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Stryker reports second quarter 2016 results

Kalamazoo, Michigan - July 21, 2016 - Stryker Corporation (SYK) reported operating results for the second quarter of 2016:

Second Quarter Highlights

Net sales grew 16.8% to $2.8 billion (17.0% constant currency)

Reported net earnings per diluted share decreased 2.9% to $1.00
Adjusted net earnings per diluted share(1) increased 15.8% to $1.39

"With organic sales growth of 6.6% we delivered another solid quarter, once again demonstrating the strength of our diversified model," said Kevin A. Lobo, Chairman and Chief Executive Officer. "This growth, combined with strong expense controls, positions us well to deliver on our updated full year financial guidance."

Sales Analysis

Consolidated net sales of $2.8 billion increased 16.8% in the quarter as reported and 17.0% in constant currency, as foreign currency exchange rates negatively impacted net sales by 0.2%. Excluding the 10.4% impact of acquisitions, net sales in the quarter increased 6.6% in constant currency, including 7.9% 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 $240 million to our sales in the quarter.

Orthopaedics net sales of $1.1 billion increased 4.6% in the quarter as reported and 4.8% in constant currency, as foreign currency exchange rates negatively impacted net sales by 0.2%. Excluding the 0.3% impact of acquisitions, net sales in the quarter increased 4.5% in constant currency, including 6.7% from increased unit volume partially offset by 2.2% due to lower prices.

MedSurg net sales of $1.3 billion increased 33.8% in the quarter as reported and 34.2% in constant currency, as foreign currency exchange rates negatively impacted net sales by 0.4%. Excluding the 25.7% impact of acquisitions, net sales in the quarter increased 8.5% in constant currency, including 9.0% from increased unit volume partially offset by 0.5% due to lower prices.

Neurotechnology and Spine net sales of $0.5 billion increased 9.3% in the quarter as reported and 9.0% in constant currency, as foreign currency exchange rates favorably impacted net sales by 0.3%. Excluding the 1.5% impact of acquisitions, net sales in the quarter increased 7.5% in constant currency, including 8.5% from increased unit volume partially offset by 1.0% due to lower prices.

Earnings Analysis

Reported net earnings of $380 million decreased 3.1% in the quarter. Reported net earnings per diluted share of $1.00 decreased 2.9% 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 recalls 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, gross profit margin increased in the quarter from 64.9% to 66.2% and operating income margin increased in the quarter from 17.6% to 24.8%.

Excluding the impact of the items described above, adjusted net earnings(2) of $525 million increased 14.6% in the quarter. Adjusted net earnings per diluted share(1) of $1.39 increased 15.8% in the quarter.

2016 Outlook

We now expect 2016 organic sales growth to be in the range of 6.0% - 6.5% compared to our prior target of 5.5% - 6.5% and adjusted net earnings per diluted share(3) to be in the range of $5.70 - $5.80 compared to our prior target of $5.65 - $5.80. For the third quarter we expect adjusted net earnings per diluted share(3) to be in the range of $1.33 - $1.38. If foreign currency exchange rates hold near current levels, we expect a neutral impact on net sales in the third quarter and a negative impact of approximately 1.0% in the full year. We expect a negative impact on adjusted net earnings per diluted share of approximately $0.03 in the third quarter and $0.10 - $0.12 in the full year.

(1) A reconciliation of reported net earnings per diluted share to adjusted net earnings per diluted 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.

(3) A reconciliation of expected net earnings per diluted share to expected adjusted net earnings per diluted share for the third quarter and full year and other important information appears below.

Conference Call on Thursday, July 21, 2016

As previously announced, the Company will host a conference call on Thursday, July 21, 2016 at 4:30 p.m., Eastern Time, to discuss the Company`s operating results for the quarter ended June 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 confirmation number 57934209 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 8:00 p.m., Eastern Time, on Thursday, July 21, 2016, until 11:59 p.m., Eastern Time, on Thursday, July 21, 2016. To hear this recording you may dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and enter the conference ID number 57934209.

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 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...


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