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Stryker reports 2021 operating results and 2022 outlook

01/27/2022

Kalamazoo, Michigan, Jan. 27, 2022 (GLOBE NEWSWIRE) -- Stryker (NYSE:SYK) reported operating results for the fourth quarter and full year of 2021:

Fourth Quarter Results

  • Reported net sales increased 10.3% from 2020 and 13.8% from 2019 to $4.7 billion
  • Organic net sales increased 9.0% from 2020 and 6.2% from 2019
  • Reported operating income margin of 17.4%
  • Adjusted operating income margin (1) contracted 190 bps to 27.3%
  • Reported EPS increased 16.1% to $1.73
  • Adjusted EPS (1) decreased 3.6% to $2.71

In addition to sales growth analysis versus 2020, we are including sales growth versus 2019 as 2019 provides a more normal baseline for comparison given the variability caused by the COVID-19 pandemic throughout 2020. As previously disclosed, effective December 31, 2021, we have updated our reportable business segments to (i) MedSurg and Neurotechnology and (ii) Orthopaedics and Spine to align to our new internal reporting structure.

  Fourth Quarter Net Sales Growth Overview
  From 2020   From 2019
  Reported   Foreign Currency Exchange   Constant Currency   Acquisitions / Divestitures   Organic   Reported   Foreign Currency Exchange   Constant Currency   Acquisitions / Divestitures   Organic
MedSurg and Neurotechnology         8.7         %           (0.7)        %           9.4         %           0.2         %           9.2         %           12.3         %           0.5         %           11.8         %           0.2         %           11.6         %
Orthopaedics and Spine         12.5                     (0.8)                      13.3                     4.6                     8.7                     15.8                     0.6                     15.2                     16.0             (0.8)        
Total         10.3         %           (0.8)        %           11.1         %           2.1         %           9.0         %           13.8         %           0.5         %           13.3         %           7.1         %           6.2         %

Full Year Results

  • Reported net sales increased 19.2% from 2020 and 14.9% from 2019 to $17.1 billion
  • Organic net sales increased 12.6% from 2020 and 7.2% from 2019
  • Reported operating income margin of 15.1%
  • Adjusted operating income margin (1) expanded 120 bps to 25.6%
  • Reported EPS increased 24.0% to $5.21
  • Adjusted EPS (1) increased 22.3% to $9.09
  Full Year Net Sales Growth Overview
  From 2020   From 2019
  Reported   Foreign Currency Exchange   Constant Currency   Acquisitions / Divestitures   Organic   Reported   Foreign Currency Exchange   Constant Currency   Acquisitions / Divestitures   Organic
MedSurg and Neurotechnology         14.3         %           1.0         %           13.3         %           0.2         %           13.1         %           12.6         %           1.0         %           11.6         %           0.2         %           11.4         %
Orthopaedics and Spine         26.0                     1.2                     24.8                     12.8                     12.0                     18.1                     1.3                     16.8                     15.1                     1.7          
Total         19.2         %           1.1         %           18.1         %           5.5         %           12.6         %           14.9         %           1.1         %           13.8         %           6.6         %           7.2         %


"We delivered a strong year of financial results, despite the ongoing challenges of the pandemic," said Kevin Lobo, Chair & Chief Executive Officer. "Organic sales growth of over 7% versus 2019, coupled with double-digit adjusted EPS growth and excellent cash flow performance were all noteworthy achievements, as was the excellent integration of Wright Medical. We continue to be well-positioned for future growth."

Sales Analysis Compared to 2020 and 2019

Consolidated net sales of $4.7 billion and $17.1 billion increased 10.3% in the quarter, 11.1% in constant currency, and increased 19.2% in the full year, 18.1% in constant currency, from 2020. Organic net sales increased 9.0% and 12.6% in the quarter and full year including 9.8% and 13.4% from increased unit volume partially offset by 0.8% and 0.8% from lower prices. From 2019, consolidated net sales increased 13.8% in the quarter, 13.3% in constant currency, and increased 14.9% in the full year, 13.8% in constant currency. Organic net sales increased 6.2% and 7.2% in the quarter and full year including 7.9% and 8.7% from increased unit volume partially offset by 1.7% and 1.5% from lower prices.

