Stryker (NYSE:SYK) reported operating results for the fourth
quarter and full year of 2023:
Fourth Quarter
Results
- Reported net sales
increased 11.8%
to $5.8 billion
- Organic net sales
increased 11.4%
- Reported operating income
margin of 21.6%
- Adjusted operating income
margin(1) increased
60 bps to
27.2%
- Reported EPS
increased 102.7%
to $2.98
- Adjusted
EPS(1) increased
15.3% to
$3.46
|
Fourth Quarter Net Sales Growth Overview |
|
Reported |
|
Foreign Currency Exchange |
|
Constant Currency |
|
Acquisitions / Divestitures |
|
Organic |
MedSurg and
Neurotechnology |
12.3 |
% |
|
0.3 |
% |
|
12.0 |
% |
|
0.2 |
% |
|
11.8 |
% |
Orthopaedics and Spine |
11.0 |
|
|
0.3 |
|
|
10.7 |
|
|
— |
|
|
10.7 |
|
Total |
11.8 |
% |
|
0.3 |
% |
|
11.5 |
% |
|
0.1 |
% |
|
11.4 |
% |
Full Year Results
- Reported net sales
increased 11.1%
to $20.5 billion
- Organic net sales
increased 11.5%
- Reported operating income
margin of 19.0%
- Adjusted operating income
margin(1) increased
40 bps to
24.2%
- Reported EPS
increased 33.7%
to $8.25
- Adjusted
EPS(1) increased
13.5% to
$10.60
|
Full Year Net Sales Growth Overview |
|
Reported |
|
Foreign Currency Exchange |
|
Constant Currency |
|
Acquisitions / Divestitures |
|
Organic |
MedSurg and
Neurotechnology |
11.5 |
% |
|
(0.6)
% |
|
12.1 |
% |
|
0.3 |
% |
|
11.8 |
% |
Orthopaedics and Spine |
10.5 |
|
|
(0.6)
|
|
|
11.1 |
|
|
— |
|
|
11.1 |
|
Total |
11.1 |
% |
|
(0.5)
% |
|
11.6 |
% |
|
0.1 |
% |
|
11.5 |
% |
"We drove excellent organic sales growth of over 11% in both the
fourth quarter and the full year, and delivered strong adjusted
earnings," said Kevin Lobo, Chair & CEO. "It was exciting to
surpass $20 billion in sales as we continue to drive high growth. I
would like to thank our teams for the strong performance in
2023."
Sales Analysis
Consolidated net sales of $5.8 billion and $20.5
billion increased 11.8% in the quarter, 11.5% in constant currency,
and increased 11.1% in the full year, 11.6% in constant currency.
Organic net sales increased 11.4% and 11.5% in the quarter and full
year including 10.7% and 10.9% from increased unit volume and 0.7%
and 0.6% from higher prices.
MedSurg and Neurotechnology net sales of $3.4
billion and $11.8 billion increased 12.3% in the quarter, 12.0% in
constant currency, and increased 11.5% in the full year, 12.1% in
constant currency. Organic net sales increased 11.8% and 11.8% in
the quarter and full year including 10.1% and 10.2% from increased
unit volume and 1.7% and 1.6% from higher prices.
Orthopaedics and Spine net sales of $2.4 billion
and $8.7 billion increased 11.0% in the quarter, 10.7% in constant
currency, and increased 10.5% in the full year, 11.1% in constant
currency. Organic net sales increased 10.7% and 11.1% in the
quarter and full year including 11.5% and 11.9% from increased unit
volume partially offset by 0.8% and 0.8% from lower prices.
Earnings Analysis
Reported net earnings of $1.1 billion and $3.2
billion increased 103.0% and 34.2% in the quarter and full year.
Reported net earnings per diluted share of $2.98 and $8.25
increased 102.7% and 33.7% in the quarter and full year. Reported
gross profit margin and reported operating income margin were 63.7%
and 21.6% in the quarter and 63.7% and 19.0% 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, structural optimization and other
special charges (including asset write-offs and impairments), costs
to comply with certain medical device regulations, recall-related
matters, regulatory and legal matters and tax matters. Excluding
the aforementioned items, adjusted gross profit margin(1) was 63.9%
in both the quarter and full year, and adjusted operating income
margin(1) was 27.2% and 24.2% in the quarter and full year.
Adjusted net earnings(1) of $1.3 billion and $4.1 billion increased
15.4% and 13.9% in the quarter and full year. Adjusted net earnings
per diluted share(1) of $3.46 and $10.60 increased 15.3% and 13.5%
in the quarter and full year.
2024
Outlook
Based on our momentum from 2023, strong
procedural volumes, healthy demand for capital products and a
stabilizing macro-economic environment, we expect 2024 organic net
sales growth(2) to be in the range of 7.5% to 9.0% and expect
adjusted net earnings per diluted share(2) to be in the range of
$11.70 to $12.00. Based on the steady progress of our pricing
actions, we would expect the full year impact of price to be
roughly flat. If foreign exchange rates hold near current levels,
we anticipate sales will be modestly unfavorably impacted for the
full year, being more negative in the first half of the year. We
expect adjusted net earnings per diluted share(2) will be
negatively impacted by foreign exchange rates approximately $0.05
to $0.10. This is included in our guidance.
