increased 5.4% in the quarter, as reported and 7.5% in constant currency. Net sales grew by 7.6% due to increased unit volume and changes in product mix and 1.5% as a result of acquisitions. Net sales were unfavorably impacted by 1.7% due to changes in price and 2.1% due to the unfavorable impact of foreign currency exchange rates on net sales. Excluding the impact of acquisitions, Neurotechnology and Spine net sales increased 6.0% in constant currency.
Reported net earnings of $386 million and $1.0 billion increased 43.0% and decreased 22.5% in the quarter and full year, respectively. Reported diluted net earnings per share of $1.01 and $2.63 increased 42.3% and decreased 22.4% in the quarter and full year, respectively. Reported net earnings per share in 2013 included approximately $0.04 and $0.13 per diluted share of costs in the quarter and full year, respectively, associated with the new Medical Device Excise Tax.
Reported net earnings include charges for the Rejuvenate, ABG II and Neptune recalls, acquisition and integration related charges related to the Neurovascular, Surpass, Trauson and MAKO Surgical Corp. acquisitions, additional cost of sales for inventory sold that was "stepped up" to fair value related to the Trauson and MAKO acquisitions, restructuring and related charges, certain charges related to legal and regulatory matters, a donation to an educational institution and benefits associated with the resolution of certain tax matters. The effect of each of these matters on reported net earnings appears in the reconciliation of GAAP to non-GAAP measures provided below. These charges reduced the reported gross profit margin in the quarter from 66.3% to 65.5% and the reported operating income margin from 25.3% to 17.4%.
Excluding the impact of the items described above, adjusted net earnings(2) of $469 million and $1,616 million increased 7.6% and 3.6% in the quarter and full year, respectively. Adjusted diluted net earnings per share(1) of $1.23 and $4.23 increased 7.9% and 3.9% in the quarter and full year, respectively.
Organic sales growth in 2014 is expected to be in the range of 4.5% to 6.0%. If foreign currency exchange rates hold near current levels, we expect net sales in the first quarter and full year of 2014 to be negatively impacted by less than 1.0%.
Beginning in 2014 we will also exclude amortization of intangible assets from our adjusted net earnings per share which we expect to be in the range of $4.75 to $4.90 using this new measure. Adjusted diluted net earnings per share(1) for 2013 would have been $4.49 if amortization of intangible assets were excluded.
A reconciliation of reported diluted net earnings per share to adjusted diluted net earnings per share, a non-GAAP financial measure, and other important information, appears below.
A reconciliation of reported net earnings to adjusted net earnings, a non-GAAP financial measure, and other important information, appears below.
Conference Call on Wednesday, January 22, 2014
As previously announced, the Company will host a conference call at 4:30 p.m., Eastern Time to discuss the Company's results, provide an operational update and outlook for 2014.
To participate in the conference call dial (866) 436-9172 (domestic) or (630) 691-2760 (international) and be prepared to provide confirmation number 34454651 to the operator.
A simultaneous webcast of the call and presentation of the 2014 outlook will be accessible via the Company's website at www.stryker.com. The call will be archived on this site for 90 days.
A recording of the call will also be available from 7:30 p.m., Eastern Time, on Wednesday, January 22, 2014, until 11:59 p.m., Eastern Time, on Wednesday, January 29, 2014. To hear this recording you may dial (888) 843-7419 (domestic) or 630-652-3042 (international) and enter the passcode 34454651#.
Forward-Looking Statements
This press release contains information that includes or is based on forward-looking statements within the meaning of the federal securities law 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; changes in reimbursement levels from third-party payors; a significant increase in product liability claims; the ultimate total cost with respect to the Rejuvenate and ABG II matter; the impact of investigative and legal proceedings and compliance risks; resolution of tax audits; the impact of the federal legislation to reform the United States healthcare system; changes in financial markets; changes in the competitive environment; our ability to integrate acquisitions, including the acquisition of MAKO Surgical Corp; and our ability to realize anticipated cost savings as a result of workforce reductions and other restructuring activities. 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 is dedicated to helping healthcare professionals perform their jobs more efficiently while enhancing patient care. We offer a diverse array of innovative medical technologies, including reconstructive, medical and surgical, and neurotechnology and spine products to help people lead more active and more satisfying lives. For more information about Stryker, please visit www.stryker.com.
