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Stryker Reports 7% Sales Growth, 14% Adjusted Net Earnings Growth for Quarter Ended September 30, 2010
Date:10/19/2010

KALAMAZOO, Mich., Oct. 19 /PRNewswire-FirstCall/ -- Stryker Corporation (NYSE: SYK) reported operating results for the quarter ended September 30, 2010 as follows:

Third Quarter Highlights

  • Net sales increased 7.0% on a constant currency basis (6.9% as reported) to $1,768 million
  • Orthopaedic Implants sales increased 1.3% on a constant currency basis (1.2% as reported)
  • MedSurg Equipment sales increased 16.3% on a constant currency basis (16.1% as reported)
  • Adjusted net earnings increased 14.2% from $277 million to $317 million and adjusted diluted net earnings per share increased 15.9% from $0.69 to $0.80
  • Reported net earnings increased 47.5% from $229 million to $338 million and reported diluted net earnings per share increased 49.1% from $0.57 to $0.85

  • "We are pleased that our third quarter results continue to reinforce the strengths provided by our unique set of businesses. As we move into the final quarter of the year, we remain focused on delivering on the goals we outlined at the start of 2010 as it relates to both sales and earnings while also ensuring we are making investments in our business to position us for continued growth in the future," commented Stephen P. MacMillan, Chairman, President and Chief Executive Officer.

    Sales Analysis Net sales increased 6.9% to $1,768 million for the third quarter of 2010. On a constant currency basis, net sales increased 7.0% in the quarter.

    Domestic sales were $1,174 million for the third quarter of 2010, representing an increase of 9.7%, as a result of higher shipments of Orthopaedic Implants and MedSurg Equipment.

    International sales were $594 million for the third quarter of 2010, representing an increase of 1.7%.  The impact of foreign currency comparisons to the dollar value of international sales was unfavorable by $2 million in the third quarter of 2010.  On a constant currency basis, international sales increased 2.1% in the third quarter of 2010, as a result of higher shipments of MedSurg Equipment partially offset by lower sales of Orthopaedic Implants.

    Worldwide sales of Orthopaedic Implants were $1,029 million for the third quarter of 2010, representing an increase of 1.2%.  On a constant currency basis, sales of Orthopaedic Implants increased 1.3% in the third quarter of 2010, based on higher domestic sales of hips, knees, and trauma implant systems.

    Worldwide sales of MedSurg Equipment were $739 million for the third quarter of 2010, representing an increase of 16.1%.  On a constant currency basis, sales of MedSurg Equipment increased 16.3% in the third quarter of 2010, based on higher shipments of surgical equipment and surgical navigation systems, endoscopic and communications systems and patient handling and emergency medical equipment as well as sales growth through acquisitions.  

    Earnings Analysis Net earnings for the third quarter of 2010 included a gain of $13 million (net of income tax expense) as a result of the sale of the Company's Orthopaedic Implants manufacturing facility based in Caen, France.  In addition, during the third quarter of 2010, the Company recorded a favorable income tax expense adjustment of $7 million to reduce the income tax liability originally recorded in the fourth quarter of 2009 associated with the repatriation of foreign earnings to the United States.  Net earnings for the third quarter of 2009 were reduced by $48 million in restructuring charges (net of income tax benefits) related to decisions to terminate certain third party agent agreements, simplify some Company organizations and discontinue selling certain products.

    Excluding the impacts of the 2010 gain on sale of assets and income tax adjustment as well as the 2009 restructuring charges described above, adjusted net earnings for the third quarter of 2010 of $317 million increased 14.2% over adjusted net earnings of $277 million for the third quarter of 2009.  Adjusted diluted net earnings per share for the third quarter of 2010 were $0.80, representing a 15.9% increase over adjusted diluted net earnings per share of $0.69 for the third quarter of 2009. 

    Net earnings for the third quarter of 2010 were $338 million, representing a 47.5% increase over net earnings of $229 million for the third quarter of 2009.  Diluted net earnings per share for the third quarter of 2010 were $0.85, representing a 49.1% increase compared to $0.57 for the third quarter of 2009.  

    2010 Outlook Given the underlying strength of the Company's diversified product and services offering, the financial forecast for 2010 is being updated to increase the constant currency net sales range from 5 - 8% to an increase of 7 - 8%. If foreign currency exchange rates hold near September 30, 2010 levels, the Company anticipates an unfavorable impact on net sales of approximately 0 - 1% for the fourth quarter of 2010, and a favorable impact on net sales of approximately 0.5 - 1% for the full year of 2010. Given the change to the net sales outlook, the Company now projects that adjusted diluted net earnings per share for 2010 will be in the range of $3.27 - $3.30, an increase of 11 - 12% over adjusted diluted net earnings per share of $2.95 in 2009, versus the previous range of $3.20 - $3.30.