MedSurg and Neurotechnology net sales of $2.6 billion and $9.5 billion increased 8.7% in the quarter, 9.4% in constant currency, and increased 14.3% in the full year, 13.3% in constant currency, from 2020. Organic net sales increased 9.2% and 13.1% in the quarter and full year including 10.0% and 13.6% from increased unit volume partially offset by 0.8% and 0.5% from lower prices. From 2019, MedSurg and Neurotechnology net sales increased 12.3% in the quarter, 11.8% in constant currency, and increased 12.6% in the full year, 11.6% in constant currency. Organic net sales increased 11.6% and 11.4% in the quarter and full year including 12.8% and 11.9% from increased unit volume partially offset by 1.2% and 0.5% from lower prices.

Orthopaedics and Spine net sales of $2.1 billion and $7.6 billion increased 12.5% in the quarter, 13.3% in constant currency, and increased 26.0% in the full year, 24.8% in constant currency, from 2020. Organic net sales increased 8.7% and 12.0% in the quarter and full year including 9.6% and 13.2% from increased unit volume partially offset by 0.9% and 1.2% from lower prices. From 2019, Orthopaedics and Spine net sales increased 15.8% in the quarter, 15.2% in constant currency, and increased 18.1% in the full year, 16.8% in constant currency. Organic net sales decreased 0.8% in the quarter including 1.6% from increased unit volume and 2.4% and from lower prices. Organic net sales increased 1.7% in the full year including 4.4% from increased unit volume partially offset by 2.7% from lower prices.

Earnings Analysis Compared to 2020

Reported net earnings of $662 million and $2.0 billion increased 16.5% and 24.7% in the quarter and full year. Reported net earnings per diluted share of $1.73 and $5.21 increased 16.1% and 24.0% in the quarter and full year. Reported gross profit margin and reported operating income margin were 64.8% and 17.4% in the quarter and 64.1% and 15.1% in the full year. In the quarter, we recorded asset impairments of $137 million consisting primarily of in-process research and development, other intangible assets and property, plant and equipment as a result of COVID-19-related demand impacts on in-process product development and certain other divestiture and restructuring activities. Reported net earnings include certain items, such as charges for acquisition and integration-related activities, the amortization of purchased intangible assets, asset impairments and restructuring-related and other charges, 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 65.8% and 65.9% in the quarter and full year, and adjusted operating income margin(1) was 27.3% and 25.6% in the quarter and full year. Adjusted net earnings(1) of $1.0 billion and $3.5 billion decreased 3.5% and increased 22.9% in the quarter and full year. Adjusted net earnings per diluted share(1) of $2.71 and $9.09 decreased 3.6% and increased 22.3% in the quarter and full year.

2022 Outlook

We continue to monitor and evaluate the impact the global response to the COVID-19 pandemic has had, and will continue to have, on our operations and financial results. As we assess the impact of the pandemic on our operations and the external environment we believe the short-term outlook remains volatile. We expect 2022 organic net sales growth to be in the range of 6% to 8% and expect adjusted net earnings per diluted share(2) to be in the range of $9.60 to $10.00. Consistent with the pricing environment experienced in previous years, we expect continued unfavorable price reductions of approximately 1% in 2022. If foreign exchange rates hold near their current levels, we anticipate sales and EPS will be modestly unfavorably impacted as compared to 2021.

(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 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 restructuring-related and other charges, acquisition-related expenses and fair value adjustments to inventory 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 Thursday, January 27, 2022

As previously announced, Stryker will host a conference call on Thursday, January 27, 2022 at 4:30 p.m., Eastern Time, to discuss the Company's operating results for the quarter and year ended December 31, 2021 and provide an operational update.

To register for this conference call, please use the following link: Stryker's Q4 2021 earnings call. 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, the Company suggests 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 the Company's website at www.stryker.com. For those not planning to ask a question of management, the Company recommends 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 at (866) 813-9403 (Toll Free) or (929) 458-6194 (International). The replay passcode is 064681. An archive of the webcast will also be available on the Company's website two hours after the live call ends.

