Stryker Corporation : Stryker Reports Second Quarter 2013 Results

      Stryker Corporation : Stryker Reports Second Quarter 2013 Results

Kalamazoo, Michigan - July 18, 2013 - Stryker Corporation (NYSE:SYK) reported
operating results for the second quarter of 2013:

Second Quarter Highlights

  *Net sales growth of 5.0% to $2.2 billion

           *Reconstructive increased 5.6% as reported, 7.6% constant
             currency

           *MedSurg increased 4.2% as reported, 4.8% constant currency

           *Neurotechnology and Spine increased 5.4% as reported, 7.5%
             constant currency

  *Adjusted diluted net earnings per share^(1) increased 2.0% to $1.00 

  *Reported diluted net earnings per share decreased 34.1% to $0.56

  *Cash flow from operations increased 20.3% in the first half

"We delivered another solid quarter of operational results with balanced sales
growth across all segments and geographies, as well as strong cash flow
performance," said Kevin A. Lobo, President and Chief Executive Officer. "Our
earnings per share was impacted by foreign exchange headwinds which we expect
to continue throughout the year."

Sales Analysis

Consolidated net sales of $2.2 billion increased 5.0% in the quarter compared
to the prior year. Net sales in the quarter grew by 7.8% due to increased
unit volume and changes in product mix and 0.6% as a result of acquisitions.
Net sales in the quarter were unfavorably impacted by 1.9% due to changes in
price and 1.5% due to the unfavorable impact of foreign currency exchange
rates on net sales. Excluding the impact of acquisitions, net sales increased
5.9% in constant currency over the prior year.

Reconstructive net sales of $979 million increased 5.6% in the quarter
compared to the prior year, as reported, and 7.6% in constant currency. Net
sales in the quarter grew by 9.9% due to increased unit volume and changes in
product mix and 1.1% as a result of acquisitions. Net sales in the quarter
were unfavorably impacted by 3.4% due to changes in price and 2.0% due to the
unfavorable impact of foreign currency exchange rates on net sales. Excluding
the impact of acquisitions, Reconstructive net sales increased 6.5% in
constant currency over the prior year.

MedSurg net sales of $819 million increased 4.2% in the quarter compared to
the prior year, as reported, and 4.8% in constant currency. Net sales in the
quarter grew by 4.8% due to increased unit volume and changes in product mix
but were unfavorably impacted by 0.1% due to changes in price and 0.6% due to
the impact of foreign currency exchange rates on net sales. 

Neurotechnology and Spine net sales of $414 million increased 5.4% in the
quarter compared to the prior year, as reported, and 7.5% in constant
currency. Net sales in the quarter grew by 8.8% due to increased unit volume
and changes in product mix and 0.8% as a result of acquisitions. Net sales in
the quarter were unfavorably impacted by 2.1% due to changes in price and 2.0%
due to the unfavorable impact of foreign currency exchange rates on net sales.
Excluding the impact of acquisitions, Neurotechnology and Spine net sales
increased 6.7% in constant currency over the prior year.

Earnings Analysis

Reported net earnings of $213 million decreased 34.5% in the quarter compared
to the prior year. Diluted net earnings per share of $0.56 decreased 34.1% in
the quarter over the prior year. Reported net earnings in the quarter
includes an additional charge of $170 million ($120 million net of tax or
$0.31 per diluted share) related to the previously disclosed voluntary recall
of the Rejuvenate and ABG II modular-neck hip stems, bringing total charges
recorded for this recall to $400 million. In addition, a charge of $19
million ($22 million net of tax or $0.06 per diluted share) was recorded in
the quarter related to two previously disclosed United States regulatory
matters. Reported net earnings in the quarter also includes acquisition and
integration related charges of $18 million ($15 million net of taxes or $0.04
per diluted share) related to the Neurovascular, Surpass and Trauson
acquisitions and restructuring and related charges of $19 million ($10 million
net of taxes or $0.03 per diluted share). These charges reduced the reported
gross profit margin from 67.7% to 67.0% and the reported operating income
margin from 23.3% to 13.1%.

Excluding the charges described above, adjusted net earnings^(2) of $380
million increased 1.3% in the quarter over the prior year and adjusted diluted
net earnings per share^(1) of $1.00 increased 2.0% in the quarter over the
prior year. Adjusted diluted net earnings per share^(1) in the second quarter
of 2013 includes approximately $0.03 per diluted share of costs associated
with the new Medical Device Excise Tax.