For investor inquiries please contact:
Katherine A. Owen, Stryker Corporation, 269-385-2600 or katherine.owen@stryker.com
| STRYKER CORPORATION (Unaudited - Millions of Dollars, Except Per Share Amounts) CONDENSED STATEMENTS OF EARNINGS | |||||||||||||||||
| Fourth Quarter | Year Ended December 31 | ||||||||||||||||
| 2013 | 2012 | % Change | 2013 | 2012 | % Change | ||||||||||||
| Net sales | $ | 2,468 | $ | 2,337 | 5.6 | $ | 9,021 | $ | 8,657 | 4.2 | |||||||
| Cost of sales | 852 | 744 | 14.5 | 2,977 | 2,781 | 7.0 | |||||||||||
| GROSS PROFIT | 1,616 | 1,593 | 1.4 | 6,044 | 5,876 | 2.9 | |||||||||||
| % of sales | 65.5 | % | 68.2 | % | 67.0 | % | 67.9 | % | |||||||||
| Research, development & engineering expenses | 139 | 129 | 7.8 | 536 | 471 | 13.8 | |||||||||||
| Selling general & administrative expenses | 999 | 1,033 | (3.3 | ) | 4,066 | 3,466 | 17.3 | ||||||||||
| Intangibles amortization | 36 | 31 | 16.1 | 138 | 123 | 12.2 | |||||||||||
| Restructuring charges | 12 | 30 | (60.0 | ) | 48 | 75 | (36.0 | ) | |||||||||
| 1,186 | 1,223 | (3.0 | ) | 4,788 | 4,135 | 15.8 | |||||||||||
| OPERATING INCOME | 430 | 370 | 16.2 | 1,256 | 1,741 | (27.9 | ) | ||||||||||
| % of sales | 17.4 | % | 15.8 | % | 13.9 | % | 20.1 | % | |||||||||
| Other income (expense) | 1 | (12 | ) | (108.3 | ) | (44 | ) | (36 | ) | 22.2 | |||||||
| EARNINGS BEFORE INCOME TAXES | 431 | 358 | 20.4 | 1,212 | 1,705 | (28.9 | ) | ||||||||||
| Income Taxes | 45 | 88 | (48.9 | ) | 206 | 407 | (49.4 | ) | |||||||||
| NET EARNINGS | $ | 386 | $ | 270 | 43.0 | $ | 1,006 | $ | 1,298 | (22.5 | ) | ||||||
| Net earnings per share | |||||||||||||||||
| Basic | $ | 1.02 | $ | 0.71 | 43.7 | $ | 2.66 | $ | 3.41 | (22.0 | ) | ||||||
| Diluted | $ | 1.01 | $ | 0.71 | 42.3 | $ | 2.63 | $ | 3.39 | (22.4 | ) | ||||||
| Average shares outstanding | |||||||||||||||||
| Basic | 378.4 | 380.3 | 378.6 | 380.6 | |||||||||||||
| Diluted | 382.3 | 382.7 | 382.1 | 383.0 |
| CONDENSED BALANCE SHEETS | ||||||
| December | December | |||||
| 2013 | 2012 | |||||
| ASSETS | ||||||
| Cash and cash equivalents | $ | 1,339 | $ | 1,395 | ||
| Marketable securities | 2,641 | 2,890 | ||||
| Accounts receivable (net) | 1,518 | 1,430 | ||||
| Inventories | 1,422 | 1,265 | ||||
| Other current assets | 1,415 | 1,168 | ||||
| TOTAL CURRENT ASSETS | 8,335 | 8,148 | ||||
| Property, plant and equipment (net) | 1,081 | 948 | ||||
| Goodwill and other intangibles (net) | 5,833 | 3,566 | ||||
| Other assets | 494 | 544 | ||||
| TOTAL ASSETS | $ | 15,743 | $ | 13,206 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
| Current liabilities | $ | 2,657 | $ | 1,876 | ||
