KALAMAZOO, Mich., Jan. 27 /PRNewswire/ -- Stryker Corporation (NYSE: SYK)
reported today that net sales were $559.1 million for the fourth quarter ended
December 31, 1999, representing a 74% increase over sales of $321.3 million in
the fourth quarter of 1998, and $2,103.7 million for the year ended
December 31, 1999, representing a 91% increase over sales of $1,103.2 million
for 1998. Net sales for Howmedica, which was acquired on December 4, 1998,
were $242.9 million for the fourth quarter and $902.4 million for the year
ended December 31, 1999, representing increases of approximately 3% and 7%,
respectively, over its sales for the same periods last year. On a pro forma
basis, net sales increased 9% in the fourth quarter and 10% for the year.
Excluding nonrecurring charges, net earnings for the fourth quarter
increased 44% to $51.7 million from $35.9 million in 1998, basic net earnings
per share increased 43% to $.53 and diluted net earnings per share increased
41% to $.52. For the year ended December 31, 1999, net earnings excluding
nonrecurring charges increased 13% to $160.5 million from $141.9 million in
1998, basic net earnings per share increased 13% to $1.66 and diluted net
earnings per share increased 12% to $1.62. Nonrecurring charges were
$12.2 million ($7.9 million net of tax) for the fourth quarter and
$217.1 million ($141.1 million net of tax) for the year ended December 31,
1999, as follows:
* Additional cost of sales for inventory stepped-up to fair value in
connection with the Howmedica acquisition of $13.0 million in the fourth
quarter and $198.2 million in the year. There is no more inventory step-up to
be charged off.
* A $5.5 million credit in the fourth quarter to close out the
$19.7 million charge recorded in the first quarter for reorganizing Stryker's
Japanese distribution operation.
* A $4.7 million charge in the fourth quarter to complete the
reorganization of Stryker's distribution channels to accommodate the Howmedica
integration.
Including the nonrecurring charges, the Company reported net earnings of
$43.8 million ($.44 per diluted share) for the fourth quarter of 1999 and
$19.4 million ($.20 per diluted share) for the year ended December 31, 1999.
RESTATEMENT OF 1998 ACQUISITION-RELATED CHARGES
Stryker also announced that it will restate its operating results for the
year ended December 31, 1998 to reduce acquisition-related charges by
$30.9 million ($20.4 million net of tax). The restatement results from
discussions with the Securities and Exchange Commission relating to the
accounting for the Company's 1998 acquisition of Howmedica. The Company had
provided reserves for the conversion of a portion of its domestic and foreign
distributors to direct sales to accommodate the integration with the Howmedica
sales force. The cost of the conversions was based on contractual terms or in
accordance with plans to complete such conversions. The $30.9 million
restatement relates to reserves provided for several foreign distributors
where contractual terms had not been reached as of December 31, 1998. As
indicated above, the $4.7 million charge recorded in the fourth quarter of
1999 completes the reorganization of Stryker's distribution channels as a
result of the Howmedica acquisition.
The impact of the restatement on the fourth quarter and year ended
December 31, 1998 follows ($Millions):
Fourth Quarter Year
As previously reported
Earnings (loss) before income taxes (103.1) 60.0
Net earnings (loss) (66.4) 39.6
Net earnings (loss) per share - diluted (.68) .40
As adjusted
Earnings (loss) before income taxes (72.2) 90.9
Net earnings (loss) (46.0) 60.0
Net earnings (loss) per share - diluted (.47) .61
A revised Form 10-K for 1998 reflecting the restatement and revised Forms
10-Q for the 1999 period reflecting the related increase in retained earnings
are expected to be filed with the Securities and Exchange Commission on or
about February 15, 2000.