(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 sales growth to expected organic net sales
growth as we are unable to predict with reasonable certainty and
without unreasonable effort the impact and timing of acquisitions
and divestitures and the impact of foreign currency exchange rates.
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 structural optimization and other special charges,
acquisition-related expenses 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 30, 2024
As previously announced, we will host a
conference call on Tuesday,
January 30, 2024 at 4:30 p.m., Eastern Time,
to discuss our operating results for the quarter and year ended
December 31, 2023 and provide an operational update.
Please register for this conference call at:
https://www.veracast.com/webcasts/stryker/events/SYK4Q23.cfm. After
registering, a confirmation will be sent via email, including
dial-in details and unique conference call access codes required
for call entry. Registration is open throughout the live call. To
ensure you are connected prior to the beginning of the call, we
suggest registering a minimum of 15 minutes before the start of the
call.
A simultaneous webcast of the call will be
accessible via the Investor Relations page of our website at
www.stryker.com. For those not planning to ask a question of
management, we recommend listening via the webcast. Please allow 15
minutes to register, download and install any necessary
software.
Following the conference call, a replay will be
available on our website up to one year from the time of the
earnings call.
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 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, or the anticipation thereof, that could
adversely affect the level of demand for our products; geopolitical
risks, including from international conflicts and upcoming
elections in the United States and other countries, which could,
among other things, lead to increased market volatility; pricing
pressures generally, including cost-containment measures that could
adversely affect the price of or demand for our products; changes
in foreign currency exchange markets; legislative and regulatory
actions; unanticipated issues arising in connection with clinical
studies and otherwise that affect United States Food and Drug
Administration approval of new products; inflationary pressures;
increased interest rates; supply chain 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;
changes in tax laws and regulations; the impact of legislation to
reform the healthcare system in the United States or other
countries; costs to comply with medical device regulations; changes
in financial markets; changes in our credit ratings; 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; our ability to realize anticipated cost
savings; potential negative impacts resulting from environmental,
social and governance (ESG) and sustainability related matters; the
impact on our operations and financial results of any public health
emergency and any related policies and actions by governments or
other third parties; and breaches or failures of our or our
vendors' information technology systems or products, including by
cyber-attack, data leakage, unauthorized access or theft.
Additional information concerning these and other factors is
contained in our filings with the United States Securities and
Exchange Commission, including our Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q. We disclaim any intention or
obligation to publicly update or revise any forward-looking
statement to reflect any change in our expectations or in events,
