|
|
[X]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Michigan
|
|
|
|
38-1239739
|
(State of incorporation)
|
|
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
|
|
2825 Airview Boulevard Kalamazoo, Michigan
|
|
49002
|
||
(Address of principal executive offices)
|
|
(Zip Code)
|
||
|
|
|
|
|
|
|
(269) 385-2600
|
|
|
(Registrant’s telephone number, including area code)
|
|
Large accelerated filer
|
[X]
|
|
Accelerated filer
|
[ ]
|
|
|
Non-accelerated filer
|
[ ]
|
|
Small reporting company
|
[ ]
|
|
|
|
|
|
Emerging growth company
|
[ ]
|
|
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
Three Months
|
|
Nine Months
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net sales
|
$
|
3,242
|
|
|
$
|
3,006
|
|
|
$
|
9,805
|
|
|
$
|
8,973
|
|
Cost of sales
|
1,087
|
|
|
1,022
|
|
|
3,323
|
|
|
3,034
|
|
||||
Gross profit
|
$
|
2,155
|
|
|
$
|
1,984
|
|
|
$
|
6,482
|
|
|
$
|
5,939
|
|
Research, development and engineering expenses
|
221
|
|
|
198
|
|
|
641
|
|
|
582
|
|
||||
Selling, general and administrative expenses
|
1,242
|
|
|
1,103
|
|
|
3,668
|
|
|
3,335
|
|
||||
Recall charges
|
4
|
|
|
66
|
|
|
10
|
|
|
164
|
|
||||
Amortization of intangible assets
|
112
|
|
|
92
|
|
|
324
|
|
|
275
|
|
||||
Total operating expenses
|
$
|
1,579
|
|
|
$
|
1,459
|
|
|
$
|
4,643
|
|
|
$
|
4,356
|
|
Operating income
|
$
|
576
|
|
|
$
|
525
|
|
|
$
|
1,839
|
|
|
$
|
1,583
|
|
Other income (expense), net
|
(42
|
)
|
|
(54
|
)
|
|
(140
|
)
|
|
(169
|
)
|
||||
Earnings before income taxes
|
$
|
534
|
|
|
$
|
471
|
|
|
$
|
1,699
|
|
|
$
|
1,414
|
|
Income taxes
|
(56
|
)
|
|
37
|
|
|
214
|
|
|
145
|
|
||||
Net earnings
|
$
|
590
|
|
|
$
|
434
|
|
|
$
|
1,485
|
|
|
$
|
1,269
|
|
|
|
|
|
|
|
|
|
||||||||
Net earnings per share of common stock:
|
|
|
|
|
|
|
|
||||||||
Basic net earnings per share of common stock
|
$
|
1.58
|
|
|
$
|
1.16
|
|
|
$
|
3.97
|
|
|
$
|
3.39
|
|
Diluted net earnings per share of common stock
|
$
|
1.55
|
|
|
$
|
1.14
|
|
|
$
|
3.90
|
|
|
$
|
3.34
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding (in millions):
|
|
|
|
|
|
|
|
||||||||
Basic
|
374.1
|
|
|
374.2
|
|
|
374.0
|
|
|
373.8
|
|
||||
Effect of dilutive employee stock options
|
6.1
|
|
|
6.0
|
|
|
6.4
|
|
|
6.0
|
|
||||
Diluted
|
380.2
|
|
|
380.2
|
|
|
380.4
|
|
|
379.8
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash dividends declared per share of common stock
|
$
|
0.470
|
|
|
$
|
0.425
|
|
|
$
|
1.410
|
|
|
$
|
1.275
|
|
|
Three Months
|
|
Nine Months
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net earnings
|
$
|
590
|
|
|
$
|
434
|
|
|
$
|
1,485
|
|
|
$
|
1,269
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Marketable securities
|
—
|
|
|
(3
|
)
|
|
(1
|
)
|
|
(3
|
)
|
||||
Pension plans
|
(3
|
)
|
|
14
|
|
|
(1
|
)
|
|
4
|
|
||||
Unrealized gains (losses) on designated hedges
|
6
|
|
|
(6
|
)
|
|
23
|
|
|
(7
|
)
|
||||
Financial statement translation
|
(50
|
)
|
|
87
|
|
|
(72
|
)
|
|
269
|
|
||||
Total other comprehensive income (loss), net of tax
|
$
|
(47
|
)
|
|
$
|
92
|
|
|
$
|
(51
|
)
|
|
$
|
263
|
|
Comprehensive income
|
$
|
543
|
|
|
$
|
526
|
|
|
$
|
1,434
|
|
|
$
|
1,532
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
1
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
|
September 30
|
|
December 31
|
||||
|
2018
|
|
2017
|
||||
|
(Unaudited)
|
|
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,918
|
|
|
$
|
2,542
|
|
Marketable securities
|
292
|
|
|
251
|
|
||
Accounts receivable, less allowance of $62 ($59 in 2017)
|
2,076
|
|
|
2,198
|
|
||
Inventories:
|
|
|
|
||||
Materials and supplies
|
614
|
|
|
528
|
|
||
Work in process
|
174
|
|
|
148
|
|
||
Finished goods
|
2,105
|
|
|
1,789
|
|
||
Total inventories
|
$
|
2,893
|
|
|
$
|
2,465
|
|
Prepaid expenses and other current assets
|
739
|
|
|
537
|
|
||
Total current assets
|
$
|
7,918
|
|
|
$
|
7,993
|
|
Property, plant and equipment:
|
|
|
|
||||
Land, buildings and improvements
|
976
|
|
|
936
|
|
||
Machinery and equipment
|
3,176
|
|
|
2,864
|
|
||
Total property, plant and equipment
|
$
|
4,152
|
|
|
$
|
3,800
|
|
Less accumulated depreciation
|
1,974
|
|
|
1,825
|
|
||
Property, plant and equipment, net
|
$
|
2,178
|
|
|
$
|
1,975
|
|
Goodwill
|
7,634
|
|
|
7,168
|
|
||
Other intangibles, net
|
3,463
|
|
|
3,477
|
|
||
Other noncurrent assets
|
891
|
|
|
1,584
|
|
||
Total assets
|
$
|
22,084
|
|
|
$
|
22,197
|
|
|
|
|
|
||||
Liabilities and shareholders' equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable
|
$
|
563
|
|
|
$
|
487
|
|
Accrued compensation
|
748
|
|
|
838
|
|
||
Income taxes
|
100
|
|
|
143
|
|
||
Dividend payable
|
176
|
|
|
178
|
|
||
Accrued recall expenses
|
111
|
|
|
196
|
|
||
Accrued expenses and other liabilities
|
1,180
|
|
|
1,011
|
|
||
Current maturities of debt
|
1,275
|
|
|
632
|
|
||
Total current liabilities
|
$
|
4,153
|
|
|
$
|
3,485
|
|
Long-term debt, excluding current maturities
|
5,928
|
|
|
6,590
|
|
||
Income taxes
|
1,251
|
|
|
1,261
|
|
||
Other noncurrent liabilities
|
892
|
|
|
881
|
|
||
Total liabilities
|
$
|
12,224
|
|
|
$
|
12,217
|
|
Shareholders' equity
|
|
|
|
||||
Common stock, $0.10 par value
|
37
|
|
|
37
|
|
||
Additional paid-in capital
|
1,535
|
|
|
1,496
|
|
||
Retained earnings
|
8,892
|
|
|
8,986
|
|
||
Accumulated other comprehensive loss
|
(604
|
)
|
|
(553
|
)
|
||
Total Stryker shareholders' equity