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: the impact on our operations and financial results of the COVID-19 pandemic and any related policies and actions by governments or other third parties; the failure to satisfy any of the closing conditions to the acquisition of Vocera Communications, Inc. ("Vocera"), including the receipt of any required regulatory clearances (and the risk that such clearances may result in the imposition of conditions that could adversely affect the expected benefits of the transaction); delays in consummating the acquisition of Vocera; unexpected liabilities, costs, charges or expenses in connection with the acquisition of Vocera; the effects of the proposed Vocera transaction (or the announcement thereof) on the parties' relationships with employees, customers, other business partners or governmental entities; 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 United States Food and Drug Administration approval of new products, including Vocera products; potential supply 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; the impact of the federal legislation to reform the United States healthcare system; costs to comply with medical device regulations; changes in financial markets; 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, including the acquisition of Vocera; 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. 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 one of the world's leading medical technology companies and, together with its customers, is driven to make healthcare better. The company offers innovative products and services in Medical and Surgical, Neurotechnology, Orthopaedics and Spine that help improve patient and hospital outcomes. More information is available at www.stryker.com.

For investor inquiries please contact:

Preston Wells, Vice President, Investor Relations at 269-385-2600 or preston.wells@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
    2021       2020     % Change     2021       2020     % Change
Net sales $         4,701             $         4,262                     10.3         %   $         17,108             $         14,351                     19.2         %
Cost of sales           1,656                       1,545                     7.2                       6,140                       5,294                     16.0          
Gross profit $         3,045             $         2,717                     12.1         %   $         10,968             $         9,057                     21.1         %
% of sales           64.8         %             63.7         %                 64.1         %             63.1         %    
Research, development and engineering expenses           331                       255                     29.8                       1,235                       984                     25.5          
Selling, general and administrative expenses           1,745                       1,562                     11.7                       6,427                       5,361                     19.9          
Recall charges           5                       21                      nm             103                       17                      nm
Amortization of intangible assets           145                       130                     11.5                       619                       472                     31.1          
Total operating expenses $         2,226             $         1,968                     13.1         %   $         8,384             $         6,834                     22.7         %
Operating income $         819             $         749                     9.3         %   $         2,584             $         2,223                     16.2         %
% of sales           17.4         %             17.6         %                 15.1         %             15.5         %    
Other income (expense), net           (62)                      (78)            (20.5)                      (303)                      (269)                    12.6          
Earnings before income taxes $         757             $         671                     12.8         %   $         2,281             $         1,954                     16.7         %
Income taxes           95                       103                     (7.8)                      287                       355                     (19.2)         
Net earnings $         662             $         568                     16.5         %   $         1,994             $         1,599                     24.7         %
Net earnings per share of common stock:                      
Basic $         1.75             $         1.51                     15.9         %   $         5.29             $         4.26                     24.2         %
Diluted $         1.73             $         1.49                     16.1         %   $         5.21             $         4.20                     24.0         %
Weighted-average shares outstanding (in millions):                      
Basic   377.3       375.9           377.0       375.5      
Diluted   382.7       381.3           382.3       380.3      


CONDENSED CONSOLIDATED BALANCE SHEETS
  December 31
    2021     2020
Assets      
Cash and cash equivalents $         2,944           $         2,943        
Marketable securities           75                     81        
Accounts receivable, net           3,022                     2,701        
Inventories           3,314                     3,494        
Prepaid expenses and other current assets           662                     488        
Total current assets $         10,017           $         9,707        
Property, plant and equipment, net           2,833                     2,752        
Goodwill and other intangibles, net           17,758                     18,332        
Noncurrent deferred income tax assets           1,760                     1,530        
Other noncurrent assets           2,263                     2,009        
Total assets $         34,631           $         34,330        
Liabilities and shareholders' equity      
Current liabilities $         4,549           $         5,041        
Long-term debt, excluding current maturities           12,472                     13,230        
Income taxes           913                     990        
Other noncurrent liabilities           1,820                     1,985        
Shareholders' equity           14,877                     13,084        
Total liabilities and shareholders' equity $         34,631           $         34,330        


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  December 31
    2021       2020  
Operating activities      
Net earnings $         1,994             $         1,599          
Depreciation           371                       340          
Amortization of intangible assets           619                       472          
Changes in operating assets, liabilities, income taxes payable and other, net           279                       866          
Net cash provided by operating activities $         3,263             $         3,277          
Investing activities      
Acquisitions, net of cash acquired $         (339)            $         (4,222)         
Purchases of property, plant and equipment           (525)                      (487)         
Other investing, net           5                       8          
Net cash used in investing activities $         (859)            $         (4,701)         
Financing activities      
Borrowings (payments) of debt, net $         (1,153)            $         989          
Payments of dividends           (950)                      (863)         
Other financing, net           (262)                      (137)         
Net cash provided by (used in) financing activities $         (2,365)            $         (11)         
Effect of exchange rate changes on cash and cash equivalents           (38)                      41          
Change in cash and cash equivalents $         1             $         (1,394)        

