Kalamazoo, MI, Jan. 28, 2020 (GLOBE NEWSWIRE) — Stryker (NYSE:SYK) reported operating results for the fourth quarter and full year of 2019 and 2020 outlook:Fourth Quarter HighlightsReported net sales increased 8.8% to $4.1 billionOrganic net sales increased 8.0%Reported operating income margin of 22.9%Adjusted operating income margin(1) expanded 80 bps to 28.3%Reported EPS decreased 65.1% to $1.90Adjusted EPS(1) increased 14.2% to $2.49, exceeding the high end of guidance rangeFull Year HighlightsReported net sales increased 9.4% to $14.9 billionOrganic net sales increased 8.1%Reported operating income margin of 18.2%Adjusted operating income margin(1) expanded 40 bps to 26.3%Reported EPS decreased 41.3% to $5.48Adjusted EPS(1) increased 13.0% to $8.26, exceeding the high end of guidance range
“We had an excellent finish to 2019, achieving 8.1% full-year organic sales growth and 13% adjusted EPS gains. This marks our seventh consecutive year of accelerating organic sales growth and is a testament to our talent, culture and durable operating model,” said Kevin Lobo, Chairman and Chief Executive Officer. “The performance was balanced across businesses and geographies and positions us well for continued success.”Sales AnalysisConsolidated net sales of $4.1 billion and $14.9 billion increased 8.8% and 9.4% in the quarter and full year and 9.4% and 10.7% in constant currency. Organic net sales increased 8.0% and 8.1% in the quarter and full year including 8.6% and 9.0% from increased unit volume partially offset by 0.6% and 0.9% from lower prices.Orthopaedics net sales of $1.5 billion and $5.3 billion increased 6.7% and 5.2% in the quarter and full year and 7.3% and 6.7% in constant currency. Organic net sales increased 7.3% and 6.7% in the quarter and full year including 8.5% and 8.2% from increased unit volume partially offset by 1.2% and 1.5% from lower prices.MedSurg net sales of $1.8 billion and $6.6 billion increased 6.8% and 8.8% in the quarter and full year and 7.4% and 9.9% in constant currency. Organic net sales increased 6.8% and 8.9% in the quarter and full year including 7.2% and 9.4% from increased unit volume partially offset by 0.4% and 0.5% from lower prices.Neurotechnology and Spine net sales of $827 million and $3.1 billion increased 18.0% and 19.2% in the quarter and full year and 18.2% and 20.5% in constant currency. Organic net sales increased 12.5% and 8.9% in the quarter and full year including 12.5% and 9.6% from increased unit volume partially offset by 0.7% from lower prices in the full year, with a nominal impact from pricing in the quarter.Earnings AnalysisReported net earnings of $725 million and $2.1 billion decreased 64.9% and 41.4% in the quarter and full year. Reported net earnings per diluted share of $1.90 and $5.48 decreased 65.1% and 41.3% in the quarter and full year. Reported gross profit margin and reported operating income margin were 65.4% and 22.9% in the quarter and 65.1% and 18.2% in the 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, recall-related matters, regulatory and legal matters and tax matters. In the fourth quarter 2018 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 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, adjusted gross profit margin(1) and adjusted operating income margin(1) were 66.3% and 28.3%, an improvement of 80 basis points, in the quarter and were 65.9% and 26.3%, an improvement of 40 basis points, for the full year. Adjusted net earnings(1) of $948 million and $3.1 billion increased 14.5% and 13.0% in the quarter and full year. Adjusted net earnings per diluted share(1) of $2.49 and $8.26 increased 14.2% and 13.0% in the quarter and full year.2020 OutlookWe expect 2020 organic net sales growth to be in the range of 6.5% to 7.5% and expect adjusted net earnings per diluted share(2) to be in the range of $9.00 to $9.20. We expect adjusted net earnings per diluted share(2) to be in the range of $2.05 to $2.10 in the first quarter. If foreign currency exchange rates hold near current levels, we expect sales and EPS will be nominally impacted in 2020.(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, January 28, 2020As previously announced, Stryker will host a conference call on Tuesday, January 28, 2020 at 4:30 p.m., Eastern Time, to discuss the company’s operating results for the quarter and year ended December 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 3198166 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 28, 2020, until 11:59 p.m., Eastern Time, on Tuesday, February 4, 2020. To hear this recording, you may dial (800) 585-8367 (domestic) or (416) 621-4642 (international) and enter conference ID number 3198166.
Caution Concerning Forward-Looking StatementsThis 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 failure to satisfy any of the closing conditions to the acquisition of Wright Medical Group N.V. (“Wright”), including the receipt of any required regulatory clearances (and the risk that such clearances may result in the imposition of conditions that could adversely affect the expected benefits of the transaction); timing of the closing of the acquisition of Wright; unexpected liabilities, costs, charges or expenses in connection with the acquisition of Wright; the effects of the proposed Wright transaction (or the announcement thereof) 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.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 Owen, Vice President, Strategy & Investor Relations at 269-385-2600 or [email protected]For media inquiries please contact:Yin Becker, Vice President, Communications, Public Affairs and Corporate Marketing at 269-385-2600 or [email protected]
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SUPPLEMENTAL INFORMATION – RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURESWe 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 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. 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.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, 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.
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