|
$
|
9,860
|
|
|
$
|
9,966
|
|
Noncontrolling interest
|
—
|
|
|
14
|
|
||
Total shareholders' equity
|
$
|
9,860
|
|
|
$
|
9,980
|
|
Total liabilities and shareholders' equity
|
$
|
22,084
|
|
|
$
|
22,197
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
2
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
|
Nine Months
|
||||||
|
2018
|
|
2017
|
||||
Operating activities
|
|
|
|
||||
Net earnings
|
$
|
1,485
|
|
|
$
|
1,269
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
||||
Depreciation
|
223
|
|
|
198
|
|
||
Amortization of intangible assets
|
324
|
|
|
275
|
|
||
Share-based compensation
|
87
|
|
|
85
|
|
||
Recall charges
|
10
|
|
|
164
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
119
|
|
|
72
|
|
||
Inventories
|
(439
|
)
|
|
(322
|
)
|
||
Accounts payable
|
57
|
|
|
(2
|
)
|
||
Accrued expenses and other liabilities
|
(40
|
)
|
|
(97
|
)
|
||
Recall-related payments
|
(89
|
)
|
|
(492
|
)
|
||
Income taxes
|
(231
|
)
|
|
(7
|
)
|
||
Other, net
|
58
|
|
|
(263
|
)
|
||
Net cash provided by operating activities
|
$
|
1,564
|
|
|
$
|
880
|
|
Investing activities
|
|
|
|
||||
Acquisitions, net of cash acquired
|
(770
|
)
|
|
(712
|
)
|
||
Purchases of marketable securities
|
(214
|
)
|
|
(85
|
)
|
||
Proceeds from sales of marketable securities
|
173
|
|
|
56
|
|
||
Purchases of property, plant and equipment
|
(418
|
)
|
|
(412
|
)
|
||
Net cash used in investing activities
|
$
|
(1,229
|
)
|
|
$
|
(1,153
|
)
|
Financing activities
|
|
|
|
||||
Payments on short-term borrowings, net
|
(8
|
)
|
|
(198
|
)
|
||
Proceeds from issuance of long-term debt
|
595
|
|
|
498
|
|
||
Payments on long-term debt
|
(600
|
)
|
|
—
|
|
||
Dividends paid
|
(528
|
)
|
|
(477
|
)
|
||
Repurchases of common stock
|
(300
|
)
|
|
(230
|
)
|
||
Cash paid for taxes from withheld shares
|
(104
|
)
|
|
(83
|
)
|
||
Payments to purchase noncontrolling interest
|
(14
|
)
|
|
—
|
|
||
Other financing, net
|
8
|
|
|
(32
|
)
|
||
Net cash used in financing activities
|
$
|
(951
|
)
|
|
$
|
(522
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
(8
|
)
|
|
71
|
|
||
Change in cash and cash equivalents
|
$
|
(624
|
)
|
|
$
|
(724
|
)
|
Cash and cash equivalents at beginning of period
|
2,542
|
|
|
3,316
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,918
|
|
|
$
|
2,592
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
3
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
4
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
|
Three Months
|
|
Nine Months
|
||||||||||
|
2018
|
2017
|
|
2018
|
2017
|
||||||||
Orthopaedics:
|
|
|
|
|
|
||||||||
Knees
|
$
|
395
|
|
$
|
369
|
|
|
$
|
1,236
|
|
$
|
1,149
|
|
Hips
|
316
|
|
313
|
|
|
983
|
|
955
|
|
||||
Trauma and Extremities
|
376
|
|
367
|
|
|
1,152
|
|
1,070
|
|
||||
Other
|
84
|
|
83
|
|
|
244
|
|
234
|
|
||||
|
$
|
1,171
|
|
$
|
1,132
|
|
|
$
|
3,615
|
|
$
|
3,408
|
|
MedSurg:
|
|
|
|
|
|
||||||||
Instruments
|
$
|
442
|
|
$
|
404
|
|
|
$
|
1,292
|
|
$
|
1,190
|
|
Endoscopy
|
443
|
|
404
|
|
|
1,335
|
|
1,183
|
|
||||
Medical
|
492
|
|
464
|
|
|
1,508
|
|
1,413
|
|
||||
Sustainability
|
66
|
|
64
|
|
|
190
|
|
191
|
|
||||
|
$
|
1,443
|
|
$
|
1,336
|
|
|
$
|
4,325
|
|
$
|
3,977
|
|
Neurotechnology and Spine:
|
|
|
|
|
|
||||||||
Neurotechnology
|
$
|
435
|
|
$
|
353
|
|
|
$
|
1,282
|
|
$
|
1,036
|
|
Spine
|
193
|
|
185
|
|
|
583
|
|
552
|
|
||||
|
$
|
628
|
|
$
|
538
|
|
|
$
|
1,865
|
|
$
|
1,588
|
|
Total
|
$
|
3,242
|
|
$
|
3,006
|
|
|
$
|
9,805
|
|
$
|
8,973
|
|
|
Three Months 2018
|
|
Three Months 2017
|
||||||||||
|
United States
|
International
|
|
United States
|
International
|
||||||||
Orthopaedics:
|
|
|
|
|
|
||||||||
Knees
|
$
|
291
|
|
$
|
104
|
|
|
$
|
270
|
|
$
|
99
|
|
Hips
|
198
|
|
118
|
|
|
194
|
|
119
|
|
||||
Trauma and Extremities
|
242
|
|
134
|
|
|
237
|
|
130
|
|
||||
Other
|
67
|
|
17
|
|
|
68
|
|
15
|
|
||||
|
$
|
798
|
|
$
|
373
|
|
|
$
|
769
|
|
$
|
363
|
|
MedSurg:
|
|
|
|
|
|
||||||||
Instruments
|
$
|
352
|
|
$
|
90
|
|
|
$
|
316
|
|
$
|
88
|
|
Endoscopy
|
346
|
|
97
|
|
|
316
|
|
88
|
|
||||
Medical
|
393
|
|
99
|
|
|
357
|
|
108
|
|
||||
Sustainability
|
66
|
|
—
|
|
|
63
|
|
—
|
|
||||
|
$
|
1,157
|
|
$
|
286
|
|
|
$
|
1,052
|
|
$
|
284
|
|
Neurotechnology and Spine:
|
|
|
|
|
|
||||||||
Neurotechnology
|
$
|
284
|
|
$
|
150
|
|
|
$
|
222
|
|
$
|
131
|
|
Spine
|
142
|
|
52
|
|
|
139
|
|
46
|
|
||||
|
$
|
426
|
|
$
|
202
|
|
|
$
|
361
|
|
$
|
177
|
|
Total
|
$
|
2,381
|
|
$
|
861
|
|
|
$
|
2,182
|
|
$
|
824
|
|
|
Nine Months 2018
|
|
Nine Months 2017
|
||||||||||
|
United States
|
International
|
|
United States
|
International
|
||||||||
Orthopaedics:
|
|
|
|
|
|
||||||||
Knees
|
$
|
896
|
|
$
|
340
|
|
|
$
|
838
|
|
$
|
311
|
|
Hips
|
610
|
|
373
|
|
|
601
|
|
354
|
|
||||
Trauma and Extremities
|
729
|
|
423
|
|
|
693
|
|
377
|
|
||||
Other
|
198
|
|
46
|
|
|
190
|
|
44
|
|
||||
|
$
|
2,433
|
|
$
|
1,182
|
|
|
$
|
2,322
|
|
$
|
1,086
|
|
MedSurg:
|
|
|
|
|
|
||||||||
Instruments
|
$
|
1,007
|
|
$
|
285
|
|
|
$
|
927
|
|
$
|
263
|
|
Endoscopy
|
1,049
|
|
286
|
|
|
927
|
|
256
|
|
||||
Medical
|
1,158
|
|
350
|
|
|
1,099
|
|
314
|
|
||||
Sustainability
|
189
|
|
1
|
|
|
190
|
|
1
|
|
||||
|
$
|
3,403
|
|
$
|
922
|
|
|
$
|
3,143
|
|
$
|
834
|
|
Neurotechnology and Spine:
|
|
|
|
|
|
||||||||
Neurotechnology
|
$
|
820
|
|
$
|
462
|
|
|
$
|
660
|
|
$