2013 Outlook

For the full year 2013, Stryker is projecting constant currency sales growth
in a range of 5.0% to 6.5%. If foreign currency exchange rates hold near
current levels, the Company anticipates net sales will be negatively impacted
by approximately 1.5% to 2.5% in both the third quarter and full year of 2013.
Excluding the expected impact of foreign currency and acquisitions, projected
2013 sales growth is 4.0% to 5.5% for the full year.

The Company now projects 2013 adjusted diluted net earnings per share^(1) to
be in a range of $4.20 to $4.26. 

1.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.

2.A reconciliation of reported net earnings to adjusted net earnings, a
    non-GAAP financial measure, and other important information, appears
    below.

Conference Call on Thursday, July 18, 2013.

As previously announced, the Company will host a conference call on Thursday,
July 18, 2013 at 4:30 p.m., Eastern Time, to discuss the Company's operating
results for the quarter ended June 30, 2013 and provide an operational update.

To participate in the conference call, dial (866) 436-9172 (domestic) or (630)
691-2760 (international) and be prepared to provide confirmation number
34454647 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 this site for 90
days.

A recording of the call will also be available from 7:30 p.m., Eastern Time,
on Thursday, July 18, 2013, until 11:59 p.m., Eastern Time, on Thursday, July
25, 2013. To hear this recording, dial (888) 843-7419 (domestic) or
630-652-3042 (international) and enter the passcode 34454647#.

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; 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 are 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
                           Three Months                   Six Months
                      2013      2012    % Change    2013      2012    % Change
Net sales           $ 2,212   $ 2,106      5.0    $ 4,402   $ 4,267      3.2
Cost of sales           730       672      8.6      1,443     1,381      4.5
GROSS PROFIT          1,482     1,434      3.3      2,959     2,886      2.5
% of sales             67.0 %    68.1 %              67.2 %    67.6 %
Research,
development &
engineering
expenses                132       116     13.8        261       228     14.5
Selling general &
administrative
expenses              1,015       823     23.3      1,931     1,642     17.6
Intangibles
amortization             36        31     16.1         68        62      9.7
Restructuring
charges                   9        19    (52.6 )       23        33    (30.3 )
                      1,192       989     20.5      2,283     1,965     16.2
OPERATING INCOME        290       445    (34.8 )      676       921    (26.6 )
% of sales             13.1 %    21.1 %              15.4 %    21.6 %
Other income
(expense)               (21 )     (10 )  110.0        (32 )     (18 )   77.8
EARNINGS BEFORE
INCOME TAXES            269       435    (38.2 )      644       903    (28.7 )
Income Taxes             56       110    (49.1 )      127       228    (44.3 )
NET EARNINGS        $   213   $   325    (34.5 )  $   517   $   675    (23.4 )
Net earnings per
share
Basic               $  0.56   $  0.85    (34.1 )  $  1.36   $  1.77    (23.2 )
Diluted             $  0.56   $  0.85    (34.1 )  $  1.35   $  1.76    (23.3 )
Average shares
outstanding
Basic                 378.0     381.0               378.8     381.0
Diluted               381.0     383.3               382.0     383.5

                   CONDENSED BALANCE SHEETS
                                             June     December
                                             2013       2012
ASSETS
Cash and cash equivalents                  $    971   $  1,395
Marketable securities                         3,681      2,890
Accounts receivable (net)                     1,413      1,430
Inventories                                   1,345      1,265
Other current assets                          1,279      1,168
TOTAL CURRENT ASSETS                          8,689      8,148
Property, plant and equipment (net)           1,021        948
Goodwill and other intangibles (net)          4,117      3,566
Other assets                                    555        544
TOTAL ASSETS                               $ 14,382   $ 13,206
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities                        $  1,971   $  1,876
Other liabilities                             1,066        987
Long-term debt                                2,742      1,746
Shareholders' equity                          8,603      8,597
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 14,382   $ 13,206