conditions or circumstances on which those expectations may be
based, or that affect the likelihood that actual results will
differ from those contained in the forward-looking statements.
Stryker is a global leader in medical
technologies and, together with our customers, we are driven to
make healthcare better. We offer innovative products and services
in MedSurg, Neurotechnology, Orthopaedics and Spine that help
improve patient and healthcare outcomes. Alongside our customers
around the world, we impact more than 150 million patients
annually. More information is available at www.stryker.com.
For investor inquiries please
contact:Jason Beach, Vice President, Investor Relations at
269-385-2600 or jason.beach@stryker.com
For media inquiries please
contact:Yin Becker, Vice President, Chief Corporate
Affairs Officer at 269-385-2600 or yin.becker@stryker.com
STRYKER CORPORATION |
For the Three Months and Full Year December
31 |
(Unaudited - Millions of Dollars, Except Per Share
Amounts) |
CONSOLIDATED STATEMENTS OF EARNINGS |
|
|
|
|
|
|
|
|
|
Three Months |
|
Full Year |
|
|
2023
|
|
|
|
2022 |
|
|
% Change |
|
|
2023
|
|
|
|
2022
|
|
|
% Change |
Net
sales |
$ |
5,815 |
|
|
$ |
5,202 |
|
|
11.8 |
% |
|
$ |
20,498 |
|
|
$ |
18,449 |
|
|
11.1 |
% |
Cost of sales |
|
2,112 |
|
|
|
1,966 |
|
|
7.4 |
|
|
|
7,440 |
|
|
|
6,871 |
|
|
8.3 |
|
Gross
profit |
$ |
3,703 |
|
|
$ |
3,236 |
|
|
14.4 |
% |
|
$ |
13,058 |
|
|
$ |
11,578 |
|
|
12.8 |
% |
% of sales |
|
63.7 |
% |
|
|
62.2 |
% |
|
|
|
|
63.7 |
% |
|
|
62.8 |
% |
|
|
Research, development and engineering expenses |
|
350 |
|
|
|
326 |
|
|
7.4 |
|
|
|
1,388 |
|
|
|
1,454 |
|
|
(4.5)
|
|
Selling, general and administrative expenses |
|
1,941 |
|
|
|
1,751 |
|
|
10.9 |
|
|
|
7,129 |
|
|
|
6,455 |
|
|
10.4 |
|
Recall charges, net |
|
6 |
|
|
|
(29) |
|
|
nm |
|
|
18 |
|
|
|
(15)
|
|
|
nm |
Amortization of intangible assets |
|
149 |
|
|
|
158 |
|
|
(5.7)
|
|
|
|
635 |
|
|
|
627 |
|
|
1.3 |
|
Goodwill impairment |
|
— |
|
|
|
216 |
|
|
nm |
|
|
— |
|
|
|
216 |
|
|
nm |
Total operating expenses |
$ |
2,446 |
|
|
$ |
2,422 |
|
|
1.0 |
% |
|
$ |
9,170 |
|
|
$ |
8,737 |
|
|
5.0 |
% |
Operating
income |
$ |
1,257 |
|
|
$ |
814 |
|
|
54.4 |
% |
|
$ |
3,888 |
|
|
$ |
2,841 |
|
|
36.9 |
% |
% of sales |
|
21.6 |
% |
|
|
15.6 |
% |
|
|
|
|
19.0 |
% |
|
|
15.4 |
% |
|
|
Other income (expense), net |
|
(31)
|
|
|
|
(53) |
|
|
(41.5)
|
|
|
|
(215)
|
|
|
|
(158)
|
|
|
36.1 |
|
Earnings before income
taxes |
$ |
1,226 |
|
|
$ |
761 |
|
|
61.1 |
% |
|
$ |
3,673 |
|
|
$ |
2,683 |
|
|
36.9 |
% |
Income taxes |
|
83 |
|
|
|
198 |
|
|
(58.1)
|
|
|
|
508 |
|
|
|
325 |
|
|
56.3 |
|
Net
earnings |
$ |
1,143 |
|
|
$ |
563 |
|
|
103.0 |
% |
|
$ |
3,165 |
|
|
$ |
2,358 |
|
|
34.2 |
% |
Net earnings per share
of common stock: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
3.01 |
|
|
$ |
1.48 |
|
|
103.4 |
% |
|
$ |
8.34 |
|
|
$ |
6.23 |
|
|
33.9 |
% |
Diluted |
$ |
2.98 |
|
|
$ |
1.47 |
|
|
102.7 |
% |
|
$ |
8.25 |
|
|
$ |
6.17 |
|
|
33.7 |
% |
Weighted-average
shares outstanding (in millions): |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
380.0 |
|
|
|
378.5 |
|
|
|
|
|
379.6 |
|
|
|
378.2 |
|
|
|
Diluted |
|
383.9 |
|
|
|
382.3 |
|
|
|
|
|
383.7 |
|
|
|
382.2 |
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
December
31 |
|
|
2023 |
|
|
2022 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
2,940 |
|
$ |
1,844 |
Marketable securities |
|
82 |
|
|
84 |
Accounts receivable, net |
|
3,765 |
|
|
3,565 |
Inventories |
|
4,843 |
|
|
3,995 |
Prepaid expenses and other current assets |
|
857 |
|
|
787 |
Total current assets |
$ |
12,487 |
|
$ |
10,275 |
Property, plant and equipment, net |