|
376
|
|
Spine
|
424
|
|
159
|
|
|
421
|
|
131
|
|
||||
|
$
|
1,244
|
|
$
|
621
|
|
|
$
|
1,081
|
|
$
|
507
|
|
Total
|
$
|
7,080
|
|
$
|
2,725
|
|
|
$
|
6,546
|
|
$
|
2,427
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
5
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
Three Months 2018
|
Marketable Securities
|
Pension Plans
|
Hedges
|
Financial Statement Translation
|
Total
|
||||||||||
Beginning
|
$
|
(5
|
)
|
$
|
(132
|
)
|
$
|
45
|
|
$
|
(465
|
)
|
$
|
(557
|
)
|
OCI
|
1
|
|
(2
|
)
|
8
|
|
(50
|
)
|
(43
|
)
|
|||||
Income taxes
|
—
|
|
(2
|
)
|
(2
|
)
|
—
|
|
(4
|
)
|
|||||
Reclassifications to:
|
|
|
|
|
|
||||||||||
Cost of sales
|
—
|
|
2
|
|
(2
|
)
|
—
|
|
—
|
|
|||||
Other expense
|
(1
|
)
|
—
|
|
1
|
|
—
|
|
—
|
|
|||||
Income taxes
|
—
|
|
(1
|
)
|
1
|
|
—
|
|
—
|
|
|||||
Net OCI
|
$
|
—
|
|
$
|
(3
|
)
|
$
|
6
|
|
$
|
(50
|
)
|
$
|
(47
|
)
|
Ending
|
$
|
(5
|
)
|
$
|
(135
|
)
|
$
|
51
|
|
$
|
(515
|
)
|
$
|
(604
|
)
|
Three Months 2017
|
Marketable Securities
|
Pension Plans
|
Hedges
|
Financial Statement Translation
|
Total
|
||||||||||
Beginning
|
$
|
—
|
|
$
|
(142
|
)
|
$
|
23
|
|
$
|
(471
|
)
|
$
|
(590
|
)
|
OCI
|
(6
|
)
|
16
|
|
(7
|
)
|
74
|
|
77
|
|
|||||
Income taxes
|
2
|
|
(4
|
)
|
2
|
|
13
|
|
13
|
|
|||||
Reclassifications to:
|
|
|
|
|
|
||||||||||
Cost of sales
|
—
|
|
2
|
|
(1
|
)
|
—
|
|
1
|
|
|||||
Other income
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
|||||
Net OCI
|
$
|
(3
|
)
|
$
|
14
|
|
$
|
(6
|
)
|
$
|
87
|
|
$
|
92
|
|
Ending
|
$
|
(3
|
)
|
$
|
(128
|
)
|
$
|
17
|
|
$
|
(384
|
)
|
$
|
(498
|
)
|
Nine Months 2018
|
Marketable Securities
|
Pension Plans
|
Hedges
|
Financial Statement Translation
|
Total
|
||||||||||
Beginning
|
$
|
(4
|
)
|
$
|
(134
|
)
|
$
|
28
|
|
$
|
(443
|
)
|
$
|
(553
|
)
|
OCI
|
(1
|
)
|
(6
|
)
|
32
|
|
(84
|
)
|
(59
|
)
|
|||||
Income taxes
|
—
|
|
1
|
|
(8
|
)
|
12
|
|
5
|
|
|||||
Reclassifications to:
|
|
|
|
|
|
||||||||||
Cost of sales
|
—
|
|
6
|
|
(4
|
)
|
—
|
|
2
|
|
|||||
Other expense
|
—
|
|
—
|
|
1
|
|
—
|
|
1
|
|
|||||
Income taxes
|
—
|
|
(2
|
)
|
2
|
|
—
|
|
—
|
|
|||||
Net OCI
|
$
|
(1
|
)
|
$
|
(1
|
)
|
$
|
23
|
|
$
|
(72
|
)
|
$
|
(51
|
)
|
Ending
|
$
|
(5
|
)
|
$
|
(135
|
)
|
$
|
51
|
|
$
|
(515
|
)
|
$
|
(604
|
)
|
Nine Months 2017
|
Marketable Securities
|
Pension Plans
|
Hedges
|
Financial Statement Translation
|
Total
|
||||||||||
Beginning
|
$
|
—
|
|
$
|
(132
|
)
|
$
|
24
|
|
$
|
(653
|
)
|
$
|
(761
|
)
|
OCI
|
(6
|
)
|
1
|
|
(17
|
)
|
227
|
|
205
|
|
|||||
Income taxes
|
2
|
|
(1
|
)
|
5
|
|
42
|
|
48
|
|
|||||
Reclassifications to:
|
|
|
|
|
|
||||||||||
Cost of sales
|
—
|
|
5
|
|
7
|
|
—
|
|
12
|
|
|||||
Other income
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
|||||
Income taxes
|
—
|
|
(1
|
)
|
(2
|
)
|
—
|
|
(3
|
)
|
|||||
Net OCI
|
$
|
(3
|
)
|
$
|
4
|
|
$
|
(7
|
)
|
$
|
269
|
|
$
|
263
|
|
Ending
|
$
|
(3
|
)
|
$
|
(128
|
)
|
$
|
17
|
|
$
|
(384
|
)
|
$
|
(498
|
)
|
September 2018
|
Designated
|
Non-Designated
|
Total
|
||||||
Gross notional amount
|
$
|
828
|
|
$
|
4,611
|
|
$
|
5,439
|
|
Maximum term in days
|
|
|
586
|
|
|||||
Fair value:
|
|
|
|
||||||
Other current assets
|
$
|
16
|
|
$
|
22
|
|
$
|
38
|
|
Other noncurrent assets
|
1
|
|
1
|
|
2
|
|
|||
Other current liabilities
|
(3
|
)
|
(15
|
)
|
(18
|
)
|
|||
Total fair value
|
$
|
14
|
|
$
|
8
|
|
$
|
22
|
|
December 2017
|
Designated
|
Non-Designated
|
Total
|
||||||
Gross notional amount
|
$
|
1,104
|
|
$
|
4,767
|
|
$
|
5,871
|
|
Maximum term in days
|
|
|
548
|
|
|||||
Fair value:
|
|
|
|
||||||
Other current assets
|
$
|
11
|
|
$
|
4
|
|
$
|
15
|
|
Other noncurrent assets
|
1
|
|
—
|
|
1
|
|
|||
Other current liabilities
|
(7
|
)
|
(29
|
)
|
(36
|
)
|
|||
Other noncurrent liabilities
|
(1
|
)
|
—
|
|
(1
|
)
|
|||
Total fair value
|
$
|
4
|
|
$
|
(25
|
)
|
$
|
(21
|
)
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
6
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
|
Three Months
|
|
Nine Months
|
||||||||||
Recorded in:
|
2018
|
2017
|
|
2018
|
2017
|
||||||||
Cost of sales
|
$
|
2
|
|
$
|
1
|
|
|
$
|
4
|
|
$
|
(7
|
)
|
Other income (expense), net
|
1
|
|
(2
|
)
|
|
(3
|
)
|
(6
|
)
|
||||
Total
|
$
|
3
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
$
|
(13
|
)
|
Assets Measured at Fair Value
|
September
|
December
|
||||
2018
|
2017
|
|||||
Cash and cash equivalents
|
$
|
1,918
|
|
$
|
2,542
|
|
Trading marketable securities
|
130
|
|
121
|
|
||
Level 1 - Assets
|
$
|
2,048
|
|
$
|
2,663
|
|
Available-for-sale marketable securities:
|
|
|
||||
Corporate and asset-backed debt securities
|
$
|
53
|
|
$
|
125
|
|
Foreign government debt securities
|
112
|
|
2
|
|
||
United States agency debt securities
|
2
|
|
27
|
|
||
United States Treasury debt securities
|
33
|
|
70
|
|
||
Certificates of deposit
|
92
|
|
27
|
|
||
Total available-for-sale marketable securities
|
$
|
292
|
|
$
|
251
|
|
Foreign currency exchange forward contracts
|
40
|
|
15
|
|
||
Interest rate swap asset
|
—
|
|
49
|
|
||
Level 2 - Assets
|
$
|
332
|
|
$
|
315
|
|
Total assets measured at fair value
|
$
|
2,380
|
|
$
|
2,978
|
|
Liabilities Measured at Fair Value
|
September
|
December
|
||||
2018
|
2017
|
|||||
Deferred compensation arrangements
|
$
|
130
|
|
$
|
121
|
|
Level 1 - Liabilities
|
$
|
130
|
|
$
|
121
|
|
Foreign currency exchange forward contracts
|
$
|
18
|
|
$
|
37