| Other liabilities | 1,300 | 987 | ||||
| Long-term debt | 2,739 | 1,746 | ||||
| Shareholders' equity | 9,047 | 8,597 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 15,743 | $ | 13,206 |
| CONDENSED STATEMENTS OF CASH FLOWS | |||||||||||||
| Fourth Quarter | Year Ended December 31 | ||||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||||
| OPERATING ACTIVITIES | |||||||||||||
| Net earnings | $ | 386 | $ | 270 | $ | 1,006 | $ | 1,298 | |||||
| Depreciation | 46 | 39 | 169 | 154 | |||||||||
| Intangibles amortization | 36 | 31 | 138 | 123 | |||||||||
| Restructuring charges | 12 | 30 | 50 | 75 | |||||||||
| Changes in operating assets and liabilities and other, net | 192 | 226 | 523 | 7 | |||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 672 | 596 | 1,886 | 1,657 | |||||||||
| INVESTING ACTIVITIES | |||||||||||||
| Acquisitions, net of cash acquired | (1,634 | ) | (107 | ) | (2,320 | ) | (154 | ) | |||||
| Proceeds from (purchases of) sales of marketable securities, net | 1,399 | (413 | ) | 298 | (372 | ) | |||||||
| Purchases of property, plant and equipment | (56 | ) | (49 | ) | (195 | ) | (210 | ) | |||||
| NET CASH USED IN INVESTING ACTIVITIES | (291 | ) | (569 | ) | (2,217 | ) | (736 | ) | |||||
| FINANCING ACTIVITIES | |||||||||||||
| Borrowings of debt, net | (9 | ) | (6 | ) | 1,005 | (4 | ) | ||||||
| Dividends paid | (100 | ) | (81 | ) | (401 | ) | (324 | ) | |||||
| Repurchase and retirement of common stock | (65 | ) | - | (317 | ) | (108 | ) | ||||||
| Other | 21 | 24 | 13 | (13 | ) | ||||||||
| NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (153 | ) | (63 | ) | 300 | (449 | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 1 | 8 | (25 | ) | 18 | ||||||||
| CHANGE IN CASH AND CASH EQUIVALENTS | $ | 229 | $ | (28 | ) | $ | (56 | ) | $ | 490 |
| STRYKER CORPORATION For the Fourth Quarter and Year Ended December 31 (Unaudited - Millions of Dollars) CONDENSED SALES ANALYSIS | |||||||||||||||||||||
| Fourth Quarter | Year Ended December 31 | ||||||||||||||||||||
| % Change | % Change | ||||||||||||||||||||
| 2013 | 2012 | As Reported | Constant Currency | 2013 | 2012 | As Reported | Constant Currency | ||||||||||||||
| Geographic sales | |||||||||||||||||||||
| U.S. | $ | 1,636 | $ | 1,529 | 7.0 | 7.0 | $ | 5,984 | $ | 5,658 | 5.8 | 5.8 | |||||||||
| International | 832 | 808 | 2.9 | 8.1 | 3,037 | 2,999 | 1.3 | 6.0 | |||||||||||||
| NET SALES | $ | 2,468 | $ | 2,337 | 5.6 | 7.4 | $ | 9,021 | $ | 8,657 | 4.2 | 5.9 | |||||||||
| Worldwide sales | |||||||||||||||||||||
| Reconstructive | $ | 1,107 | $ | 1,046 | 5.8 | 8.0 | $ | 4,004 | $ | 3,823 | 4.8 | 6.9 | |||||||||