|
3,215 |
|
|
2,970 |
Goodwill and other intangibles, net |
|
19,836 |
|
|
19,765 |
Noncurrent deferred income tax assets |
|
1,670 |
|
|
1,410 |
Other noncurrent assets |
|
2,673 |
|
|
2,464 |
Total
assets |
$ |
39,881 |
|
$ |
36,884 |
Liabilities and
shareholders' equity |
|
|
|
Current liabilities |
$ |
7,890 |
|
$ |
6,303 |
Long-term debt, excluding current maturities |
|
10,901 |
|
|
11,857 |
Income taxes |
|
567 |
|
|
641 |
Other noncurrent liabilities |
|
1,930 |
|
|
1,467 |
Shareholders' equity |
|
18,593 |
|
|
16,616 |
Total liabilities and
shareholders' equity |
$ |
39,881 |
|
$ |
36,884 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
December
31 |
|
|
2023
|
|
|
|
2022
|
|
Operating
activities |
|
|
|
Net earnings |
$ |
3,165 |
|
|
$ |
2,358 |
|
Depreciation |
|
393 |
|
|
|
371 |
|
Amortization of intangible assets |
|
635 |
|
|
|
627 |
|
Changes in operating assets, liabilities, income taxes payable and
other, n |
|
(513) |
|
|
|
(732) |
|
Net cash provided by
operating activities |
$ |
3,680 |
|
|
$ |
2,624 |
|
Investing
activities |
|
|
|
Acquisitions, net of cash acquired |
$ |
(390)
|
|
|
$ |
(2,563)
|
|
Purchases of property, plant and equipment |
|
(575)
|
|
|
|
(588)
|
|
Other investing, net |
|
3 |
|
|
|
227 |
|
Net cash used in
investing activities |
$ |
(962)
|
|
|
$ |
(2,924)
|
|
Financing
activities |
|
|
|
Borrowings (payments) of debt, net |
$ |
(277)
|
|
|
$ |
472 |
|
Payments of dividends |
|
(1,139)
|
|
|
|
(1,051)
|
|
Other financing, net |
|
(178)
|
|
|
|
(170)
|
|
Net cash provided by
(used in) financing activities |
$ |
(1,594)
|
|
|
$ |
(749)
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
(28)
|
|
|
|
(51)
|
|
Change in cash and
cash equivalents |
$ |
1,096 |
|
|
$ |
(1,100)
|
|
nm - not meaningful
STRYKER CORPORATION |
For the Three Months and Full Year December
31 |
(Unaudited - Millions of Dollars) |
SALES GROWTH ANALYSIS |
|
Three Months |
|
Full Year |
|
|
|
|
Percentage Change |
|
|
|
|
Percentage Change |
|
|
2023
|
|
2022
|
|
As Reported |
ConstantCurrency |
|
|
2023
|
|
2022
|
|
As Reported |
ConstantCurrency |
Geographic: |
|
|
|
|
|
|
|
|
|
|
|
United States |
$ |
4,356 |
$ |
3,862 |
|
12.8 |
% |
12.8 |
% |
|
$ |
15,257 |
$ |
13,638 |
|
11.9 |
% |
11.9 |
% |
International |
|
1,459 |
|
1,340 |
|
8.9 |
|
7.8 |
|
|
|
5,241 |
|
4,811 |
|
8.9 |
|
10.9 |
|
Total |
$ |
5,815 |
$ |
5,202 |
|
11.8 |
% |
11.5 |
% |
|
$ |
20,498 |
$ |
18,449 |
|
11.1 |
% |
11.6 |
% |
Segment: |
|
|
|
|
|
|
|
|
|
|
|
MedSurg and Neurotechnology |
$ |
3,427 |
$ |
3,051 |
|
12.3 |
% |
12.0 |
% |
|
$ |
11,836 |
$ |
10,611 |
|
11.5 |
% |
12.1 |
% |
Orthopaedics and Spine |
|
2,388 |
|
2,151 |
|
11.0 |
|
10.7 |
|
|
|
8,662 |
|
7,838 |
|
10.5 |
|
11.1 |
|
Total |
$ |
5,815 |
$ |
5,202 |
|
11.8 |
% |
11.5 |
% |
|
$ |
20,498 |
$ |
18,449 |
|
11.1 |
% |
11.6 |
% |
SUPPLEMENTAL SALES GROWTH ANALYSIS |
|
Three Months |
|
|
|
|
|
|
United States |
|
International |
|
|
|
Percentage Change |
|
|
2023
|
|
2022
|
|
As Reported |
Constant Currency |
|
As Reported |
|
As Reported |
Constant Currency |
MedSurg and
Neurotechnology: |
|
|
|
|
|
|
|
|
|
|
Instruments |
$ |
736 |
$ |
653 |
|
12.5 |
% |
12.0 |
% |
|
12.5 |
% |
|
12.3 |
% |
10.0 |
% |
Endoscopy |
|
892 |
|
779 |
|
14.6 |
|
14.4 |
|
|
17.9 |
|
|
1.1 |
|
0.6 |
|
Medical |
|
1,042 |
|
936 |
|
11.4 |
|
11.2 |
|
|
12.9 |
|
|
6.0 |
|
4.9 |
|
Neurovascular |
|
320 |
|
299 |
|
6.7 |
|
6.6 |
|
|
7.6 |
|
|
6.2 |
|
6.1 |
|
Neuro Cranial |
|
437 |
|
384 |
|
14.1 |
|
13.8 |
|
|
14.0 |
|
|
14.4 |
|
12.7 |
|
|
$ |
3,427 |
$ |
3,051 |
|
12.3 |
% |
12.0 |
% |
|
14.0 |
% |
|
6.9 |
% |
5.9 |
% |
Orthopaedics and
Spine: |
|
|
|