|
|
Level 2 - Liabilities
|
$
|
18
|
|
$
|
37
|
|
Contingent consideration:
|
|
|
||||
Beginning
|
$
|
32
|
|
$
|
86
|
|
Additions
|
78
|
|
3
|
|
||
Change in estimate
|
—
|
|
2
|
|
||
Settlements
|
(9
|
)
|
(59
|
)
|
||
Ending
|
$
|
101
|
|
$
|
32
|
|
Level 3 - Liabilities
|
$
|
101
|
|
$
|
32
|
|
Total liabilities measured at fair value
|
$
|
249
|
|
$
|
190
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
7
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
8
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
Purchase Price Allocation of Acquired Net Assets
|
|||||||
|
2018
|
|
2017
|
||||
|
Entellus
|
|
NOVADAQ
|
||||
Tangible assets:
|
|
|
|
||||
Accounts receivable
|
$
|
17
|
|
|
$
|
11
|
|
Inventory
|
14
|
|
|
25
|
|
||
Other assets
|
72
|
|
|
7
|
|
||
Contingent consideration
|
(78
|
)
|
|
—
|
|
||
Other liabilities
|
(92
|
)
|
|
(56
|
)
|
||
Intangible assets:
|
|
|
|
||||
Customer relationship
|
33
|
|
|
18
|
|
||
Trade name
|
—
|
|
|
1
|
|
||
Developed technology and patents
|
256
|
|
|
141
|
|
||
Goodwill
|
475
|
|
|
527
|
|
||
Purchase price, net of cash acquired
|
$
|
697
|
|
|
$
|
674
|
|
Weighted-average life of intangible assets
|
16
|
|
|
15
|
|
Estimated Amortization Expense
|
||||||||||||||
Remainder of 2018
|
2019
|
2020
|
2021
|
2022
|
||||||||||
$
|
105
|
|
$
|
384
|
|
$
|
349
|
|
$
|
338
|
|
$
|
331
|
|
|
Three Months
|
|
Nine Months
|
||||||||||
|
2018
|
2017
|
|
2018
|
2017
|
||||||||
Orthopaedics
|
$
|
1,171
|
|
$
|
1,132
|
|
|
$
|
3,615
|
|
$
|
3,408
|
|
MedSurg
|
1,443
|
|
1,336
|
|
|
4,325
|
|
3,977
|
|
||||
Neurotechnology and Spine
|
628
|
|
538
|
|
|
1,865
|
|
1,588
|
|
||||
Net sales
|
$
|
3,242
|
|
$
|
3,006
|
|
|
$
|
9,805
|
|
$
|
8,973
|
|
Orthopaedics
|
$
|
397
|
|
$
|
390
|
|
|
$
|
1,263
|
|
$
|
1,178
|
|
MedSurg
|
341
|
|
272
|
|
|
968
|
|
841
|
|
||||
Neurotechnology and Spine
|
173
|
|
157
|
|
|
532
|
|
446
|
|
||||
Segment operating income
|
$
|
911
|
|
$
|
819
|
|
|
$
|
2,763
|
|
$
|
2,465
|
|
Items not allocated to segments:
|
|
|
|
|
|
||||||||
Corporate and other
|
(104
|
)
|
(89
|
)
|
|
(291
|
)
|
(265
|
)
|
||||
Acquisition and integration-related charges
|
(8
|
)
|
(11
|
)
|
|
(49
|
)
|
(29
|
)
|
||||
Amortization of purchased intangible assets
|
(112
|
)
|
(92
|
)
|
|
(324
|
)
|
(275
|
)
|
||||
Restructuring-related and other charges
|
(39
|
)
|
(36
|
)
|
|
(124
|
)
|
(119
|
)
|
||||
European Medical Devices Regulation
|
(2
|
)
|
—
|
|
|
(5
|
)
|
—
|
|
||||
Rejuvenate and other recall-related matters
|
(4
|
)
|
(66
|
)
|
|
(10
|
)
|
(164
|
)
|
||||
Regulatory and legal matters
|
(66
|
)
|
—
|
|
|
(121
|
)
|
(30
|
)
|
||||
Consolidated operating income
|
$
|
576
|
|
$
|
525
|
|
|
$
|
1,839
|
|
$
|
1,583
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
9
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
Three Months
|
|
Nine Months
|
||||||||||||||||||||||
|
|
|
Percent Net Sales
|
Percentage
|
|
|
|
Percent Net Sales
|
Percentage
|
||||||||||||||||
|
2018
|
2017
|
2018
|
2017
|
Change
|
|
2018
|
2017
|
2018
|
2017
|
Change
|
||||||||||||||
Net sales
|
$
|
3,242
|
|
$
|
3,006
|
|
100.0
|
%
|
100.0
|
%
|
7.9
|
%
|
|
$
|
9,805
|
|
$
|
8,973
|
|
100.0
|
%
|
100.0
|
%
|
9.3
|
%
|
Gross profit
|
2,155
|
|
1,984
|
|
66.5
|
|
66.0
|
|
8.6
|
|
|
6,482
|
|
5,939
|
|
66.1
|
|
66.2
|
|
9.1
|
|
||||
Research, development and engineering expenses
|
221
|
|
198
|
|
6.8
|
|
6.6
|
|
11.6
|
|
|
641
|
|
582
|
|
6.5
|
|
6.5
|
|
10.1
|
|
||||
Selling, general and administrative expenses
|
1,242
|
|
1,103
|
|
38.3
|
|
36.7
|
|
12.6
|
|
|
3,668
|
|
3,335
|
|
37.4
|
|
37.2
|
|
10.0
|
|
||||
Recall charges
|
4
|
|
66
|
|
0.1
|
|
2.2
|
|
(93.9
|
)
|
|
10
|
|
164
|
|
0.1
|
|
1.8
|
|
(93.9
|
)
|
||||
Amortization of intangible assets
|
112
|
|
92
|
|
3.5
|
|
3.1
|
|
21.7
|
|
|
324
|
|
275
|
|
3.3
|
|
3.1
|
|
17.8
|
|
||||
Other income (expense), net
|
(42
|
)
|
(54
|
)
|
(1.3
|
)
|
(1.8
|
)
|
(22.2
|
)
|
|
(140
|
)
|
(169
|
)
|
(1.4
|
)
|
(1.9
|
)
|
(17.2
|
)
|
||||
Income taxes
|
(56
|
)
|
37
|
|
|
|
(251.4
|
)
|
|
214
|
|
145
|
|
|
|
47.6
|
|
||||||||
Net earnings
|
$
|
590
|
|
$
|
434
|
|
18.2
|
%
|
14.4
|
%
|
35.9
|
%
|
|
$
|
1,485
|
|
$
|
1,269
|
|
15.1
|
%
|
14.1
|
%
|
17.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net earnings per diluted share
|
$
|
1.55
|
|
$
|
1.14
|
|
|
|
36.0
|
%
|
|
$
|
3.90
|
|
$
|
3.34
|
|
|
|
16.8
|
%
|
||||
Adjusted net earnings per diluted share
(1)
|
$
|
1.69
|
|
$
|
1.52
|
|
|
|
11.2
|
%
|
|
$
|
5.13
|
|
$
|
4.53
|
|
|
|
13.2
|
%
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
10
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
Geographic and Segment Net Sales
|
Three Months
|
|
Nine Months
|
||||||||||||||||||
|
|
|
Percentage Change
|
|
|
|
Percentage Change
|
||||||||||||||
|
2018
|
2017
|
As Reported
|
Constant
Currency |
|
2018
|
2017
|
As Reported
|
Constant
Currency |
||||||||||||
Geographic:
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
$
|
2,381
|
|
$
|
2,182
|
|
9.1
|
%
|
9.1
|
%
|
|
$
|
7,080
|
|
$
|
6,546
|
|
8.2
|
%
|
8.2
|
%
|
International
|
861
|
|
824
|
|
4.5
|
|
7.8
|
|
|
2,725
|
|
2,427
|
|
12.3
|
|
8.9
|
|
||||
Total
|
$
|
3,242
|
|
$
|
3,006
|
|
7.9
|
%
|
8.8
|
%
|
|
$
|
9,805
|
|
$
|
8,973
|
|
9.3
|
%
|
8.4
|
%
|
Segment:
|
|
|
|
|
|
|
|
|
|
||||||||||||
Orthopaedics
|
$
|
1,171
|
|
$
|
1,132
|
|
3.4
|
%
|
4.5
|
%
|
|
$
|
3,615
|
|
$
