|
|
[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
|
|
2019 First Quarter Form 10-Q
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
Three Months
|
||||||
|
2019
|
|
2018
|
||||
Net sales
|
$
|
3,516
|
|
|
$
|
3,241
|
|
Cost of sales
|
1,233
|
|
|
1,104
|
|
||
Gross profit
|
$
|
2,283
|
|
|
$
|
2,137
|
|
Research, development and engineering expenses
|
225
|
|
|
204
|
|
||
Selling, general and administrative expenses
|
1,403
|
|
|
1,236
|
|
||
Recall charges
|
13
|
|
|
4
|
|
||
Amortization of intangible assets
|
114
|
|
|
102
|
|
||
Total operating expenses
|
$
|
1,755
|
|
|
$
|
1,546
|
|
Operating income
|
$
|
528
|
|
|
$
|
591
|
|
Other income (expense), net
|
(48
|
)
|
|
(49
|
)
|
||
Earnings before income taxes
|
$
|
480
|
|
|
$
|
542
|
|
Income taxes
|
68
|
|
|
99
|
|
||
Net earnings
|
$
|
412
|
|
|
$
|
443
|
|
|
|
|
|
||||
Net earnings per share of common stock:
|
|
|
|
||||
Basic
|
$
|
1.10
|
|
|
$
|
1.18
|
|
Diluted
|
$
|
1.09
|
|
|
$
|
1.16
|
|
|
|
|
|
||||
Weighted-average shares outstanding (in millions):
|
|
|
|
||||
Basic
|
373.3
|
|
|
374.0
|
|
||
Effect of dilutive employee stock options
|
6.0
|
|
|
6.7
|
|
||
Diluted
|
379.3
|
|
|
380.7
|
|
||
|
|
|
|
||||
Cash dividends declared per share of common stock
|
$
|
0.52
|
|
|
$
|
0.47
|
|
|
Three Months
|
||||||
|
2019
|
|
2018
|
||||
Net earnings
|
$
|
412
|
|
|
$
|
443
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
||||
Marketable securities
|
1
|
|
|
(1
|
)
|
||
Pension plans
|
(4
|
)
|
|
(6
|
)
|
||
Unrealized gains (losses) on designated hedges
|
(16
|
)
|
|
15
|
|
||
Financial statement translation
|
85
|
|
|
35
|
|
||
Total other comprehensive income (loss), net of tax
|
$
|
66
|
|
|
$
|
43
|
|
Comprehensive income
|
$
|
478
|
|
|
$
|
486
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
1
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
|
March 31
|
|
December 31
|
||||
|
2019
|
|
2018
|
||||
|
(Unaudited)
|
|
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,674
|
|
|
$
|
3,616
|
|
Marketable securities
|
84
|
|
|
83
|
|
||
Accounts receivable, less allowance of $67 ($64 in 2018)
|
2,284
|
|
|
2,332
|
|
||
Inventories:
|
|
|
|
||||
Materials and supplies
|
608
|
|
|
606
|
|
||
Work in process
|
178
|
|
|
149
|
|
||
Finished goods
|
2,278
|
|
|
2,200
|
|
||
Total inventories
|
$
|
3,064
|
|
|
$
|
2,955
|
|
Prepaid expenses and other current assets
|
782
|
|
|
747
|
|
||
Total current assets
|
$
|
7,888
|
|
|
$
|
9,733
|
|
Property, plant and equipment:
|
|
|
|
||||
Land, buildings and improvements
|
1,021
|
|
|
1,041
|
|
||
Machinery and equipment
|
3,321
|
|
|
3,236
|
|
||
Total property, plant and equipment
|
$
|
4,342
|
|
|
$
|
4,277
|
|
Less accumulated depreciation
|
2,045
|
|
|
1,986
|
|
||
Property, plant and equipment, net
|
$
|
2,297
|
|
|
$
|
2,291
|
|
Goodwill
|
8,710
|
|
|
8,563
|
|
||