|
|
|
|
|
|
|
Knees |
$ |
630 |
$ |
552 |
|
14.2 |
% |
13.9 |
% |
|
12.9 |
% |
|
18.0 |
% |
16.9 |
% |
Hips |
|
414 |
|
375 |
|
10.2 |
|
10.3 |
|
|
12.9 |
|
|
5.5 |
|
5.8 |
|
Trauma and Extremities |
|
860 |
|
774 |
|
11.0 |
|
10.3 |
|
|
12.1 |
|
|
8.3 |
|
5.5 |
|
Spine |
|
318 |
|
297 |
|
7.0 |
|
6.5 |
|
|
6.0 |
|
|
9.9 |
|
7.7 |
|
Other |
|
166 |
|
153 |
|
9.3 |
|
10.4 |
|
|
3.0 |
|
|
25.5 |
|
29.0 |
|
|
$ |
2,388 |
$ |
2,151 |
|
11.0 |
% |
10.7 |
% |
|
10.9 |
% |
|
11.3 |
% |
10.1 |
% |
Total |
$ |
5,815 |
$ |
5,202 |
|
11.8 |
% |
11.5 |
% |
|
12.8 |
% |
|
8.9 |
% |
7.8 |
% |
|
|
Full Year |
|
|
|
|
|
|
United States |
|
International |
|
|
|
Percentage Change |
|
|
2023
|
|
2022
|
|
As Reported |
Constant Currency |
|
As Reported |
|
As Reported |
Constant Currency |
MedSurg and
Neurotechnology: |
|
|
|
|
|
|
|
|
|
|
Instruments |
$ |
2,569 |
$ |
2,279 |
|
12.7 |
% |
13.0 |
% |
|
13.3 |
% |
|
10.4 |
% |
11.8 |
% |
Endoscopy |
|
3,033 |
|
2,725 |
|
11.3 |
|
11.7 |
|
|
12.1 |
|
|
7.6 |
|
9.9 |
|
Medical |
|
3,459 |
|
3,031 |
|
14.1 |
|
14.4 |
|
|
15.0 |
|
|
10.8 |
|
12.3 |
|
Neurovascular |
|
1,226 |
|
1,200 |
|
2.1 |
|
4.0 |
|
|
8.1 |
|
|
(1.4)
|
|
1.5 |
|
Neuro Cranial |
|
1,549 |
|
1,376 |
|
12.6 |
|
13.0 |
|
|
11.9 |
|
|
16.1 |
|
18.4 |
|
|
$ |
11,836 |
$ |
10,611 |
|
11.5 |
% |
12.1 |
% |
|
13.0 |
% |
|
7.0 |
% |
9.1 |
% |
Orthopaedics and
Spine: |
|
|
|
|
|
|
|
|
|
|
Knees |
$ |
2,273 |
$ |
1,997 |
|
13.9 |
% |
14.4 |
% |
|
12.2 |
% |
|
18.8 |
% |
20.9 |
% |
Hips |
|
1,544 |
|
1,413 |
|
9.2 |
|
10.4 |
|
|
10.1 |
|
|
7.7 |
|
10.7 |
|
Trauma and Extremities |
|
3,147 |
|
2,807 |
|
12.1 |
|
12.2 |
|
|
12.9 |
|
|
10.1 |
|
10.5 |
|
Spine |
|
1,189 |
|
1,146 |
|
3.8 |
|
4.0 |
|
|
5.7 |
|
|
(1.6)
|
|
(0.9)
|
|
Other |
|
509 |
|
475 |
|
7.1 |
|
8.8 |
|
|
(2.0)
|
|
|
33.8 |
|
40.9 |
|
|
$ |
8,662 |
$ |
7,838 |
|
10.5 |
% |
11.1 |
% |
|
10.2 |
% |
|
11.2 |
% |
13.0 |
% |
Total |
$ |
20,498 |
$ |
18,449 |
|
11.1 |
% |
11.6 |
% |
|
11.9 |
% |
|
8.9 |
% |
10.9 |
% |
Note: Fourth quarter and full
year 2023 had the same number of selling days as 2022. Beginning in
the first quarter 2023 we consolidated Other MedSurg and
Neurotechnology into Endoscopy as Other MedSurg and Neurotechnology
(primarily Sustainability Solutions) has been fully integrated into
our Endoscopy business. Endoscopy includes sales related to Other
of $91 and $84 for the three months 2023 and 2022 and $343 and $302
for the full year 2023 and 2022. We have reflected these changes in
all historical periods presented.
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 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 other income (expense), net; adjusted income
taxes; adjusted effective income tax rate; adjusted net earnings;
and adjusted net earnings per diluted share (Diluted EPS). We
believe 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,
acquisitions and divestitures, which affect the comparability and
trend of sales. Percentage organic sales growth is calculated by
translating current year and prior year results at the same foreign
currency exchange rate excluding the impact of acquisitions and
divestitures. 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. The
income tax effect of each adjustment was determined based on the
tax effect of the jurisdiction in which the related pre-tax
adjustment was recorded.
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, other income (expense), net, income taxes, 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 adjusted net earnings per diluted share
are the same as those used in the calculation of reported net
earnings per diluted share for the respective period.