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
    2021   2020   As Reported Constant
Currency
    2021   2020   As Reported Constant
Currency
Geographic:                      
United States $         3,418         $         3,098                   10.3         %         10.3         %   $         12,321         $         10,455                   17.9         %         17.9         %
International           1,283                   1,164                   10.2                   13.1                       4,787                   3,896                   22.8                   18.8          
Total $         4,701         $         4,262                   10.3         %         11.1         %   $         17,108         $         14,351                   19.2         %         18.1         %
Segment:                      
MedSurg and Neurotechnology $         2,639         $         2,429                   8.7         %         9.4         %   $         9,538         $         8,345                   14.3         %         13.3         %
Orthopaedics and Spine           2,062                   1,833                   12.5                   13.3                       7,570                   6,006                   26.0                   24.8          
Total $         4,701         $         4,262                   10.3         %         11.1         %   $         17,108         $         14,351                   19.2         %         18.1         %


SUPPLEMENTAL SALES GROWTH ANALYSIS
  Three Months
            United States   International
      Percentage Change
    2021   2020   As Reported Constant Currency   As Reported   As Reported Constant Currency
MedSurg and Neurotechnology:                    
Instruments $         600         $         555                   8.4         %         9.0         %           5.3         %           20.9         %         23.9         %
Endoscopy           629                   525                   19.9                   21.0                     19.7                     20.7                   25.9          
Medical           709                   705                   0.5                   1.0                     0.6                     0.4                   2.5          
Neurovascular           303                   281                   7.0                   8.3                     1.1                     10.8                   13.1          
Neuro Cranial           324                   294                   10.7                   11.1                     11.5                     7.2                   9.6          
Other           74                   69                   6.0                   6.0                     5.6                     32.1                   27.9          
  $         2,639         $         2,429                   8.7         %         9.4         %           7.7         %           11.5         %         14.4         %
Orthopaedics and Spine:                    
Knees $         523         $         459                   14.2         %         14.9         %           14.6         %           13.1         %         15.8         %
Hips           352                   340                   3.2                   4.0                     1.6                     5.9                   8.1          
Trauma and Extremities           711                   570                   24.5                   25.5                     30.7                     11.4                   14.4          
Spine           300                   307                   (1.8)                  (1.1)                    (0.5)                     (5.2)                   (2.6)         
Other           176                   157                   11.7                   13.0                     8.2                     25.2                   32.1          
  $         2,062         $         1,833                   12.5         %         13.3         %           14.1         %           8.7         %         11.7         %
Total $         4,701         $         4,262                   10.3         %         11.1         %           10.3         %           10.2         %         13.1         %


 
  Full Year
            United States   International
      Percentage Change
    2021   2020   As Reported Constant Currency   As Reported   As Reported Constant Currency
MedSurg and Neurotechnology:                    
Instruments $         2,111         $         1,863                   13.4         %         12.5         %           11.3         %           20.9         %         16.6         %
Endoscopy           2,141                   1,763                   21.5                   20.8                     18.6                     32.7                   29.4          
Medical           2,607                   2,524                   3.3                   2.2                     5.1                     (2.4)                  (6.6)          
Neurovascular           1,188                   973                   22.0                   19.5                     18.3                     24.4                   20.3          
Neuro Cranial           1,214                   972                   24.9                   24.3                     23.4                     32.4                   28.6          
Other           277                   250                   10.4                   10.3                     10.0                     48.9                   40.8          
  $         9,538         $         8,345                   14.3         %         13.3         %           13.0         %           18.1         %         14.0         %
Orthopaedics and Spine:                    
Knees $         1,848         $         1,567                   18.0         %         16.9         %           15.4         %           25.5         %         21.3         %
Hips           1,342                   1,206                   11.2                   9.9                     5.8                     21.1                   17.2          
Trauma and Extremities           2,664                   1,722                   54.6                   53.0                     63.8                     36.8                   32.3          
Spine           1,167                   1,047                   11.5                   10.5                     8.7                     19.1                   15.2          
Other           549                   464                   18.2                   18.0                     10.1                     58.8                   57.4          
  $         7,570         $         6,006                   26.0         %         24.8         %           25.0         %           28.6         %         24.5         %
Total $         17,108         $         14,351                   19.2         %         18.1         %           17.9         %           22.8         %         18.8         %