A reconciliation of net earnings excluding non-recurring charges to net
earnings (loss) for the fourth quarter and year ended December 31, 1999 and
1998 follows ($Millions):
Fourth Quarter Year
1999 1998 1999 1998
Net earnings excluding
non-recurring charges 51.7 35.9 160.5 141.9
Additional cost of sales for inventory
stepped-up to fair value (13.0) (7.8) (198.2) (7.8)
Additional cost of sales for inventory
repurchased from distributors (14.0) (14.0)
Write off of purchased research
and development (83.3) (83.3)
Credit (charge) for reorganizing
Stryker's Japanese operation 5.5 (14.2)
Charges for reorganizing Stryker's
distribution channels and
acquisition-related expenses (4.7) (19.0) (4.7) (19.0)
Total nonrecurring charges (12.2) (124.1) (217.1) (124.1)
Income tax benefit 4.3 42.2 76.0 42.2
Net nonrecurring charges (7.9) (81.9) (141.1) (81.9)
Net earnings (loss) 43.8 (46.0) 19.4 60.0
SALES ANALYSIS
Domestic sales were $322.3 million for the fourth quarter and $1,228.4
million for the year ended December 31, 1999, representing increases of 63%
and 69%, respectively, as a result of the Howmedica acquisition and higher
shipments of orthopaedic implants, powered surgical instruments and endoscopic
equipment. U.S. sales of Howmedica products were $110.2 million for the
fourth quarter and $413.9 million for the year ended December 31, 1999,
representing increases of 10% and 6%, respectively, over sales for the prior
year. On a pro forma basis and excluding a $17.1 million sales credit in the
prior year for inventory repurchased from distributors, domestic sales
increased 9% in the fourth quarter and 10% for the year.
International sales were $236.8 million for the fourth quarter and
$875.3 million for the year ended December 31, 1999, representing increases of
92% and 134%, respectively, as a result of the Howmedica acquisition and
higher shipments of Stryker products. International sales of Howmedica
products were $132.7 million in the fourth quarter and $488.5 million for the
year ended December 31, 1999, representing a decline of 1% and an increase of
7%, respectively, over sales for the prior year periods. On a pro forma
basis, international sales increased less than 1% in the fourth quarter and 8%
for the year. The impact of foreign currency comparisons to the dollar value
of international sales, on a pro forma basis, was unfavorable by $3.8 million,
or 2%, in the fourth quarter and favorable by $12.9 million, or 2%, for the
year ended December 31, 1999.
Worldwide sales of Orthopaedic Implants were $336.2 million for the fourth
quarter and $1,248.2 million for the year ended December 31, 1999 representing
increases of 164% and 205%, respectively, as a result of the Howmedica
acquisition and higher shipments of reconstructive, trauma and spinal
implants. On a pro forma basis and excluding the $17.1 million sales credit
in the prior year, sales of Orthopaedic Implants increased 8% in the fourth
quarter and 11% for the year.
Worldwide sales of MedSurg Equipment were $195.8 million for the fourth
quarter and $733.5 million for the year ended December 31, 1999, representing
increases of 20% and 27%, respectively, based on higher shipments of powered
surgical instruments and endoscopic systems along with the Leibinger
craniomaxillofacial line acquired with Howmedica. On a pro forma basis, sales
of MedSurg Equipment increased 4% in the fourth quarter and 8% for the year.
Physical Therapy Services revenue was $27.1 million for the fourth quarter
and $122.0 million for the year ended December 31, 1999 representing a decline
of 11% for the fourth quarter and an increase of 5% for the year.
ACCOUNTS RECEIVABLE SECURITIZATION
In December 1999, the Company established a one-year securitization
facility under which certain domestic accounts receivables are sold on an
ongoing basis to a special purpose subsidiary which in turn may sell up to a
$130 million interest in such receivables to a third party. As of
December 31, 1999, a $97 million interest had been sold under this facility.
The transaction is reflected in the balance sheet as a $97 million reduction
of accounts receivable and long-term debt. The cost associated with the
facility, including the third party's financing cost of issuing its commercial
paper backed by these receivables, is included in selling, general and
administrative expense.