STRYKER CORPORATION |
For the Three Months and Full 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 2023 |
Gross Profit |
Selling, General & Administrative
Expenses |
Research, Development & Engineering
Expenses |
Operating Income |
Other Income (Expense), Net |
Income Taxes |
Net Earnings |
EffectiveTax Rate |
Diluted EPS |
Reported |
$ |
3,703 |
|
$ |
1,941 |
|
$ |
350 |
|
$ |
1,257 |
|
$ |
(31) |
|
$ |
83 |
$ |
1,143 |
|
6.8 |
% |
$ |
2.98 |
|
Reported percent net
sales |
|
63.7 |
% |
|
33.4 |
% |
|
6.0 |
% |
|
21.6 |
% |
(0.5) % |
nm |
|
19.7 |
% |
|
|
Acquisition and
integration-related costs |
|
|
|
|
|
|
|
|
|
Inventory stepped-up to fair value |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
Other acquisition and integration-related (a) |
|
— |
|
|
(13) |
|
|
— |
|
|
13 |
|
|
— |
|
|
— |
|
13 |
|
(0.2)
|
|
|
0.04 |
|
Amortization of purchased
intangible assets |
|
— |
|
|
— |
|
|
— |
|
|
149 |
|
|
— |
|
|
28 |
|
121 |
|
0.6 |
|
|
0.31 |
|
Structural optimization and
other special charges (b) |
|
9 |
|
|
(54) |
|
|
(1) |
|
|
64 |
|
|
— |
|
|
15 |
|
49 |
|
0.5 |
|
|
0.13 |
|
Goodwill impairment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
Medical device regulations
(c) |
|
1 |
|
|
— |
|
|
(21) |
|
|
22 |
|
|
— |
|
|
5 |
|
17 |
|
0.1 |
|
|
0.04 |
|
Recall-related matters
(d) |
|
— |
|
|
— |
|
|
— |
|
|
6 |
|
|
— |
|
|
1 |
|
5 |
|
— |
|
|
0.02 |
|
Regulatory and legal matters
(e) |
|
— |
|
|
(73) |
|
|
— |
|
|
73 |
|
|
— |
|
|
25 |
|
48 |
|
1.2 |
|
|
0.12 |
|
Tax matters (f) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
70 |
|
(70)
|
|
5.6 |
|
|
(0.18)
|
|
Adjusted |
$ |
3,713 |
|
$ |
1,801 |
|
$ |
328 |
|
$ |
1,584 |
|
$ |
(31) |
|
$ |
227 |
$ |
1,326 |
|
14.6 |
% |
$ |
3.46 |
|
Adjusted percent net
sales |
|
63.9 |
% |
|
31.0 |
% |
|
5.6 |
% |
|
27.2 |
% |
(0.5)
% |
nm |
|
22.8 |
% |
|
|
Three Months 2022 |
Gross Profit |
Selling, General & Administrative
Expenses |
Research, Development & Engineering
Expenses |
Operating Income |
Other Income (Expense), Net |
Income Taxes |
Net Earnings |
EffectiveTax Rate |
Diluted EPS |
Reported |
$ |
3,236 |
|
$ |
1,751 |
|
$ |
326 |
|
$ |
814 |
|
$ |
(53) |
|
$ |
198 |
|
$ |
563 |
|
26.0 |
% |
$ |
1.47 |
|
Reported percent net
sales |
|
62.2 |
% |
|
33.7 |
% |
|
6.3 |
% |
|
15.6 |
% |
(1.0) % |
nm |
|
10.8 |
% |
|
|
Acquisition and
integration-related costs |
|
|
|
|
|
|
|
|
|
Inventory stepped-up to fair value |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
Other acquisition and integration-related (a) |
|
— |
|
|
(42) |
|
|
— |
|
|
42 |
|
|
— |
|
|
(16)
|
|
|
58 |
|
(2.9)
|
|
|
0.15 |
|
Amortization of purchased
intangible assets |
|
— |
|
|
— |
|
|
— |
|
|
158 |
|
|
— |
|
|
34 |
|
|
124 |
|
1.5 |
|
|
0.33 |
|
Structural optimization and
other special charges (b) |
|
27 |
|
|
(93) |
|
|
— |
|
|
120 |
|
|
— |
|
|
27 |
|
|
93 |
|
1.6 |
|
|
0.24 |
|
Goodwill impairment |
|
— |
|
|
— |
|
|
— |
|
|
216 |
|
|
— |
|
|
— |
|
|
216 |
|
(3.9)
|
|
|
0.57 |
|
Medical device regulations
(c) |
|
— |
|
|
— |
|
|
(42) |
|
|
42 |
|
|
— |
|
|
9 |
|
|
33 |
|
0.4 |
|
|
0.09 |
|
Recall-related matters
(d) |
|
— |
|
|
— |
|
|
— |
|
|
(29)
|
|
|
— |
|
|
(7)
|
|
|
(22)
|
|
(0.4)
|
|
|
(0.06)
|
|
Regulatory and legal matters
(e) |
|
— |
|
|
(23) |
|
|
— |
|
|
23 |
|
|
— |
|
|
(7)
|
|
|
30 |
|
(1.5)
|
|
|
0.08 |
|
Tax matters (f) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1)
|
|
|
(55)
|
|
|
54 |
|
(7.0)
|
|
|
0.13 |
|
Adjusted |
$ |
3,263 |
|
$ |
1,593 |
|
$ |
284 |
|
$ |
1,386 |
|
$ |
(54) |
|
$ |
183 |
|
$ |
1,149 |
|
13.8 |
% |
$ |
3.00 |
|
Adjusted percent net
sales |
|
62.7 |
% |
|
30.6 |
% |
|
5.5 |
% |
|
26.6 |
% |
(1.0) % |
nm |
|
22.1 |
% |
|
|
(a) |
Charges represent certain acquisition and integration-related costs