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
    2021   2019   As Reported Constant
Currency
    2021   2019   As Reported Constant
Currency
Geographic:                      
United States $         3,418         $         3,039                   12.5         %         12.5         %   $         12,321         $         10,957                   12.4         %         12.4         %
International           1,283                   1,092                   17.5                   15.5                       4,787                   3,927                   21.9                   17.6          
Total $         4,701         $         4,131                   13.8         %         13.3         %   $         17,108         $         14,884                   14.9         %         13.8         %
Segment:                      
MedSurg and Neurotechnology $         2,639         $         2,352                   12.3         %         11.8         %   $         9,538         $         8,475                   12.6         %         11.6         %
Orthopaedics and Spine           2,062                   1,779                   15.8                   15.2                       7,570                   6,409                   18.1                   16.8          
Total $         4,701         $         4,131                   13.8         %         13.3         %   $         17,108         $         14,884                   14.9         %         13.8         %


SUPPLEMENTAL SALES GROWTH ANALYSIS
  Three Months
              United States   International
        Percentage Change
    2021   2019   As Reported Constant Currency   As Reported   As Reported Constant Currency
MedSurg and Neurotechnology:                    
Instruments $         600         $         542                   10.8         %         10.3         %           10.8         %           10.6         %         8.6         %
Endoscopy           629                   559                   12.5                   12.7                     11.3                     17.0                   17.7          
Medical           709                   637                   11.4                   10.9                     10.3                     15.1                   13.1          
Neurovascular           303                   245                   23.3                   20.9                     7.4                     35.0                   30.6          
Neuro Cranial           324                   295                   10.2                   10.0                     6.7                     28.5                   26.9          
Other           74                   74                   0.4                   0.3                     (0.6)                    87.0                   78.6          
  $         2,639         $         2,352                   12.3         %         11.8         %           9.6         %           20.7         %         18.7         %
Orthopaedics and Spine:                    
Knees $         523         $         510                   2.6         %         2.2         %           0.3         %           9.7         %         7.9         %
Hips           352                   372                   (5.3)                  (5.8)                    (9.7)                    2.7                   1.3          
Trauma and Extremities           711                   442                   60.5                   59.0                     78.2                     29.1                   25.9          
Spine           300                   312                   (3.7)                  (4.2)                    (6.6)                    5.3                   2.9          
Other           176                   143                   22.1                   22.3                     21.5                     24.0                   24.7          
  $         2,062         $         1,779                   15.8         %         15.2         %           16.6         %           14.0         %         12.1         %
Total $         4,701         $         4,131                   13.8         %         13.3         %           12.5         %           17.5         %         15.5         %


 
  Full Year
              United States   International
        Percentage Change
    2021   2019   As Reported Constant Currency   As Reported   As Reported Constant Currency
MedSurg and Neurotechnology:                    
Instruments $         2,111         $         1,959                   7.7         %         6.8         %           6.1         %           13.6         %         9.4         %
Endoscopy           2,141                   1,983                   8.0                   7.6                     5.9                     16.0                   14.2          
Medical           2,607                   2,264                   15.2                   14.2                     12.4                     25.8                   21.0          
Neurovascular           1,188                   924                   28.6                   25.3                     15.5                     38.2                   32.4          
Neuro Cranial           1,214                   1,059                   14.7                   14.0                     10.9                     34.3                   29.8          
Other           277                   286                   (3.2)                  (3.3)                    (3.7)                    46.2                   37.7          
  $         9,538         $         8,475                   12.6         %         11.6         %           8.6         %           25.3         %         21.0         %
Orthopaedics and Spine:                    
Knees $         1,848         $         1,815                   1.8         %         0.9         %           0.3         %           6.3         %         2.6         %
Hips           1,342                   1,383                   (3.0)                  (4.2)                    (6.9)                    4.0                   0.6          
Trauma and Extremities           2,664                   1,639                   62.5                   60.3                     77.6                     35.6                   30.2          
Spine           1,167                   1,157                   0.9                   (0.2)                    (4.8)                    18.4                   13.6          
Other           549                   415                   32.1                   31.5                     27.5                     51.0                   47.9          
  $         7,570         $         6,409                   18.1         %         16.8         %           18.0         %           18.3         %         14.1         %
Total $         17,108         $         14,884                   14.9         %         13.8         %           12.4         %           21.9         %         17.6         %

Note: Fourth quarter 2021 had the same number of selling days as 2020 and 2019. The full year 2021 had one less selling day than 2020 and the same number of selling days as 2019.