    Conference CallAs previously announced the Company will host a conference call for financial analysts at 4:30 p.m., Eastern Time, today to discuss the Company's operating results for the quarter ended September 30, 2010 and provide an operational update.  To participate in the conference call dial 866-270-6057(domestic) or 617-213-8891 (international) and enter the participant passcode 19349658. 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 8:30 p.m., Eastern Time, on Tuesday, October 19, 2010, until 11:58 p.m. on Tuesday, October 26, 2010. To hear this recording, dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter the passcode 30594001.

    Forward Looking Statements

    Certain statements made in the presentation may constitute forward-looking statements. They will be based upon management's current expectations and will be subject to various risks and uncertainties that could cause the Company's 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 the Company's products; pricing pressures generally, including cost-containment measures that could adversely affect the price of or demand for the Company's 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; unfavorable resolution of tax audits; changes in financial markets; and changes in the competitive environment.  Additional information concerning these and other factors is contained in the Company's filings with the U.S. Securities and Exchange Commission, including the Company's 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.   The Company provides innovative orthopaedic implants as well as state-of-the-art medical and surgical equipment to help people lead more active and more satisfying lives.  For more information about Stryker, please visit www.stryker.com.STRYKER CORPORATIONFor the Three Month and Nine Month Periods Ended September 30, 2010(Unaudited - In Millions Except Per Share Amounts)Third QuarterNine MonthsCONDENSED STATEMENTS OF EARNINGS

    2010 2009 % Change2010 2009 % ChangeNet sales

    $
    ,767.6$
    ,653.36.9$
    5,324.9$
    4,888.98.9Cost of sales

    540.8538.70.41,661.51,590.54.5GROSS PROFIT

    1,226.81,114.610.13,663.43,298.411.1% of Sales

    69.467.468.867.5Research, development andengineering expenses

    98.683.717.8283.2246.714.8Selling, general andadministrative expenses

    643.3643.9(0.1)1,972.91,877.65.1Intangibles amortization

    14.48.667.442.326.758.4   Restructuring charges

    -67.0(100.0)-67.0(100.0)756.3803.2(5.8)2,298.42,218.03.6OPERATING INCOME

    470.5311.451.11,365.01,080.426.3% of Sales

    26.618.825.622.1Other income (expense)

    (8.6)3.0--(14.7)20.4--EARNINGS BEFORE INCOME TAXES

    461.9314.446.91,350.31,100.822.7Income taxes

    124.285.445.4371.9299.424.2NET EARNINGS

    $
    337.7$
    229.047.5$
    978.4$
    801.422.1   Net earnings per shareBasic

    $
    .85$
    .5846.6$
    2.46$
    2.0221.8Diluted

    $
    .85$
    .5749.1$
    2.45$
    2.0121.9Average Shares OutstandingBasic

    397.0397.6397.0397.2Diluted

    398.1399.6399.1399.1RECONCILIATION OF REPORTED NET EARNINGS TO ADJUSTED NET EARNINGSThird QuarterNine Months2010 2009 % Change2010 2009 % ChangeNET EARNINGS Reported net earnings

    $
    337.7$
    229.047.5$
    978.4$
    801.422.1Restructuring charges

    -48.4(100.0)-48.4(100.0)Gain on sale of property, plant and equipment

    (13.4)---(13.4)---Income taxes on repatriation of foreign earnings

    (7.4)---(7.4)---Adjusted net earnings

    $
    316.9$
    277.414.2$
    957.6$
    849.812.7DILUTED NET EARNINGS PER SHARE Reported diluted net earnings per share

    $
    .85$
    .5749.1$
    2.45$
    2.0121.9Restructuring charges

    $
    -$
    .12(100.0)$
    -$
    .12(100.0)Gain on sale of property, plant and equipment

    $
    (0.03)---$
    (0.03)---Income taxes on repatriation of foreign earnings

    $
    (0.02)---$
    (0.02)---Adjusted diluted net earnings per share

    $
    .80$
    .6915.9$
    2.40$
    2.1312.7STRYKER CORPORATIONFor the Three Month and Nine Month Periods Ended September 30, 2010(Unaudited - In Millions)Third QuarterNine Months% Change% ChangeConstant Constant CONDENSED SALES ANALYSIS