|
3,408
|
|
6.1
|
%
|
5.0
|
%
|
MedSurg
|
1,443
|
|
1,336
|
|
8.0
|
|
8.8
|
|
|
4,325
|
|
3,977
|
|
8.8
|
|
8.2
|
|
||||
Neurotechnology and Spine
|
628
|
|
538
|
|
16.7
|
|
17.7
|
|
|
1,865
|
|
1,588
|
|
17.4
|
|
16.2
|
|
||||
Total
|
$
|
3,242
|
|
$
|
3,006
|
|
7.9
|
%
|
8.8
|
%
|
|
$
|
9,805
|
|
$
|
8,973
|
|
9.3
|
%
|
8.4
|
%
|
Supplemental Net Sales Growth Information
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
Three Months
|
|
Nine Months
|
||||||||||||||||||||||||||||||
|
|
Percentage Change
|
|
|
Percentage Change
|
||||||||||||||||||||||||||||
|
|
|
|
United States
|
International
|
|
|
|
|
United States
|
International
|
||||||||||||||||||||||
|
2018
|
2017
|
As Reported
|
Constant Currency
|
As Reported
|
As Reported
|
Constant Currency
|
|
2018
|
2017
|
As Reported
|
Constant Currency
|
As Reported
|
As Reported
|
Constant Currency
|
||||||||||||||||||
Orthopaedics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Knees
|
$
|
395
|
|
$
|
369
|
|
7.0
|
%
|
8.3
|
%
|
7.8
|
%
|
5.1
|
%
|
9.2
|
%
|
|
$
|
1,236
|
|
$
|
1,149
|
|
7.6
|
%
|
6.7
|
%
|
6.9
|
%
|
9.3
|
%
|
6.2
|
%
|
Hips
|
316
|
|
313
|
|
1.0
|
|
2.2
|
|
2.1
|
|
(0.8
|
)
|
2.5
|
|
|
983
|
|
955
|
|
2.9
|
|
1.9
|
|
1.5
|
|
5.4
|
|
2.4
|
|
||||
Trauma and Extremities
|
376
|
|
367
|
|
2.5
|
|
3.2
|
|
2.1
|
|
3.1
|
|
5.1
|
|
|
1,152
|
|
1,070
|
|
7.7
|
|
6.0
|
|
5.2
|
|
12.2
|
|
7.5
|
|
||||
Other
|
84
|
|
83
|
|
1.2
|
|
2.7
|
|
(1.5
|
)
|
13.3
|
|
19.1
|
|
|
244
|
|
234
|
|
4.3
|
|
3.9
|
|
4.2
|
|
4.5
|
|
4.1
|
|
||||
|
$
|
1,171
|
|
$
|
1,132
|
|
3.4
|
%
|
4.5
|
%
|
3.8
|
%
|
2.8
|
%
|
6.0
|
%
|
|
$
|
3,615
|
|
$
|
3,408
|
|
6.1
|
%
|
5.0
|
%
|
4.8
|
%
|
8.8
|
%
|
5.4
|
%
|
MedSurg:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Instruments
|
$
|
442
|
|
$
|
404
|
|
9.4
|
%
|
10.0
|
%
|
11.4
|
%
|
2.3
|
%
|
4.2
|
%
|
|
$
|
1,292
|
|
$
|
1,190
|
|
8.6
|
%
|
7.8
|
%
|
8.6
|
%
|
8.4
|
%
|
4.9
|
%
|
Endoscopy
|
443
|
|
404
|
|
9.7
|
|
10.8
|
|
9.5
|
|
10.2
|
|
15.0
|
|
|
1,335
|
|
1,183
|
|
12.8
|
|
12.4
|
|
13.2
|
|
11.7
|
|
9.3
|
|
||||
Medical
|
492
|
|
464
|
|
6.0
|
|
6.8
|
|
10.1
|
|
(8.3
|
)
|
(4.4
|
)
|
|
1,508
|
|
1,413
|
|
6.7
|
|
6.1
|
|
5.4
|
|
11.5
|
|
8.5
|
|
||||
Sustainability
|
66
|
|
64
|
|
3.1
|
|
3.9
|
|
4.8
|
|
—
|
|
15.0
|
|
|
190
|
|
191
|
|
(0.5
|
)
|
(0.6
|
)
|
(0.5
|
)
|
—
|
|
15.7
|
|
||||
|
$
|
1,443
|
|
$
|
1,336
|
|
8.0
|
%
|
8.8
|
%
|
10.0
|
%
|
0.7
|
%
|
4.3
|
%
|
|
$
|
4,325
|
|
$
|
3,977
|
|
8.8
|
%
|
8.2
|
%
|
8.3
|
%
|
10.6
|
%
|
7.6
|
%
|
Neurotechnology and Spine:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Neurotechnology
|
$
|
435
|
|
$
|
353
|
|
23.2
|
%
|
24.1
|
%
|
27.9
|
%
|
14.5
|
%
|
18.1
|
%
|
|
$
|
1,282
|
|
$
|
1,036
|
|
23.7
|
%
|
22.3
|
%
|
24.2
|
%
|
22.9
|
%
|
18.9
|
%
|
Spine
|
193
|
|
185
|
|
4.3
|
|
5.5
|
|
2.2
|
|
13.0
|
|
15.8
|
|
|
583
|
|
552
|
|
5.6
|
|
4.8
|
|
0.7
|
|
21.4
|
|
17.5
|
|
||||
|
$
|
628
|
|
$
|
538
|
|
16.7
|
%
|
17.7
|
%
|
18.0
|
%
|
14.1
|
%
|
17.5
|
%
|
|
$
|
1,865
|
|
$
|
1,588
|
|
17.4
|
%
|
16.2
|
%
|
15.1
|
%
|
22.5
|
%
|
18.6
|
%
|
Total
|
$
|
3,242
|
|
$
|
3,006
|
|
7.9
|
%
|
8.8
|
%
|
9.1
|
%
|
4.5
|
%
|
7.8
|
%
|
|
$
|
9,805
|
|
$
|
8,973
|
|
9.3
|
%
|
8.4
|
%
|
8.2
|
%
|
12.3
|
%
|
8.9
|
%
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
11
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
|
|
Three Months
|
||||||||||||||||||
|
|
|
|
|
Percentage Change Excluding ASC 606 Impact
|
||||||||||||||
|
|
Percentage Change
|
|
|
|
International
|
|||||||||||||
|
2018
|
2017
|
As Reported
|
Excluding ASC 606 Impact
|
|
Constant Currency
|
United States
|
Excluding ASC 606 Impact
|
Constant Currency
|
||||||||||
Orthopaedics:
|
|
|
|
|
|
|
|
|
|
||||||||||
Knees
|
$
|
395
|
|
$
|
369
|
|
7.0
|
%
|
7.7
|
%
|
|
8.7
|
%
|
8.4
|
%
|
5.7
|
%
|
9.6
|
%
|
Hips
|
316
|
|
313
|
|
1.0
|
|
1.2
|
|
|
2.5
|
|
2.4
|
|
(0.6
|
)
|
2.8
|
|
||
Trauma and Extremities
|
376
|
|
367
|
|
2.5
|
|
3.2
|
|
|
4.0
|
|
3.2
|
|
3.1
|
|
5.5
|
|
||
Other
|
84
|
|
83
|
|
1.2
|
|
1.6
|
|
|
2.7
|
|
(0.9
|
)
|
13.1
|
|
19.3
|
|
||
|
$
|
1,171
|
|
$
|
1,132
|
|
3.4
|
%
|
4.0
|
%
|
|
5.0
|
%
|
4.4
|
%
|
3.0
|
%
|
6.3
|
%
|
MedSurg:
|
|
|
|
|
|
|
|
|
|
||||||||||
Instruments
|
$
|
442
|
|
$
|
404
|
|
9.4
|
%
|
10.7
|
%
|
|
11.6
|
%
|
13.7
|
%
|
0.3
|
%
|
4.3
|
%
|
Endoscopy
|
443
|
|
404
|
|
9.7
|
|
10.8
|
|
|
11.9
|
|
11.0
|
|
10.4
|
|
15.2
|
|
||
Medical
|
492
|
|
464
|
|
6.0
|
|
7.5
|
|
|
8.5
|
|
12.4
|
|
(8.1
|
)
|
(4.2
|
)
|
||
Sustainability
|
66
|
|
64
|
|
3.1
|
|
7.0
|
|
|
7.0
|
|
7.0
|
|
10.9
|
|
15.0
|
|
||
|
$
|
1,443
|
|
$
|
1,336
|
|
8.0
|
%
|
9.5
|
%
|
|
10.4
|
%
|
12.0
|
%
|
0.2
|
%
|
4.5
|
%
|
Neurotechnology and Spine:
|
|
|
|
|
|
|
|
|
|
||||||||||
Neurotechnology
|
$
|
435
|
|
$
|
353
|
|
23.2
|
%
|
23.8
|
%
|
|
24.8
|
%
|
28.7
|
%
|
15.4
|
%
|
18.2
|
%
|
Spine
|
193
|
|
185
|
|
4.3
|
|
5.2
|
|
|
5.9
|
|
2.4
|
|
13.4
|
|
16.5
|
|
||
|
$
|
628
|
|
$
|
538
|
|
16.7
|
%
|
17.4
|
%
|
|
18.3
|
%
|
18.6
|
%
|
14.9
|
%
|
17.8
|
%
|
Total
|
$
|
3,242
|
|
$
|
3,006
|
|
7.9
|
%
|
8.8
|
%
|
|
9.8
|
%
|
10.4
|
%
|
4.6
|
%
|
8.1
|
%
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
12
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
|
Nine Months
|
||||||||||||||||||
|
|
|
|
|
Percentage Change Excluding ASC 606 Impact
|
||||||||||||||
|
|
Percentage Change
|
|
|
|
International
|
|||||||||||||
|
2018
|
2017