Other intangibles, net
|
4,240
|
|
|
4,163
|
|
||
Noncurrent deferred income tax assets
|
1,631
|
|
|
1,678
|
|
||
Other noncurrent assets
|
1,171
|
|
|
801
|
|
||
Total assets
|
$
|
25,937
|
|
|
$
|
27,229
|
|
|
|
|
|
||||
Liabilities and shareholders' equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable
|
$
|
619
|
|
|
$
|
646
|
|
Accrued compensation
|
531
|
|
|
917
|
|
||
Income taxes payable
|
154
|
|
|
158
|
|
||
Dividend payable
|
192
|
|
|
192
|
|
||
Accrued expenses and other liabilities
|
1,696
|
|
|
1,521
|
|
||
Current maturities of debt
|
521
|
|
|
1,373
|
|
||
Total current liabilities
|
$
|
3,713
|
|
|
$
|
4,807
|
|
Long-term debt, excluding current maturities
|
7,950
|
|
|
8,486
|
|
||
Income taxes
|
1,218
|
|
|
1,228
|
|
||
Other noncurrent liabilities
|
1,363
|
|
|
978
|
|
||
Total liabilities
|
$
|
14,244
|
|
|
$
|
15,499
|
|
Shareholders' equity
|
|
|
|
||||
Common stock, $0.10 par value
|
37
|
|
|
37
|
|
||
Additional paid-in capital
|
1,538
|
|
|
1,559
|
|
||
Retained earnings
|
10,683
|
|
|
10,765
|
|
||
Accumulated other comprehensive loss
|
(565
|
)
|
|
(631
|
)
|
||
Total shareholders' equity
|
$
|
11,693
|
|
|
$
|
11,730
|
|
Total liabilities and shareholders' equity
|
$
|
25,937
|
|
|
$
|
27,229
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
2
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
|
Three Months 2019
|
|
Three Months 2018
|
||||||||
|
Shares
|
Amount
|
|
Shares
|
Amount
|
||||||
Common stock
|
|
|
|
|
|
||||||
Beginning
|
374.4
|
|
$
|
37
|
|
|
374.4
|
|
$
|
37
|
|
Issuance of common stock under stock option and benefit plans
|
1.3
|
|
—
|
|
|
1.2
|
|
—
|
|
||
Repurchase of common stock
|
(1.9
|
)
|
—
|
|
|
(1.9
|
)
|
—
|
|
||
Ending
|
373.8
|
|
$
|
37
|
|
|
373.7
|
|
$
|
37
|
|
Additional paid-in capital
|
|
|
|
|
|
||||||
Beginning
|
|
$
|
1,559
|
|
|
|
$
|
1,496
|
|
||
Issuance of common stock under stock option and benefit plans
|
|
(48
|
)
|
|
|
(32
|
)
|
||||
Repurchase of common stock
|
|
(8
|
)
|
|
|
(7
|
)
|
||||
Share-based compensation
|
|
35
|
|
|
|
29
|
|
||||
Ending
|
|
$
|
1,538
|
|
|
|
$
|
1,486
|
|
||
Retained earnings
|
|
|
|
|
|
||||||
Beginning
|
|
$
|
10,765
|
|
|
|
$
|
8,986
|
|
||
Cumulative effect of accounting changes
|
|
—
|
|
|
|
(759
|
)
|
||||
Net earnings
|
|
412
|
|
|
|
443
|
|
||||
Repurchase of common stock
|
|
(299
|
)
|
|
|
(293
|
)
|
||||
Cash dividends declared
|
|
(195
|
)
|
|
|
(176
|
)
|
||||
Ending
|
|
$
|
10,683
|
|
|
|
$
|
8,201
|
|
||
Accumulated other comprehensive (loss) income
|
|
|
|
|
|
||||||
Beginning
|
|
$
|
(631
|
)
|
|
|
$
|
(553
|
)
|
||
Other comprehensive income (loss)
|
|
66
|
|
|
|
43
|
|
||||
Ending
|
|
$
|
(565
|
)
|
|
|
$
|
(510
|
)
|
||
Total Stryker shareholders' equity
|
|
$
|
11,693
|
|
|
|
$
|
9,214
|
|
||
Non-controlling interest
|
|
|
|
|
|
||||||
Beginning
|
|
$
|
—
|
|
|
|