    2010 2009 ReportedCurrency2010 2009 ReportedCurrencyDomestic

    $
    ,173.8$
    ,069.69.79.7$
    3,507.2$
    3,158.811.011.0International

    593.8583.71.72.11,817.71,730.15.11.2NET SALES

    $
    ,767.6$
    ,653.36.97.0$
    5,324.9$
    4,888.98.97.5Orthopaedic Implants

    $
    ,028.8$
    ,016.71.21.3$
    3,142.1$
    3,004.14.63.0MedSurg Equipment

    738.8636.616.116.32,182.81,884.815.814.8NET SALES

    $
    ,767.6$
    ,653.36.97.0$
    5,324.9$
    4,888.98.97.5Third Quarter% ChangeDomestic

    International

    TotalConstantConstantSUPPLEMENTAL SALES GROWTH ANALYSIS

    ReportedReportedCurrencyReportedCurrencyOrthopaedic Implants sales:Hips

    30(1)21Knees

    2(4)(5)00Trauma

    7(1)124Spine

    03411Total Orthopaedic Implants

    3(1)(1)11MedSurg Equipment sales:Surgical equipment and surgical navigation systems

    1410111313Endoscopic and communications systems

    85678Patient handling and emergency medical equipment

    87688Total MedSurg Equipment

    19891616Nine Months% ChangeDomestic

    International

    TotalConstantConstantReportedReportedCurrencyReportedCurrencyOrthopaedic Implants sales:Hips

    45052Knees

    61(4)43Trauma

    116487Spine

    111833Total Orthopaedic Implants

    54153MedSurg Equipment sales:Surgical equipment and surgical navigation systems

    94187Endoscopic and communications systems

    88587Patient handling and emergency medical equipment

    211251918Total MedSurg Equipment

    19731615STRYKER CORPORATION(Unaudited - In Millions)September 30

    December 31CONDENSED BALANCE SHEETS

    2010

    2009ASSETSCash and cash equivalents

    $
    925.6

    $
    58.7Marketable securities

    3,589.0

    2,296.1Accounts receivable (net)

    1,158.6

    1,147.1Inventories

    1,035.3

    943.0Other current assets

    835.2

    806.3TOTAL CURRENT ASSETS

    7,543.7

    5,851.2Property, plant and equipment (net)

    931.6

    947.6Goodwill and other intangibles (net)

    1,604.5

    1,591.5Other assets

    692.1

    681.0TOTAL ASSETS

    $
    ,771.9

    $
    9,071.3LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities

    $
    ,406.0

    $
    ,441.0Other liabilities

    1,063.5

    1,035.2Long-term debt

    996.4

    -Shareholders' equity

    7,306.0

    6,595.1TOTAL LIABILITIES ANDSHAREHOLDERS' EQUITY

    $
    ,771.9

    $
    9,071.3STRYKER CORPORATIONFor the Three Month and Nine Month Periods Ended September 30, 2010(Unaudited - In Millions)Third QuarterNine MonthsCONDENSED STATEMENTS OF CASH FLOWS

    2010

    20092010

    2009OPERATING ACTIVITIESNet earnings

    $
    337.7

    $
    229.0$
    978.4

    $
    801.4Depreciation

    39.7

    41.1119.6

    117.9Amortization

    61.4

    55.5179.3

    162.6Restructuring charges

    -

    67.0-

    67.0Changes in working capital and other

    (10.5)

    73.2(247.5)

    (228.3)NET CASH PROVIDED BY OPERATING ACTIVITIES

    428.3

    465.81,029.8

    920.6INVESTING ACTIVITIESAcquisitions, net of cash acquired

    (0.8)

    (6.0)(62.2)

    (17.7)   Purchases of marketable securities, net

    (190.1)

    (146.3)(1,362.4)

    (397.8)Purchases of property, plant and equipment

    (58.5)

    (28.6)(127.0)

    (89.6)Proceeds from sales of property, plant and equipment

    53.8

    0.654.0

    1.5NET CASH USED IN INVESTING ACTIVITIES

    (195.6)

    (180.3)(1,497.6)

    (503.6)FINANCING ACTIVITIES   Proceeds from (payments of) borrowings, net

    (0.8)

    (1.9)998.2

    (2.8)Dividends paid

    (59.5)

    -(178.7)

    (158.6)Repurchase and retirement of common stock

    -

    -(111.1)

    -Other

    (63.5)

    (17.1)50.7

    (17.9)NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

    (123.8)

    (19.0)759.1

    (179.3)Effect of exchange rate changes on cash and cash equivalents

    31.5

    27.5(24.4)

    21.5CHANGE IN CASH AND CASH EQUIVALENTS

    $
    40.4

    $
    294.0$
    266.9

    $
    259.2
    '/>"/>

    SOURCE Stryker Corporation
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