|
As Reported
|
Excluding ASC 606 Impact
|
|
Constant Currency
|
United States
|
Excluding ASC 606 Impact
|
Constant Currency
|
||||||||||
Orthopaedics:
|
|
|
|
|
|
|
|
|
|
||||||||||
Knees
|
$
|
1,236
|
|
$
|
1,149
|
|
7.6
|
%
|
8.0
|
%
|
|
7.1
|
%
|
7.3
|
%
|
9.8
|
%
|
6.6
|
%
|
Hips
|
983
|
|
955
|
|
2.9
|
|
3.3
|
|
|
2.2
|
|
1.9
|
|
5.5
|
|
2.6
|
|
||
Trauma and Extremities
|
1,152
|
|
1,070
|
|
7.7
|
|
8.5
|
|
|
6.9
|
|
6.3
|
|
12.5
|
|
8.0
|
|
||
Other
|
244
|
|
234
|
|
4.3
|
|
4.2
|
|
|
3.9
|
|
3.9
|
|
5.4
|
|
4.2
|
|
||
|
$
|
3,615
|
|
$
|
3,408
|
|
6.1
|
%
|
6.6
|
%
|
|
5.4
|
%
|
5.3
|
%
|
9.2
|
%
|
5.7
|
%
|
MedSurg:
|
|
|
|
|
|
|
|
|
|
||||||||||
Instruments
|
$
|
1,292
|
|
$
|
1,190
|
|
8.6
|
%
|
10.2
|
%
|
|
9.5
|
%
|
10.8
|
%
|
8.0
|
%
|
5.0
|
%
|
Endoscopy
|
1,335
|
|
1,183
|
|
12.8
|
|
14.2
|
|
|
13.6
|
|
14.8
|
|
11.8
|
|
9.5
|
|
||
Medical
|
1,508
|
|
1,413
|
|
6.7
|
|
8.3
|
|
|
7.7
|
|
7.4
|
|
11.5
|
|
8.7
|
|
||
Sustainability
|
190
|
|
191
|
|
(0.5
|
)
|
2.5
|
|
|
2.5
|
|
2.4
|
|
17.3
|
|
15.7
|
|
||
|
$
|
4,325
|
|
$
|
3,977
|
|
8.8
|
%
|
10.4
|
%
|
|
9.8
|
%
|
10.3
|
%
|
10.5
|
%
|
7.8
|
%
|
Neurotechnology and Spine:
|
|
|
|
|
|
|
|
|
|
||||||||||
Neurotechnology
|
$
|
1,282
|
|
$
|
1,036
|
|
23.7
|
%
|
24.5
|
%
|
|
23.0
|
%
|
25.3
|
%
|
23.1
|
%
|
19.1
|
%
|
Spine
|
583
|
|
552
|
|
5.6
|
|
6.1
|
|
|
5.2
|
|
1.1
|
|
22.1
|
|
18.2
|
|
||
|
$
|
1,865
|
|
$
|
1,588
|
|
17.4
|
%
|
18.1
|
%
|
|
16.8
|
%
|
15.8
|
%
|
22.9
|
%
|
18.9
|
%
|
Total
|
$
|
9,805
|
|
$
|
8,973
|
|
9.3
|
%
|
10.3
|
%
|
|
9.4
|
%
|
9.4
|
%
|
12.5
|
%
|
9.1
|
%
|
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2018
|
2017
|
2018
|
2017
|
||||||
Reported
|
$
|
2,155
|
|
$
|
1,984
|
|
66.5
|
%
|
66.0
|
%
|
Inventory stepped-up to fair value
|
(11
|
)
|
2
|
|
(0.3
|
)
|
0.1
|
|
||
Restructuring-related and other charges
|
4
|
|
1
|
|
0.1
|
|
—
|
|
||
Adjusted
|
$
|
2,148
|
|
$
|
1,987
|
|
66.3
|
%
|
66.1
|
%
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
13
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
|
|
Percent Net Sales
|
||||||||
Nine Months
|
2018
|
2017
|
2018
|
2017
|
||||||
Reported
|
$
|
6,482
|
|
$
|
5,939
|
|
66.1
|
%
|
66.2
|
%
|
Inventory stepped-up to fair value
|
—
|
|
2
|
|
—
|
|
—
|
|
||
Restructuring-related and other charges
|
9
|
|
12
|
|
0.1
|
|
0.1
|
|
||
European Medical Devices Regulation
|
1
|
|
—
|
|
—
|
|
—
|
|
||
Adjusted
|
$
|
6,492
|
|
$
|
5,953
|
|
66.2
|
%
|
66.3
|
%
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2018
|
2017
|
2018
|
2017
|
||||||
Reported
|
$
|
1,242
|
|
$
|
1,103
|
|
38.3
|
%
|
36.7
|
%
|
Other acquisition and integration-related
|
(19
|
)
|
(9
|
)
|
(0.6
|
)
|
(0.3
|
)
|
||
Restructuring-related and other charges
|
(35
|
)
|
(35
|
)
|
(1.1
|
)
|
(1.2
|
)
|
||
Regulatory and legal matters
|
(66
|
)
|
—
|
|
(2.0
|
)
|
—
|
|
||
Adjusted
|
$
|
1,122
|
|
$
|
1,059
|
|
34.6
|
%
|
35.2
|
%
|
|
|
Percent Net Sales
|
||||||||
Nine Months
|
2018
|
2017
|
2018
|
2017
|
||||||
Reported
|
$
|
3,668
|
|
$
|
3,335
|
|
37.4
|
%
|
37.2
|
%
|
Other acquisition and integration-related
|
(49
|
)
|
(27
|
)
|
(0.5
|
)
|
(0.3
|
)
|
||
Restructuring-related and other charges
|
(115
|
)
|
(107
|
)
|
(1.2
|
)
|
(1.2
|
)
|
||
Regulatory and legal matters
|
(121
|
)
|
(30
|
)
|
(1.2
|
)
|
(0.4
|
)
|
||
Adjusted
|
$
|
3,383
|
|
$
|
3,171
|
|
34.5
|
%
|
35.3
|
%
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2018
|
2017
|
2018
|
2017
|
||||||
Reported
|
$
|
576
|
|
$
|
525
|
|
17.8
|
%
|
17.5
|
%
|
Inventory stepped-up to fair value
|
(11
|
)
|
2
|
|
(0.3
|
)
|
0.1
|
|
||
Other acquisition and integration-related
|
19
|
|
9
|
|
0.6
|
|
0.3
|
|
||
Amortization of purchased intangible assets
|
112
|
|
92
|
|
3.4
|
|
3.0
|
|
||
Restructuring-related and other charges
|
39
|
|
36
|
|
1.2
|
|
1.2
|
|
||
European Medical Devices Regulation
|
2
|
|
—
|
|
0.1
|
|
—
|
|
||
Rejuvenate and other recall-related matters
|
4
|
|
66
|
|
0.1
|
|
2.2
|
|
||
Regulatory and legal matters
|
66
|
|
—
|
|
2.0
|
|
—
|
|
||
Adjusted
|
$
|
807
|
|
$
|
730
|
|
24.9
|
%
|
24.3
|
%
|
|
|
Percent Net Sales
|
||||||||
Nine Months
|
2018
|
2017
|
2018
|
2017
|
||||||
Reported
|
$
|
1,839
|
|
$
|
1,583
|
|
18.8
|
%
|
17.6
|
%
|
Inventory stepped-up to fair value
|
—
|
|
2
|
|
—
|
|
—
|
|
||
Other acquisition and integration-related
|
49
|
|
27
|
|
0.5
|
|
0.3
|
|
||
Amortization of purchased intangible assets
|
324
|
|
275
|
|
3.3
|
|
3.1
|
|
||
Restructuring-related and other charges
|
124
|
|
119
|
|
1.3
|
|
1.3
|
|
||
European Medical Devices Regulation
|
5
|
|
—
|
|
—
|
|
—
|
|
||
Rejuvenate and other recall-related matters
|
10
|
|
164
|
|
0.1
|
|
1.8
|
|
||
Regulatory and legal matters
|
121
|
|
30
|
|
1.2
|
|
0.4
|
|
||
Adjusted
|
$
|
2,472
|
|
$
|
2,200
|
|
25.2
|
%
|
24.5
|
%
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
14
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2018
|
2017
|
2018
|
2017
|
||||||
Reported
|
$
|
590
|
|
$
|
434
|
|
18.2
|
%
|
14.4
|
%
|
Inventory stepped-up to fair value
|
(11
|
)
|
2
|
|
(0.3
|
)
|
0.1
|
|
||
Other acquisition and integration-related
|
17
|
|
6
|
|
0.5
|
|
0.2
|
|
||
Amortization of purchased intangible assets
|
92
|
|
66
|
|
2.8
|
|
2.2
|
|
||
Restructuring-related and other charges
|
31
|
|
27
|
|
0.9
|
|
0.9
|
|
||
European Medical Devices Regulation
|
2
|
|
—
|
|
0.1
|
|
—
|
|
||