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; 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 effective income tax rate; adjusted net earnings; adjusted net earnings per diluted share (Diluted EPS); free cash flow; and free cash flow conversion. 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. To measure free cash flow, we adjust cash provided by operating activities by the amount of purchases of property, plant and equipment and proceeds from long-lived asset disposals and remove the impact of certain legal settlements and recall payments. To measure free cash flow conversion we divide free cash flow by adjusted net 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, research, development and engineering expenses, operating income, other income (expense), net, 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 non-GAAP 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 2021 Gross Profit Selling, General & Administrative Expenses Research, Development & Engineering Expenses Operating Income Other Income (Expense), Net Net Earnings Effective
Tax Rate
Diluted EPS
Reported $         3,045           $         1,745           $         331           $         819           $         (62)          $         662                   12.5         % $         1.73        
Reported percent net sales           64.8         %           37.1         %           7.0         %           17.4         %         (1.3)        %           14.1         %    
Acquisition and integration-related charges (a)                
Inventory stepped-up to fair value           35                     —                     —                     35                     —                     27                   0.4                     0.07        
Other acquisition and integration-related           —                     (55)                    —                     55                     —                     40                   0.8                     0.11        
Amortization of purchased intangible assets           —                     —                     —                     145                     —                     111                   1.4                     0.29        
Restructuring-related and other charges (b)           8                     (169)                    —                     177                     —                     147                   0.5                     0.38        
Medical device regulations (c)           3                     —                     (32)                    35                     —                     30                   —                     0.08        
Recall-related matters (d)           —                     —                     —                     5                     —                     4                   0.1                     0.01        
Regulatory and legal matters (e)           —                     (14)                    —                     14                     (4)                     7                   0.2                     0.03        
Tax matters (f)           —                     —                     —                     —                     —                     6                  (0.7)                   0.01        
Adjusted $         3,091           $         1,507           $         299           $         1,285           $         (66)          $         1,034                   15.2         % $         2.71        
Adjusted percent net sales           65.8         %           32.1         %           6.4         %           27.3         %         (1.4)        %           22.0         %    


Three Months 2020 Gross Profit Selling, General & Administrative Expenses Research, Development & Engineering Expenses Operating Income Other Income (Expense), Net Net Earnings Effective
Tax Rate
Diluted EPS
Reported $         2,717           $         1,562           $         255           $         749           $         (78)          $         568                   15.4         % $         1.49        
Reported percent net sales           63.7         %           36.6         %           6.0         %           17.6         %         (1.8)        %           13.3         %    
Acquisition and integration-related charges (a)                
Inventory stepped-up to fair value           39                     —                     —                     39                     —                     30                   0.9                     0.08        
Other acquisition and integration-related           —                     (118)                    —                     118                     —                     97                   1.8                     0.25        
Amortization of purchased intangible assets           —                     —                     —                     130                     —                     104                   2.3                     0.27        
Restructuring-related and other charges (b)           17                     (150)                    —                     166                     —                     159                   (1.0)                    0.42        
Medical device regulations (c)           1                     —                     (20)                    21                     —                     16                   0.4                     0.05        
Recall-related matters (d)           —                     —                     —                     21                     —                     15                   0.8                     0.03        
Regulatory and legal matters (e)           —                     (1)                    —                     1                     —                     2                   —                     —        
Tax matters (f)           —                     —                     —                     —                     (3)                    80                  (12.6)                   0.22        
Adjusted $         2,774           $         1,293           $         235           $         1,245           $         (81)          $         1,071                   8.0         % $         2.81        
Adjusted percent net sales           65.1         %           30.3         %           5.5         %           29.2         %         (1.9)        %           25.1         %    