associated with acquisitions, including charges for termination of
sales relationships ($3 in 2023, $5 in 2022), employee retention
and workforce reductions ($3 in 2023, $4 in 2022), changes in the
fair value of contingent consideration ($6 in 2023, ($3) in 2022),
manufacturing integration costs ($0 in 2023, $9 in 2022),
adjustments to acquisition-related tax provisions (charge of $2
included in Income Taxes for 2023, $0 for 2022) and other
integration-related activities such as deal costs and costs
associated with legal entity rationalization ($1 in 2023, $27 in
2022). |
(b) |
Charges represent the costs associated with employee retention and
workforce reductions ($6 in 2023, $38 in 2022), the
closure/transfer of manufacturing and other facilities, including
site closure costs, contract termination costs and redundant
employee costs during the work transfers ($14 in 2023, $21 in
2022), product line exits (primarily inventory, long-lived asset
and specifically-identified intangible asset write-offs) ($16 in
2023, $73 in 2022), certain long-lived and intangible asset
write-offs and impairments ($16 in 2023, ($8) in 2022) and other
charges ($12 in 2023, ($4) in 2022). |
(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. |
(d) |
Charges represent changes in our best estimate of the minimum of
the range of probable loss to resolve certain recall-related
matters. |
(e) |
Charges represent changes in 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 transfer of certain intellectual properties between tax
jurisdictions (benefit of $49 in 2023 and charge of $44 in
2022). |
Full Year 2023 |
Gross Profit |
Selling, General & Administrative
Expenses |
Research, Development & Engineering
Expenses |
Operating Income |
Other Income (Expense), Net |
Income Taxes |
Net Earnings |
EffectiveTax Rate |
Diluted EPS |
Reported |
$ |
13,058 |
|
$ |
7,129 |
|
$ |
1,388 |
|
$ |
3,888 |
|
$ |
(215) |
|
$ |
508 |
|
$ |
3,165 |
|
13.8 |
% |
$ |
8.25 |
Reported percent net
sales |
|
63.7 |
% |
|
34.8 |
% |
|
6.8
|
% |
|
19.0 |
% |
(1.0) % |
nm |
|
15.4 |
% |
|
|
Acquisition and
integration-related costs |
|
|
|
|
|
|
|
|
|
Inventory stepped-up to fair value |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
Other acquisition and integration-related (a) |
|
— |
|
|
(20) |
|
|
— |
|
|
20 |
|
|
— |
|
|
(25)
|
|
|
45 |
|
(0.8)
|
|
|
0.12 |
Amortization of purchased
intangible assets |
|
— |
|
|
— |
|
|
— |
|
|
635 |
|
|
— |
|
|
132 |
|
|
503 |
|
1.2 |
|
|
1.31 |
Structural optimization and
other special charges (b) |
|
39 |
|
|
(166) |
|
|
(1) |
|
|
206 |
|
|
— |
|
|
47 |
|
|
159 |
|
0.5 |
|
|
0.42 |
Goodwill impairment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
— |
Medical device regulations
(c) |
|
2 |
|
|
— |
|
|
(94) |
|
|
96 |
|
|
— |
|
|
22 |
|
|
74 |
|
0.2 |
|
|
0.19 |
Recall-related matters
(d) |
|
— |
|
|
— |
|
|
— |
|
|
18 |
|
|
— |
|
|
4 |
|
|
14 |
|
— |
|
|
0.04 |
Regulatory and legal matters
(e) |
|
— |
|
|
(92) |
|
|
— |
|
|
92 |
|
|
— |
|
|
29 |
|
|
63 |
|
0.4 |
|
|
0.16 |
Tax matters (f) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(8) |
|
|
(51)
|
|
|
43 |
|
(1.2)
|
|
|
0.11 |
Adjusted |
$ |
13,099 |
|
$ |
6,851 |
|
$ |
1,293 |
|
$ |
4,955 |
|
$ |
(223) |
|
$ |
666 |
|
$ |
4,066 |
|
14.1 |
% |
$ |
10.60 |
Adjusted percent net
sales |
|
63.9 |
% |
|
33.4 |
% |
|
6.3 |
% |
|
24.2 |
% |
(1.1) % |
nm |
|
19.8 |
% |
|
|
Full Year 2022 |
Gross Profit |
Selling, General & Administrative
Expenses |
Research, Development & Engineering
Expenses |
Operating Income |
Other Income (Expense), Net |
Income Taxes |
Net Earnings |
EffectiveTax Rate |
Diluted EPS |
Reported |
$ |
11,578
|
|
$ |
6,455 |
|
$ |
1,454 |
|
$ |
2,841 |
|
$ |
(158) |
|
$ |