| MedSurg | 924 | 877 | 5.4 | 6.6 | 3,359 | 3,265 | 2.9 | 3.8 | |||||||||||||
| Neurotechnology and Spine | 437 | 414 | 5.4 | 7.5 | 1,658 | 1,569 | 5.6 | 7.7 | |||||||||||||
| NET SALES | $ | 2,468 | $ | 2,337 | 5.6 | 7.4 | $ | 9,021 | $ | 8,657 | 4.2 | 5.9 |
| SUPPLEMENTAL SALES GROWTH ANALYSIS | ||||||||||||||||
| Fourth Quarter | ||||||||||||||||
| Percentage Change | ||||||||||||||||
| U.S. | International | |||||||||||||||
| 2013 | 2012 | As Reported | Constant Currency | As Reported | As Reported | Constant Currency | ||||||||||
| Reconstructive | ||||||||||||||||
| Knees | $ | 371 | $ | 360 | 3.2 | 4.7 | 8.1 | (6.7 | ) | (2.1 | ) | |||||
| Hips | 341 | 325 | 5.0 | 8.0 | 10.0 | (0.5 | ) | 5.8 | ||||||||
| Trauma and Extremities | 307 | 278 | 10.1 | 12.3 | 8.4 | 11.9 | 16.5 | |||||||||
| TOTAL RECONSTRUCTIVE | 1,107 | 1,046 | 5.8 | 8.0 | 8.7 | 1.7 | 6.9 | |||||||||
| MedSurg | ||||||||||||||||
| Instruments | 350 | 330 | 5.9 | 7.4 | 8.1 | 0.9 | 5.9 | |||||||||
| Endoscopy | 336 | 309 | 8.7 | 10.1 | 11.7 | 2.1 | 6.5 | |||||||||
| Medical | 188 | 185 | 1.4 | 2.2 | (0.2 | ) | 8.6 | 12.7 | ||||||||
| TOTAL MEDSURG | 924 | 877 | 5.4 | 6.6 | 6.4 | 2.5 | 7.2 | |||||||||
| Neurotechnology and Spine | ||||||||||||||||
| Neurotechnology | 240 | 224 | 7.0 | 9.9 | 7.2 | 6.7 | 13.8 | |||||||||
| Spine | 197 | 190 | 3.5 | 4.7 | 1.8 | 7.5 | 11.6 | |||||||||
| TOTAL NEUROTECHNOLOGY AND SPINE | 437 | 414 | 5.4 | 7.5 | 4.5 | 7.0 | 13.0 | |||||||||
| Year Ended December 31, 2013 | ||||||||||||||||
| Percentage Change | ||||||||||||||||
| U.S. | International | |||||||||||||||
| 2013 | 2012 | As Reported | Constant Currency | As Reported | As Reported | Constant Currency | ||||||||||
| Reconstructive | ||||||||||||||||
| Knees | $ | 1,371 | $ | 1,356 | 1.1 | 2.6 | 3.4 | (3.3 | ) | 1.1 | ||||||
| Hips | 1,272 | 1,233 | 3.2 | 6.0 | 7.2 | (1.4 | ) | 4.5 | ||||||||
| Trauma and Extremities | 1,116 | 989 | 12.8 | 15.1 | 18.4 | 7.2 | 11.8 | |||||||||
| TOTAL RECONSTRUCTIVE | 4,004 | 3,823 | 4.8 | 6.9 | 7.9 | 0.5 | 5.5 | |||||||||
| MedSurg | ||||||||||||||||
| Instruments | 1,269 | 1,261 | 0.6 | 1.9 | 0.7 | 0.6 | 5.1 | |||||||||
| Endoscopy | 1,167 | 1,111 | 5.0 | 6.0 | 6.6 | 1.3 | 4.6 | |||||||||
| Medical | 710 | 691 | 2.8 | 3.1 | 3.4 | 0.3 | 2.0 | |||||||||
| TOTAL MEDSURG | 3,359 | 3,265 | 2.9 | 3.8 | 3.6 | 0.8 | 4.3 | |||||||||
| Neurotechnology and Spine | ||||||||||||||||
| Neurotechnology | 915 | 842 | 8.7 | 11.4 | 11.2 | 5.1 | 11.8 | |||||||||
| Spine | 743 | 727 | 2.1 | 3.4 | 1.8 | 2.9 | 7.2 | |||||||||
| TOTAL NEUROTECHNOLOGY AND SPINE | 1,658 | 1,569 | 5.6 | 7.7 | 6.4 | 4.3 | 10.0 |