Full Year 2021 Gross Profit Selling, General & Administrative Expenses Research, Development & Engineering Expenses Operating Income Other Income (Expense), Net Net Earnings Effective
Tax Rate
Diluted EPS
Reported $         10,968           $         6,427           $         1,235           $         2,584           $         (303)          $         1,994                   12.6         % $         5.21          
Reported percent net sales           64.1         %           37.6         %           7.2         %           15.1         %         (1.8)        %           11.7         %    
Acquisition and integration-related charges (a)                
Inventory stepped-up to fair value           266                     —                     —                     266                     —                     203                   1.0                     0.53          
Other acquisition and integration-related           —                     (319)                    —                     319                     —                     244                   1.2                     0.64          
Amortization of purchased intangible assets           —                     —                     —                     619                     —                     489                   1.6                     1.28          
Restructuring-related and other charges (b)           28                     (358)                    —                     386                     11                     345                   (0.3)                    0.90          
Medical device regulations (c)           5                     —                     (102)                    107                     —                     90                   —                     0.24          
Recall-related matters (d)           —                     —                     —                     103                     —                     89                   —                     0.23          
Regulatory and legal matters (e)           —                     2                     —                     (2)                    (7)                    (12)                  0.2                      (0.02)  
Tax matters (f)           —                     —                     —                     —                     —                     32                   (1.4)                    0.08          
Adjusted $         11,267           $         5,752           $         1,133           $         4,382           $         (299)          $         3,474                   14.9         % $         9.09          
Adjusted percent net sales           65.9         %           33.6         %           6.6         %           25.6         %         (1.7)        %           20.3         %    


Full Year 2020 Gross Profit Selling, General & Administrative Expenses Research, Development & Engineering Expenses Operating Income Other Income (Expense), Net Net Earnings Effective
Tax Rate
Diluted EPS
Reported $         9,057           $         5,361           $         984           $         2,223           $         (269)          $         1,599                   18.2         % $         4.20        
Reported percent net sales           63.1         %           37.4         %           6.9         %           15.5         %         (1.9)        %           11.1         %    
Acquisition and integration-related charges (a)                
Inventory stepped-up to fair value           48                     —                     —                     48                     —                     36                   0.3                     0.10        
Other acquisition and integration-related           —                     (194)                    —                     194                     —                     157                   0.7                     0.41        
Amortization of purchased intangible assets           —                     —                     —                     472                     —                     381                   1.6                     1.00        
Restructuring-related and other charges (b)           53                     (406)                    —                     458                     —                     397                   0.2                     1.04        
Medical device regulations (c)           2                     —                     (79)                    81                     —                     63                   0.4                     0.17        
Recall-related matters (d)           —                     —                     —                     17                     —                     13                   0.1                     0.03        
Regulatory and legal matters (e)           —                     (6)                    —                     6                     —                     8                   (0.1)                    0.02        
Tax matters (f)           —                     —                     —                     —                     4                     173                   (8.8)                   0.46        
Adjusted $         9,160           $         4,755           $         905           $         3,499           $         (265)          $         2,827                   12.6         % $         7.43        
Adjusted percent net sales           63.8         %           33.1         %           6.3         %           24.4         %         (1.8)        %           19.7         %    


(a) Charges represent certain acquisition and integration-related costs associated with acquisitions.
(b) Charges represent the costs associated with the termination of sales relationships in certain countries, workforce reductions, elimination of product lines, certain long-lived and intangible asset impairments and associated costs and other restructuring-related activities.
(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 and China.
(d) Charges represent changes in our best estimate of the minimum end of the range of probable loss to resolve certain recall-related matters.
(e) 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 Tax Cuts and Jobs Act of 2017, and the transfer of certain intellectual properties between tax jurisdictions.


Year Ended   2021       2020  
Cash provided by operating activities $         3,263             $         3,277          
Net earnings           1,994                       1,599          
Conversion           163.6         %             204.9         %
       
Cash provided by operating activities $         3,263             $         3,277          
Purchases of property, plant and equipment           (525)                      (487)         
Proceeds from long-lived asset disposals           11                       14          
Recall payments           221                       17          
Free cash flow $         2,970             $         2,821          
Adjusted net earnings           3,474                       2,827          
Free cash flow conversion           85.5         %             99.8         %


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Source: Stryker Corporation
Categories: Press Releases
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