                     CONDENSED STATEMENTS OF CASH FLOWS
                                            Three Months        Six Months
                                            2013    2012       2013    2012
OPERATING ACTIVITIES
Net earnings                               $  213   $ 325     $  517   $ 675
Depreciation                                   43      38         81      77
Intangibles amortization                       36      31         68      62
Restructuring charges                          10      19         24      33
Changes in operating assets and
liabilities and other, net                     54      44        (98 )  (355 )
NET CASH PROVIDED BY OPERATING ACTIVITIES     356     457        592     492
INVESTING ACTIVITIES
Acquisitions, net of cash acquired            (62 )    (1 )     (662 )   (10 )
Proceeds from sales of (purchases of)
marketable securities, net                 (1,089 )   436       (800 )   374
Purchases of property, plant and equipment    (47 )   (51 )      (96 )  (103 )
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES                                 (1,198 )   384     (1,558 )   261
FINANCING ACTIVITIES
Borrowings (repayments) of debt, net            2      (5 )    1,011       1
Dividends paid                               (100 )   (81 )     (201 )  (162 )
Repurchase and retirement of common stock       -     (39 )     (250 )   (89 )
Other                                           5     (23 )       (2 )   (26 )
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES                                    (93 )  (148 )      558    (276 )
Effect of exchange rate changes on cash
and cash equivalents                           (7 )    10        (16 )    11
CHANGE IN CASH AND CASH EQUIVALENTS        $ (942 ) $ 703     $ (424 ) $ 488

                                    STRYKER CORPORATION
               For the Three Month and Six Month Periods Ended June 30, 2013
                             (Unaudited - Millions of Dollars)

                                  CONDENSED SALES ANALYSIS
                           Three Months                             Six Months
                                      % Change                                % Change
                                      As    Constant                          As    Constant
                  2013     2012    Reported Currency     2013      2012    Reported Currency
Geographic
sales
U.S.            $ 1,458   $ 1,384     5.4      5.4      $ 2,899     $2,768    4.7      4.7
International       754       722     4.2      8.6        1,503     1,499     0.3      4.2
NET SALES       $ 2,212   $ 2,106     5.0      6.5      $ 4,402   $ 4,267     3.2      4.5
Worldwide sales
Reconstructive  $   979   $   927     5.6      7.6      $ 1,948   $ 1,885     3.3      5.2
MedSurg             819       786     4.2      4.8        1,643     1,607     2.2      2.8
Neurotechnology
and Spine           414       393     5.4      7.5          811       775     4.7      6.6
NET SALES       $ 2,212   $ 2,106     5.0      6.5      $ 4,402   $ 4,267     3.2      4.5

SUPPLEMENTAL SALES GROWTH ANALYSIS
                                         Three Months
                                         % Change
                                                     U.S.    International
                                    As    Constant    As       As    Constant
                   2013   2012   Reported Currency Reported Reported Currency
Reconstructive
Hips              $ 319   $ 308     3.5      6.0       6.0      0.6      5.9
Knees               340     329     3.4      4.7       1.8      6.7     10.4
Trauma and
Extremities         266     233    14.4     17.0      18.9      9.8     15.0
TOTAL
RECONSTRUCTIVE      979     927     5.6      7.6       6.3      4.6      9.4
MedSurg
Instruments         315     314     0.4      1.4       1.1     (1.4 )    2.2
Endoscopy           274     264     4.0      4.6       4.8      2.1      3.9
Medical             172     158     9.2      9.3       6.3     22.1     22.5
TOTAL MEDSURG       819     786     4.2      4.8       4.4      3.4      5.8
Neurotechnology
and Spine
Neurotechnology     227     212     6.9      9.6       9.6      3.1      9.5
Spine               187     181     3.8      5.0       2.7      6.6     11.0
TOTAL
NEUROTECHNOLOGY
AND SPINE           414     393     5.4      7.5       6.0      4.4     10.1
                                          Six Months
                                         % Change
                                                     U.S.    International
                                    As    Constant    As       As    Constant
                   2013   2012   Reported Currency Reported Reported Currency
Reconstructive
Hips              $ 627   $ 620     1.1      3.4       4.8     (3.0 )    1.7
Knees               685     681     0.6      1.7       0.7      0.5      3.7
Trauma and
Extremities         532     476    11.8     14.2      22.5      1.9      6.5
TOTAL
RECONSTRUCTIVE    1,948   1,885     3.3      5.2       6.4     (0.7 )    3.5
MedSurg
Instruments         627     628    (0.1 )    0.8      (0.1 )   (0.2 )    3.2
Endoscopy           552     543     1.8      2.5       1.8      1.8      4.1
Medical             354     337     5.0      5.1       5.3      3.9      4.7
TOTAL MEDSURG     1,643   1,607     2.2      2.8       2.5      1.3      3.8
Neurotechnology
and Spine
Neurotechnology     448     413     8.5     11.0      11.9      3.8      9.8
Spine               363     362     0.4      1.6       1.4     (2.0 )    2.1
TOTAL
NEUROTECHNOLOGY
AND SPINE           811     775     4.7      6.6       6.4      1.6      6.9

SUPPLEMENTAL INFORMATION - RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
MEASURES