$
|
14
|
|
||
Interest purchased
|
|
—
|
|
|
|
(6
|
)
|
||||
Net earnings attributable to noncontrolling interest
|
|
—
|
|
|
|
—
|
|
||||
Foreign currency exchange translation adjustment
|
|
—
|
|
|
|
1
|
|
||||
Ending
|
|
$
|
—
|
|
|
|
$
|
9
|
|
||
Total shareholders' equity
|
|
$
|
11,693
|
|
|
|
$
|
9,223
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
3
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
|
Three Months
|
||||||
|
2019
|
|
2018
|
||||
Operating activities
|
|
|
|
||||
Net earnings
|
$
|
412
|
|
|
$
|
443
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
||||
Depreciation
|
76
|
|
|
74
|
|
||
Amortization of intangible assets
|
114
|
|
|
102
|
|
||
Share-based compensation
|
35
|
|
|
29
|
|
||
Recall charges
|
13
|
|
|
4
|
|
||
Sale of inventory stepped-up to fair value at acquisition
|
24
|
|
|
3
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
50
|
|
|
139
|
|
||
Inventories
|
(139
|
)
|
|
(144
|
)
|
||
Accounts payable
|
(12
|
)
|
|
33
|
|
||
Accrued expenses and other liabilities
|
(166
|
)
|
|
(306
|
)
|
||
Recall-related payments
|
(20
|
)
|
|
(28
|
)
|
||
Income taxes
|
9
|
|
|
48
|
|
||
Other, net
|
(83
|
)
|
|
(100
|
)
|
||
Net cash provided by operating activities
|
$
|
313
|
|
|
$
|
297
|
|
Investing activities
|
|
|
|
||||
Acquisitions, net of cash acquired
|
(180
|
)
|
|
(704
|
)
|
||
Purchases of marketable securities
|
(20
|
)
|
|
(77
|
)
|
||
Proceeds from sales of marketable securities
|
19
|
|
|
53
|
|
||
Purchases of property, plant and equipment
|
(122
|
)
|
|
(121
|
)
|
||
Net cash used in investing activities
|
$
|
(303
|
)
|
|
$
|
(849
|
)
|
Financing activities
|
|
|
|
||||
Proceeds and payments on short-term borrowings, net
|
(12
|
)
|
|
99
|
|
||
Proceeds from issuance of long-term debt
|
—
|
|
|
595
|
|
||
Payments on long-term debt
|
(1,341
|
)
|
|
—
|
|
||
Dividends paid
|
(195
|
)
|
|
(176
|
)
|
||
Repurchases of common stock
|
(307
|
)
|
|
(300
|
)
|
||
Cash paid for taxes from withheld shares
|
(97
|
)
|
|
(75
|
)
|
||
Payments to purchase noncontrolling interest
|
—
|
|
|
(5
|
)
|
||
Other financing, net
|
5
|
|
|
7
|
|
||
Net cash (used in) provided by financing activities
|
$
|
(1,947
|
)
|
|
$
|
145
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(5
|
)
|
|
44
|
|
||
Change in cash and cash equivalents
|
$
|
(1,942
|
)
|
|
$
|
(363
|
)
|
Cash and cash equivalents at beginning of period
|
3,616
|
|
|
2,542
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,674
|
|
|
$
|
2,179
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
4
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
Net Sales by Product Line
|
|
|
||||
|
Three Months
|
|||||
|
2019
|
2018
|
||||
Orthopaedics:
|
|
|
||||
Knees
|
$
|
439
|
|
$
|
419
|
|
Hips
|
336
|
|
331
|
|
||
Trauma and Extremities
|
396
|
|
389
|
|
||
Other
|
79
|
|
77
|
|
||
|
$
|
1,250
