Salute e Benessere
Stryker reports third quarter 2016 results
Kalamazoo, Michigan - October 27, 2016 - Stryker Corporation (NYSE:SYK) reported operating results for the third quarter of 2016:
"Our third quarter results again demonstrate our ability to consistently deliver strong organic sales growth at the high end of med tech," said Kevin A. Lobo, Chairman and Chief Executive Officer. "Our acquisitions are performing well and contributed to solid overall earnings performance."
Consolidated net sales of $2.8 billion increased 17.1% in the quarter as reported and 16.7% in constant currency, as foreign currency exchange rates favorably impacted net sales by 0.4%. Excluding the 10.5% impact of acquisitions, net sales in the quarter increased 6.2% in constant currency, including 7.5% from increased unit volume partially offset by 1.3% due to lower prices. Net sales from our recently closed acquisitions, Sage Products LLC and Physio-Control International, Inc., contributed $242 million to our consolidated net sales in the quarter.
Orthopaedics net sales of $1.1 billion increased 5.6% in the quarter as reported and 5.3% in constant currency, as foreign currency exchange rates favorably impacted net sales by 0.3%. Excluding the 0.5% impact of acquisitions, net sales in the quarter increased 4.8% in constant currency, including 7.0% from increased unit volume partially offset by 2.2% due to lower prices.
MedSurg net sales of $1.3 billion increased 33.0% in the quarter as reported and in constant currency. Excluding the 25.7% impact of acquisitions, net sales in the quarter increased 7.3% in constant currency, including 7.9% from increased unit volume partially offset by 0.6% due to lower prices.
Neurotechnology and Spine net sales of $0.5 billion increased 9.7% in the quarter as reported and 8.7% in constant currency, as foreign currency exchange rates favorably impacted net sales by 1.0%. Excluding the 1.8% impact of acquisitions, net sales in the quarter increased 6.9% in constant currency, including 7.9% from increased unit volume partially offset by 1.0% due to lower prices.
Reported net earnings of $355 million increased 17.9% in the quarter. Reported net earnings per diluted share of $0.94 increased 19.0% in the quarter. Reported net earnings include certain charges for the amortization of purchased intangible assets, acquisition and integration related activities, Rejuvenate and ABG II and other recall matters and restructuring-related activities. The effect of each of these matters on reported net earnings and net earnings per diluted share appears in the attached reconciliation of actual results to adjusted results. Excluding the impact of these charges increases gross profit margin in the quarter from 66.1% to 66.3% and increases operating income margin from 17.2% to 24.9%.
Excluding the impact of the items described above, adjusted net earnings of $526 million increased 10.5% in the quarter. Adjusted net earnings per diluted share of $1.39 increased 11.2% in the quarter.
We expect 2016 organic sales growth to be in the range of 6.0% - 6.5% and adjusted net earnings per diluted share to be in the range of $5.75 - $5.80 compared to our prior target of $5.70 - $5.80. For the fourth quarter we expect adjusted net earnings per diluted share to be in the range of $1.73 - $1.78. If foreign currency exchange rates hold near current levels, we expect a neutral impact on net sales in the fourth quarter and a negative foreign currency impact of less than 0.5% in the full year. We expect the impact of foreign currency on adjusted net earnings per diluted share to be neutral in the fourth quarter.
As previously announced, the Company will host a conference call on Thursday, October 27, 2016 at 4:30 p.m., Eastern Time, to discuss the Company's operating results for the quarter ended September 30, 2016 and provide an operational update.
To participate in the conference call dial (844) 826-0610 (domestic) or (973) 453-3249 (international) and be prepared to provide conference ID number 57981183 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 Investors page of this site.
A recording of the call will also be available from 8:00 p.m., Eastern Time, on Thursday, October 27, 2016, until 11:59 p.m., Eastern Time, on Thursday, November 3, 2016. To hear this recording you may dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and enter conference ID number 57981183.
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; 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. 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 a diverse array of innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine that help improve patient and hospital outcomes. Stryker is active in over 100 countries around the world. Please contact us for more information at www.stryker.com.
Katherine A. Owen, Stryker Corporation, 269-385-2600 or katherine.owen@stryker.com
Yin Becker, Stryker Corporation, 269-385-2600 or yin.becker@stryker.com
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 operating income; adjusted effective income tax rate; adjusted net earnings; and adjusted net earnings per diluted share. We believe that these non-GAAP measures provide meaningful information to assist 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 year results at prior year average foreign currency exchange rates. To measure percentage organic sales growth, we remove the impact of changes in foreign currency exchange rates and acquisitions that 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, 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.
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