Stryker Corporation develops, manufactures and markets specialty surgical
and medical products, including orthopaedic reconstructive, trauma and spinal
implants, powered surgical instruments, endoscopic systems, patient care and
handling equipment for the global market and provides outpatient physical
therapy services in the United States. The Company's common stock is traded
on the New York Stock Exchange under the symbol SYK.
STRYKER CORPORATION
CONDENSED SALES ANALYSIS
For the Three Month Period and Year Ended December 31, 1999
(Unaudited - In Millions)
Fourth Quarter Year Ended December 31
1999 1998 % 1999 1998 %
Domestic (A) $322.3 $197.9 62.9 $1,228.4 $728.9 68.5
International 236.8 123.4 91.9 875.3 374.3 133.8
Total $559.1 $321.3 74.0 $2,103.7 $1,103.2 90.7
Orthopaedic
Implants (A) $336.2 $127.5 163.7 $1,248.2 $409.6 204.7
MedSurg
Equipment 195.8 163.2 20.0 733.5 577.8 26.9
Physical Therapy
Services 27.1 30.6 (11.4) 122.0 115.8 5.4
Total $559.1 $321.3 74.0 $2,103.7 $1,103.2 90.7
Fourth Quarter Year Ended December 31
Pro-Forma (B) Pro Forma (B)
1999 1998 % 1999 1998 %
Domestic (A) $322.3 $277.5 16.1 $1,228.4 $1,098.6 11.8
International 236.8 236.1 0.3 875.3 807.0 8.5
Total $559.1 $513.6 8.9 $2,103.7 $1,905.6 10.4
Orthopaedic
Implants (A) $336.2 $295.4 13.8 $1,248.2 $1,111.5 12.3
MedSurg
Equipment 195.8 187.6 4.4 733.5 678.3 8.1
Physical Therapy
Services 27.1 30.6 (11.4) 122.0 115.8 5.4
Total $559.1 $513.6 8.9 $2,103.7 $1,905.6 10.4
NOTES:
(A) Includes a $17.1 million sales credit in the fourth quarter of 1998
for inventory repurchased from distributors.
(B) The pro forma sales information includes Howmedica's sales for a
comparable period but does not necessarily reflect the consolidated sales that
would have occurred had Stryker and Howmedica operated as a combined entity
during that period.
STRYKER CORPORATION
CONDENSED STATEMENT OF EARNINGS
For the Three Month Period and Year Ended December 31, 1999
(Unaudited - In Millions Except Per Share Amounts)
FOURTH QUARTER
1999 1998 (B) %
AMOUNT % AMOUNT % CHANGE
NET SALES $559.1 100.0 $321.3 100.0 74.0
Cost of sales (A) 217.0 38.8 149.3 46.5 45.3
GROSS PROFIT 342.1 61.2 172.0 53.5 98.9
Research, development
and engineering 26.8 4.8 19.6 6.1 36.7
Selling, general and
administrative 213.4 38.2 112.1 34.9 90.4
Purchased research
and development 83.3 25.9 (100.0)
Acquisition-related
and restructuring
charges (credit) (0.8) (0.1) 19.0 5.9 --
239.4 42.8 234.0 72.8 2.3
Other income (expense):
Interest expense (29.3) (5.2) (9.8) (3.1) 199.0
Intangibles
amortization (8.5) (1.5) (3.7) (1.2) 129.7
Other 2.4 0.4 3.3 1.0 --
(35.4) (6.3) (10.2) (3.2) 247.1
EARNINGS (LOSS) BEFORE
INCOME TAXES 67.3 12.0 (72.2) (22.5) --
Income taxes (credit) 23.5 34.9 (26.2) 36.3 --
NET EARNINGS (LOSS) $43.8 7.8 $(46.0) (14.3) --
BASIC EARNINGS (LOSS)
PER SHARE $0.45 ($0.48) --
DILUTED EARNINGS (LOSS)