We supplement the reporting of our financial information determined under GAAP
with certain non-GAAP financial measures, including percentage sales growth in
constant currency; adjusted gross profit; adjusted selling, general and
administrative expenses; adjusted operating income; adjusted effective income
tax rate; adjusted net earnings; and adjusted diluted net earnings per share.
We believe that these non-GAAP measures provide meaningful information to
assist investors and shareholders in understanding our financial results and
assessing our prospects for future performance and 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 for analyzing potential future business trends in connection with our
budget process and bases certain annual bonus plans 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 year results at prior year
average foreign currency exchange rates. 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 tax rate, net earnings and diluted net earnings per 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:

                                                STRYKER CORPORATION
                      For the Three Month and Six Month Periods Ended June 30, 2013 and 2012
                            (Unaudited - Millions of Dollars, Except Per Share Amounts)

                               RECONCILIATION OF ACTUAL RESULTS TO ADJUSTED RESULTS
                                  Selling, General
                                         and
Three Months                       Administrative      Operating                     Effective
Ended June 30     Gross Profit        Expenses          Income       Net Earnings     Tax Rate       Diluted EPS
                 2013     2012      2013     2012    2013    2012    2013    2012    2013    2012   2013     2012
AS REPORTED    $ 1,482   $ 1,434   $ 1,015   $ 823   $ 290   $ 445   $ 213   $ 325   20.8 % 25.3 % $ 0.56   $ 0.85
Acquisition
and
integration
related
charges (a)
Inventory
stepped up to
fair value           8         3         -       -       8       3       6       1      -    0.4     0.02        -
Other
acquisition
and
integration
related              -         -       (10 )    (8 )    10       8       9       4   (0.2 )  0.3     0.02     0.01
Restructuring
and related
charges (b)          7         -        (3 )     -      19      19      10      12    1.5    0.6     0.03     0.03
Rejuvenate/ABG
II hip recall
charges (c)          -         -      (170 )     -     170       -     120       -    3.8      -     0.31        -
Regulatory
matters (d)          -         -       (19 )   (33 )    19      33      22      33   (2.6 ) (1.9 )   0.06     0.09
ADJUSTED       $ 1,497   $ 1,437   $   813   $ 782   $ 516   $ 508   $ 380   $ 375   23.3 % 24.7 % $ 1.00   $ 0.98

                                   Selling, General
Six Months                        and Administrative                                       Effective
Ended June 30     Gross Profit         Expenses        Operating Income    Net Earnings     Tax Rate       Diluted EPS
                 2013     2012      2013      2012      2013      2012     2013    2012    2013    2012   2013    2012
AS REPORTED    $ 2,959   $ 2,886   $ 1,931   $ 1,642   $   676   $   921   $ 517   $ 675   19.7 % 25.2 % $ 1.35   $ 1.76
Acquisition
and
integration
related
charges (a)
Inventory
stepped up to
fair value           8        15         -         -         8        15       6      11      -    0.1     0.02     0.03
Other
acquisition
and
integration
related              -         -       (32 )     (17 )      32        17      26      11   (0.1 )  0.2     0.07     0.03
Restructuring
and related
charges (b)          7         2        (3 )       -        33        35      21      24    0.6    0.3     0.06     0.06
Rejuvenate/ABG
II hip recall
charges (c)          -         -      (210 )       -       210         -     152       -    2.0      -     0.40        -
Regulatory
matters (d)          -         -       (59 )     (33 )      59        33      52      33   (0.7 ) (0.9 )   0.13     0.09
ADJUSTED       $ 2,974   $ 2,903   $ 1,627   $ 1,592   $ 1,018   $ 1,021   $ 774   $ 754   21.5 % 24.9 % $ 2.03   $ 1.97

(a) In 2011 the Company completed the acquisition of the Neurovascular
    division of Boston Scientific Corporation, Orthovita, Inc., Memometal
    Technologies S.A., and Concentric Medical, Inc. In 2012 the Company
    completed the acquisition of Surpass Medical, Ltd. In 2013 the Company
    completed the acquisition of Trauson Holdings Company Limited. As a
    result, the Company has incurred certain acquisition and integration
    related charges.
(b) In 2011 the Company announced focused workforce reductions and other
    restructuring activities and has incurred and will continue to incur
    certain restructuring and related charges.
(c) Charges representing our best estimate of the minimum of the range of
    probable loss to resolve the recall of Rejuvenate / ABG II modular-neck
    hip stems.
(d) Charges representing our best estimate of the probable loss to resolve
    certain previously disclosed regulatory matters.

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Source: Stryker Corporation via Thomson Reuters ONE
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