Rejuvenate and other recall-related matters
|
2
|
|
48
|
|
0.1
|
|
1.6
|
|
||
Regulatory and legal matters
|
50
|
|
(5
|
)
|
1.5
|
|
(0.2
|
)
|
||
Tax matters
|
(130
|
)
|
—
|
|
(4.0
|
)
|
—
|
|
||
Adjusted
|
$
|
643
|
|
$
|
578
|
|
19.8
|
%
|
19.2
|
%
|
|
|
Percent Net Sales
|
||||||||
Nine Months
|
2018
|
2017
|
2018
|
2017
|
||||||
Reported
|
$
|
1,485
|
|
$
|
1,269
|
|
15.1
|
%
|
14.1
|
%
|
Inventory stepped-up to fair value
|
(4
|
)
|
2
|
|
—
|
|
—
|
|
||
Other acquisition and integration-related
|
41
|
|
20
|
|
0.4
|
|
0.2
|
|
||
Amortization of purchased intangible assets
|
263
|
|
190
|
|
2.7
|
|
2.1
|
|
||
Restructuring-related and other charges
|
98
|
|
95
|
|
1.0
|
|
1.1
|
|
||
European Medical Devices Regulation
|
4
|
|
—
|
|
0.1
|
|
—
|
|
||
Rejuvenate and other recall-related matters
|
7
|
|
123
|
|
0.1
|
|
1.4
|
|
||
Regulatory and legal matters
|
92
|
|
20
|
|
0.9
|
|
0.3
|
|
||
Tax matters
|
(35
|
)
|
—
|
|
(0.4
|
)
|
—
|
|
||
Adjusted
|
$
|
1,951
|
|
$
|
1,719
|
|
19.9
|
%
|
19.2
|
%
|
1.
|
Acquisition and integration-related costs
. Costs related to integrating recently acquired businesses and specific costs (e.g., inventory step-up and deal costs) related to the consummation of the acquisition process.
|
2.
|
Amortization of purchased intangible assets
. Periodic amortization expense related to purchased intangible assets.
|
3.
|
Restructuring-related and other charges
. Costs associated with the termination of sales relationships in certain countries, workforce reductions, elimination of product lines, weather-related asset impairments and associated costs and other restructuring-related activities.
|
4.
|
European Medical Devices Regulation.
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 European Union's regulation for medical devices.
|
5.
|
Rejuvenate and other recall-related matters
. Our best estimate of the minimum end of the range of probable loss to resolve the Rejuvenate recall and other recall-related matters.
|
6.
|
Regulatory and legal matters
. 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.
|
7.
|
Tax matters
. Charges represent the impact of accounting for certain significant and discrete tax items, including adjustments related to the Act.
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
15
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
|
||||||||||||||||||||
Three Months 2018
|
Gross Profit
|
Selling, General & Administrative Expenses
|
Amortization of Intangible Assets
|
Operating Income
|
Net Earnings
|
Effective
Tax Rate |
Diluted EPS
|
|||||||||||||
Reported
|
$
|
2,155
|
|
$
|
1,242
|
|
$
|
112
|
|
$
|
576
|
|
$
|
590
|
|
(10.5
|
)%
|
$
|
1.55
|
|
Reported percent net sales
|
66.5
|
%
|
38.3
|
%
|
3.5
|
%
|
17.8
|
%
|
18.2
|
%
|
|
|
||||||||
Acquisition and integration-related charges:
|
|
|
|
|
|
|
|
|||||||||||||
Inventory stepped-up to fair value
|
(11
|
)
|
—
|
|
—
|
|
(11
|
)
|
(11
|
)
|
0.3
|
|
(0.03
|
)
|
||||||
Other acquisition and integration-related
|
—
|
|
(19
|
)
|
—
|
|
19
|
|
17
|
|
—
|
|
0.05
|
|
||||||
Amortization of purchased intangible assets
|
—
|
|
—
|
|
(112
|
)
|
112
|
|
92
|
|
0.5
|
|
0.24
|
|
||||||
Restructuring-related and other charges
|
4
|
|
(35
|
)
|
—
|
|
39
|
|
31
|
|
0.4
|
|
0.08
|
|
||||||
European Medical Devices Regulation
|
—
|
|
—
|
|
—
|
|
2
|
|
2
|
|
—
|
|
—
|
|
||||||
Rejuvenate and other recall-related matters
|
—
|
|
—
|
|
—
|
|
4
|
|
2
|
|
0.1
|
|
0.01
|
|
||||||
Regulatory and legal matters
|
—
|
|
(66
|
)
|
—
|
|
66
|
|
50
|
|
1.0
|
|
0.13
|
|
||||||
Tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
(130
|
)
|
24.3
|
|
(0.34
|
)
|
||||||
Adjusted
|
$
|
2,148
|
|
$
|
1,122
|
|
$
|
—
|
|
$
|
807
|
|
$
|
643
|
|
16.1
|
%
|
$
|
1.69
|
|
Adjusted percent net sales
|
66.3
|
%
|
34.6
|
%
|
—
|
%
|
24.9
|
%
|
19.8
|
%
|
|
|
Three Months 2017
|
Gross Profit
|
Selling, General & Administrative Expenses
|
Amortization of Intangible Assets
|
Operating Income
|
Net Earnings
|
Effective
Tax Rate |
Diluted EPS
|
|||||||||||||
Reported
|
$
|
1,984
|
|
$
|
1,103
|
|
$
|
92
|
|
$
|
525
|
|
$
|
434
|
|
7.9
|
%
|
$
|
1.14
|
|
Reported percent net sales
|
66.0
|
%
|
36.7
|
%
|
3.1
|
%
|
17.5
|
%
|
14.4
|
%
|
|
|
||||||||
Acquisition and integration-related charges:
|
|
|
|
|
|
|
|
|||||||||||||
Inventory stepped-up to fair value
|
2
|
|
—
|
|
—
|
|
2
|
|
2
|
|
—
|
|
0.01
|
|
||||||
Other acquisition and integration-related
|
—
|
|
(9
|
)
|
—
|
|
9
|
|
6
|
|
0.2
|
|
0.01
|
|
||||||
Amortization of purchased intangible assets
|
—
|
|
—
|
|
(92
|
)
|
92
|
|
66
|
|
2.7
|
|
0.18
|
|
||||||
Restructuring-related and other charges
|
1
|
|
(35
|
)
|
—
|
|
36
|
|
27
|
|
0.7
|
|
0.07
|
|
||||||
Rejuvenate and other recall-related matters
|
—
|
|
—
|
|
—
|
|
66
|
|
48
|
|
1.9
|
|
0.13
|
|
||||||
Regulatory and legal matters
|
—
|
|
—
|
|
—
|
|
—
|
|
(5
|
)
|
1.2
|
|
(0.02
|
)
|
||||||
Tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||
Adjusted
|
$
|
1,987
|
|
$
|
1,059
|
|
$
|
—
|
|
$
|
730
|
|
$
|
578
|
|
14.6
|
%
|
$
|
1.52
|
|
Adjusted percent net sales
|
66.1
|
%
|
35.2
|
%
|
—
|
%
|
24.3
|
%
|
19.2
|
%
|
|
|
Nine Months 2018
|
Gross Profit
|
Selling, General & Administrative Expenses
|
Amortization of Intangible Assets
|
Operating Income
|
Net Earnings
|
Effective
Tax Rate |
Diluted EPS
|
|||||||||||||
Reported
|
$
|
6,482
|
|
$
|
3,668
|
|
$
|
324
|
|
$
|
1,839
|