PER SHARE $0.44 ($0.47) --
Basic Average Outstanding
Shares 97.1 96.5
Diluted Average Outstanding
Shares 99.6 98.3
YEAR ENDED DECEMBER 31
1999 1998 (B) %
AMOUNT % AMOUNT % CHANGE
NET SALES $2,103.7 100.0 $1,103.2 100.0 90.7
Cost of sales (A) 989.7 47.0 472.1 42.8 109.6
GROSS PROFIT 1,114.0 53.0 631.1 57.2 76.5
Research, development and
engineering 105.2 5.0 61.0 5.5 72.5
Selling, general and
administrative 808.4 38.4 373.6 33.9 116.4
Purchased research
and development 83.3 7.6 (100.0)
Acquisition-related
and restructuring
charges (credit) 18.9 0.9 19.0 1.7 (0.5)
932.5 44.3 536.9 48.7 73.7
Other income (expense):
Interest expense (122.6) (5.8) (12.2) (1.1) --
Intangibles
amortization (33.9) (1.6) (7.6) (0.7) 346.1
Other 4.8 0.2 16.5 1.5 --
(151.7) (7.2) (3.3) (0.3) --
EARNINGS (LOSS) BEFORE
INCOME TAXES 29.8 1.4 90.9 8.2 (67.2)
Income taxes (credit) 10.4 34.9 30.9 34.0 (66.3)
NET EARNINGS (LOSS) $19.4 0.9 $60.0 5.4 (67.7)
BASIC EARNINGS (LOSS)
PER SHARE $0.20 $0.62 (67.7)
DILUTED EARNINGS (LOSS)
PER SHARE $0.20 $0.61 (67.2)
Basic Average Outstanding
Shares 96.9 96.3
Diluted Average Outstanding
Shares 99.3 98.1
NOTES:
(A) Includes $13.0 million for the fourth quarter of 1999 ($7.8 million
for the fourth quarter of 1998) and $198.2 million for the year ended
December 31, 1999 ($7.8 million for the year ended December 31, 1998) of
additional cost of sales for inventory stepped-up to fair value in connection
with the Howmedica acquisition and $14.0 million cost of inventory repurchased
from distributors for the fourth quarter of 1998 and for the year ended
December 31, 1998.
(B) Reflects the fourth quarter of 1998 restatement to reduce
acquisition-related charges by $30.9 million ($20.4 million net of tax) and
reclassifications to conform with the 1999 presentation.
PRELIMINARY
STRYKER CORPORATION
CONDENSED BALANCE SHEET
December 31, 1999
(Unaudited - In Millions)
Dec 31 Dec 31
1999 1998 (A)
ASSETS
CURRENT ASSETS
Cash and investments $89.5 $142.2
Accounts receivable (net) 377.7 425.6
Inventories 386.1 591.0
Other current assets 265.0 179.5
TOTAL CURRENT ASSETS 1,118.3 1,338.3
PROPERTY, PLANT AND EQUIPMENT (net) 391.5 429.5
GOODWILL AND OTHER INTANGIBLES (net) 901.8 898.0
DEFERRED CHARGES (net) 92.6 131.8
OTHER ASSETS 81.1 77.8
TOTAL ASSETS $2,585.3 $2,875.4
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES $674.4 $668.5
LONG-TERM DEBT 1,181.1 1,488.0
OTHER LIABILITIES 58.3 46.3
STOCKHOLDERS' EQUITY 671.5 672.6
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,585.3 $2,875.4
NOTES:
(A) Reflects the restatement of 1998 to reduce acquisition-related
charges and reclassifications to conform with the 1999 presentation.
SOURCE Stryker Corporation
Web site: http: //www.strykercorp.com
CONTACT: David J. Simpson, Vice President, Chief Financial Officer and Secretary of Stryker Corporation, 616-385-2600