325 |
|
$ |
2,358 |
|
12.1 |
% |
$ |
6.17 |
|
Reported percent net
sales |
|
62.8 |
% |
|
35.0 |
% |
|
7.9 |
% |
|
15.4 |
% |
(0.9) % |
nm |
|
12.8 |
% |
|
|
Acquisition and
integration-related costs |
|
|
|
|
|
|
|
|
|
Inventory stepped-up to fair value |
|
12 |
|
|
— |
|
|
— |
|
|
12 |
|
|
— |
|
|
3 |
|
|
9 |
|
— |
|
|
0.02 |
|
Other acquisition and integration-related (a) |
|
— |
|
|
(138) |
|
|
— |
|
|
138 |
|
|
— |
|
|
34 |
|
|
104 |
|
0.5 |
|
|
0.27 |
|
Amortization of purchased
intangible assets |
|
— |
|
|
— |
|
|
— |
|
|
627 |
|
|
— |
|
|
132 |
|
|
495 |
|
1.7 |
|
|
1.30 |
|
Structural optimization and
other special charges (b) |
|
56 |
|
|
(206) |
|
|
(87) |
|
|
349 |
|
|
— |
|
|
66 |
|
|
283 |
|
0.7 |
|
|
0.74 |
|
Goodwill impairment |
|
— |
|
|
— |
|
|
— |
|
|
216 |
|
|
— |
|
|
— |
|
|
216 |
|
(1.1)
|
|
|
0.57 |
|
Medical device regulations
(c) |
|
3 |
|
|
— |
|
|
(137) |
|
|
140 |
|
|
— |
|
|
25 |
|
|
115 |
|
0.2 |
|
|
0.30 |
|
Recall-related matters
(d) |
|
— |
|
|
— |
|
|
— |
|
|
(15)
|
|
|
— |
|
|
(3) |
|
|
(12) |
|
— |
|
|
(0.03)
|
|
Regulatory and legal matters
(e) |
|
— |
|
|
(76) |
|
|
— |
|
|
76 |
|
|
— |
|
|
7 |
|
|
69 |
|
(0.2)
|
|
|
0.18 |
|
Tax matters (f) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(75)
|
|
|
(9)
|
|
|
(66) |
|
0.1 |
|
|
(0.18)
|
|
Adjusted |
$ |
11,649 |
|
$ |
6,035 |
|
$ |
1,230 |
|
$ |
4,384 |
|
$ |
(233) |
|
$ |
580 |
|
$ |
3,571 |
|
14.0 |
% |
$ |
9.34 |
|
Adjusted percent net
sales |
|
63.1 |
% |
|
32.7 |
% |
|
6.7 |
% |
|
23.8 |
% |
(1.3) % |
nm |
|
19.4 |
% |
|
|
(a) |
Charges represent certain acquisition and integration-related costs
associated with acquisitions, including charges for termination of
sales relationships ($5 in 2023, $21 in 2022), employee retention
and workforce reductions ($6 in 2023, $33 in 2022), changes in the
fair value of contingent consideration (($1) in 2023, ($135) in
2022), manufacturing integration costs ($2 in 2023, $32 in 2022),
stock compensation payments upon a change in control ($0 in 2023,
$132 in 2022), adjustments to acquisition-related tax provisions
(charges of $30 included in Income Taxes for 2023, $0 for 2022) and
other integration-related activities such as deal costs and costs
associated with legal entity rationalization ($8 in 2023, $55 in
2022). |
(b) |
Charges represent the costs associated with employee retention and
workforce reductions ($69 in 2023, $74 in 2022), the
closure/transfer of manufacturing and other facilities, including
site closure costs, contract termination costs and redundant
employee costs during the work transfers ($50 in 2023, $83 in
2022), product line exits (primarily inventory, long-lived asset
and specifically-identified intangible asset write-offs) ($32 in
2023, $80 in 2022), certain long-lived and intangible asset
write-offs and impairments ($28 in 2023, $96 in 2022) and other
charges ($27 in 2023, $16 in 2022). |
(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. |
(d) |
Charges represent changes in our best estimate of the minimum of
the range of probable loss to resolve certain recall-related
matters. |
(e) |
Charges represent changes in 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 transfer of certain intellectual properties between tax
jurisdictions (charges of $89 in 2023 and $182 in 2022), certain
tax audit settlements (benefit of $9 included in Other Income
(Expense), Net for 2023 and benefit of $24 included in Income Taxes
for 2023, benefit of $45 included in Other Income (Expense) and
benefit of $162 included in Income Taxes for 2022) and the reversal
of deferred income tax on undistributed earnings of foreign
subsidiaries ($0 for 2023, benefit of $71 for 2022). |
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