|
$
|
1,485
|
|
12.6
|
%
|
$
|
3.90
|
|
Reported percent net sales
|
66.1
|
%
|
37.4
|
%
|
3.3
|
%
|
18.8
|
%
|
15.1
|
%
|
|
|
||||||||
Acquisition and integration-related charges:
|
|
|
|
|
|
|
|
|||||||||||||
Inventory stepped-up to fair value
|
—
|
|
—
|
|
—
|
|
—
|
|
(4
|
)
|
0.2
|
|
(0.01
|
)
|
||||||
Other acquisition and integration-related
|
—
|
|
(49
|
)
|
—
|
|
49
|
|
41
|
|
—
|
|
0.11
|
|
||||||
Amortization of purchased intangible assets
|
—
|
|
—
|
|
(324
|
)
|
324
|
|
263
|
|
0.5
|
|
0.69
|
|
||||||
Restructuring-related and other charges
|
9
|
|
(115
|
)
|
—
|
|
124
|
|
98
|
|
0.3
|
|
0.26
|
|
||||||
European Medical Devices Regulation
|
1
|
|
—
|
|
—
|
|
5
|
|
4
|
|
—
|
|
0.01
|
|
||||||
Rejuvenate and other recall-related matters
|
—
|
|
—
|
|
—
|
|
10
|
|
7
|
|
—
|
|
0.02
|
|
||||||
Regulatory and legal matters
|
—
|
|
(121
|
)
|
—
|
|
121
|
|
92
|
|
0.6
|
|
0.24
|
|
||||||
Tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
(35
|
)
|
2.1
|
|
(0.09
|
)
|
||||||
Adjusted
|
$
|
6,492
|
|
$
|
3,383
|
|
$
|
—
|
|
$
|
2,472
|
|
$
|
1,951
|
|
16.3
|
%
|
$
|
5.13
|
|
Adjusted percent net sales
|
66.2
|
%
|
34.5
|
%
|
—
|
%
|
25.2
|
%
|
19.9
|
%
|
|
|
Nine Months 2017
|
Gross Profit
|
Selling, General & Administrative Expenses
|
Amortization of Intangible Assets
|
Operating Income
|
Net Earnings
|
Effective
Tax Rate |
Diluted EPS
|
|||||||||||||
Reported
|
$
|
5,939
|
|
$
|
3,335
|
|
$
|
275
|
|
$
|
1,583
|
|
$
|
1,269
|
|
10.3
|
%
|
$
|
3.34
|
|
Reported percent net sales
|
66.2
|
%
|
37.2
|
%
|
3.1
|
%
|
17.6
|
%
|
14.1
|
%
|
|
|
||||||||
Acquisition and integration-related charges:
|
|
|
|
|
|
|
|
|||||||||||||
Inventory stepped-up to fair value
|
2
|
|
—
|
|
—
|
|
2
|
|
2
|
|
—
|
|
0.01
|
|
||||||
Other acquisition and integration-related
|
—
|
|
(27
|
)
|
—
|
|
27
|
|
20
|
|
0.2
|
|
0.05
|
|
||||||
Amortization of purchased intangible assets
|
—
|
|
—
|
|
(275
|
)
|
275
|
|
190
|
|
3.0
|
|
0.50
|
|
||||||
Restructuring-related and other charges
|
12
|
|
(107
|
)
|
—
|
|
119
|
|
95
|
|
0.4
|
|
0.25
|
|
||||||
Rejuvenate and other recall-related matters
|
—
|
|
—
|
|
—
|
|
164
|
|
123
|
|
1.1
|
|
0.33
|
|
||||||
Regulatory and legal matters
|
—
|
|
(30
|
)
|
—
|
|
30
|
|
20
|
|
0.4
|
|
0.05
|
|
||||||
Adjusted
|
$
|
5,953
|
|
$
|
3,171
|
|
$
|
—
|
|
$
|
2,200
|
|
$
|
1,719
|
|
15.4
|
%
|
$
|
4.53
|
|
Adjusted percent net sales
|
66.3
|
%
|
35.3
|
%
|
—
|
%
|
24.5
|
%
|
19.2
|
%
|
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
16
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
Nine Months
|
2018
|
2017
|
||||
Net cash provided by operating activities
|
$
|
1,564
|
|
$
|
880
|
|
Net cash used in investing activities
|
(1,229
|
)
|
(1,153
|
)
|
||
Net cash used in financing activities
|
(951
|
)
|
(522
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(8
|
)
|
71
|
|
||
Change in cash and cash equivalents
|
$
|
(624
|
)
|
$
|
(724
|
)
|
Nine Months
|
2018
|
2017
|
||||
Total dividends paid to common shareholders
|
$
|
528
|
|
$
|
477
|
|
Total amount paid to repurchase common stock
|
$
|
300
|
|
$
|
230
|
|
Shares of repurchased common stock (in millions)
|
1.9
|
|
1.9
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
17
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 6.
|
EXHIBITS
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
18
|
STRYKER CORPORATION
|
|
2018 Third Quarter Form 10-Q
|
|
|
|
STRYKER CORPORATION
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
Date:
|
October 26, 2018
|
|
/s/ KEVIN A. LOBO
|
|
|
|
Kevin A. Lobo
|
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
|
|
|
|
Date:
|
October 26, 2018
|
|
/s/ GLENN S. BOEHNLEIN
|
|
|
|
Glenn S. Boehnlein
|
|
|
|
Vice President, Chief Financial Officer
|
|
|
19
|
1.
|
The present name of the corporation is Stryker Corporation.
|
2.
|
The identification number assigned by the Bureau is 800151233.
|
3.
|
The only former name of the corporation was Orthopedic Frame Company.
|
4.
|
The date of filing the original Articles of Incorporation was
February 20, 1946.
|
5.
|
The following Restated Articles of Incorporation supersede the original Articles of Incorporation as amended and restated to date and shall be the Articles of Incorporation for the corporation.
|
6.
|
These Restated Articles of Incorporation were duly adopted on July 31, 2018, by the Board of Directors without a vote of the shareholders pursuant to Section 641(2)(c) of the Act. These Restated Articles of Incorporation only restate and integrate the Articles and include only amendments adopted under Section 611(2) of the Act. There is no material discrepancy between the provisions of the Articles of Incorporation as amended and the provisions of these Restated Articles of Incorporation.
|
By:
|
/s/ DEAN H. BERGY
|
|
Dean H. Bergy
|
|
Vice President, Corporate Secretary
|
Date:
|
October 26, 2018
|
|
/s/ KEVIN A. LOBO
|
|
|
|
Kevin A. Lobo
|
|
|
|
Chairman and Chief Executive Officer
|
Date:
|
October 26, 2018
|
|
/s/ GLENN S. BOEHNLEIN
|
|
|
|
Glenn S. Boehnlein
|
|
|
|
Vice President, Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
October 26, 2018
|
|
/s/ KEVIN A. LOBO
|
|
|
|
Kevin A. Lobo
|
|
|
|
Chairman and Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
October 26, 2018
|
|
/s/ GLENN S. BOEHNLEIN
|
|
|
|
Glenn S. Boehnlein
|
|
|
|
Vice President, Chief Financial Officer
|