|
|
$
|
1,216
|
|
MedSurg:
|
|
|
||||
Instruments
|
$
|
478
|
|
$
|
412
|
|
Endoscopy
|
470
|
|
444
|
|
||
Medical
|
531
|
|
511
|
|
||
Sustainability
|
65
|
|
60
|
|
||
|
$
|
1,544
|
|
$
|
1,427
|
|
Neurotechnology and Spine:
|
|
|
||||
Neurotechnology
|
$
|
465
|
|
$
|
410
|
|
Spine
|
257
|
|
188
|
|
||
|
$
|
722
|
|
$
|
598
|
|
Total
|
$
|
3,516
|
|
$
|
3,241
|
|
Net Sales by Geography
|
|
|
|
|
|
||||||||
|
Three Months 2019
|
|
Three Months 2018
|
||||||||||
|
United States
|
International
|
|
United States
|
International
|
||||||||
Orthopaedics:
|
|
|
|
|
|
||||||||
Knees
|
$
|
320
|
|
$
|
119
|
|
|
$
|
301
|
|
$
|
118
|
|
Hips
|
213
|
|
123
|
|
|
205
|
|
126
|
|
||||
Trauma and Extremities
|
254
|
|
142
|
|
|
245
|
|
144
|
|
||||
Other
|
63
|
|
16
|
|
|
63
|
|
14
|
|
||||
|
$
|
850
|
|
$
|
400
|
|
|
$
|
814
|
|
$
|
402
|
|
MedSurg:
|
|
|
|
|
|
||||||||
Instruments
|
$
|
381
|
|
$
|
97
|
|
|
$
|
316
|
|
$
|
96
|
|
Endoscopy
|
376
|
|
94
|
|
|
349
|
|
95
|
|
||||
Medical
|
416
|
|
115
|
|
|
381
|
|
130
|
|
||||
Sustainability
|
64
|
|
1
|
|
|
60
|
|
—
|
|
||||
|
$
|
1,237
|
|
$
|
307
|
|
|
$
|
1,106
|
|
$
|
321
|
|
Neurotechnology and Spine:
|
|
|
|
|
|
||||||||
Neurotechnology
|
$
|
297
|
|
$
|
168
|
|
|
$
|
256
|
|
$
|
154
|
|
Spine
|
195
|
|
62
|
|
|
138
|
|
50
|
|
||||
|
$
|
492
|
|
$
|
230
|
|
|
$
|
394
|
|
$
|
204
|
|
Total
|
$
|
2,579
|
|
$
|
937
|
|
|
$
|
2,314
|
|
$
|
927
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
5
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
Three Months 2019
|
Marketable Securities
|
Pension Plans
|
Hedges
|
Financial Statement Translation
|
Total
|
||||||||||
Beginning
|
$
|
(4
|
)
|
$
|
(137
|
)
|
$
|
50
|
|
$
|
(540
|
)
|
$
|
(631
|
)
|
OCI
|
1
|
|
(6
|
)
|
(19
|
)
|
94
|
|
70
|
|
|||||
Income taxes
|
—
|
|
1
|
|
6
|
|
(9
|
)
|
(2
|
)
|
|||||
Reclassifications to:
|
|
|
|
|
|
||||||||||
Cost of sales
|
—
|
|
—
|
|
(2
|
)
|
—
|
|
(2
|
)
|
|||||
Other expense
|
—
|
|
1
|
|
—
|
|
—
|
|
1
|
|
|||||
Income taxes
|
—
|
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
|||||
Net OCI
|
$
|
1
|
|
$
|
(4
|
)
|
$
|
(16
|
)
|
$
|
85
|
|
$
|
66
|
|
Ending
|
$
|
(3
|
)
|
$
|
(141
|
)
|
$
|
34
|
|
$
|
(455
|
)
|
$
|
(565
|
)
|
Three Months 2018
|
Marketable Securities
|
Pension Plans
|
Hedges
|
Financial Statement Translation
|
Total
|
||||||||||
Beginning
|
$
|
(4
|
)
|
$
|
(134
|
)
|
$
|
28
|
|
$
|
(443
|
)
|
$
|
(553
|
)
|
OCI
|
(1
|
)
|
(10
|
)
|
21
|
|
23
|
|
33
|
|
|||||
Income taxes
|
—
|
|
1
|
|
(5
|
)
|
12
|
|
8
|
|
|||||
Reclassifications to:
|
|
|
|
|
|
||||||||||
Cost of sales
|
—
|
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
|||||
Other expense
|
—
|
|
2
|
|
—
|
|
—
|
|
2
|
|
|||||
Income taxes
|
—
|
|
1
|
|
—
|
|
—
|
|
1
|
|
|||||
Net OCI
|
$
|
(1
|
)
|
$
|
(6
|
)
|
$
|
15
|
|
$
|
35
|
|
$
|
43
|
|
Ending
|
$
|
(5
|
)
|
$
|
(140
|
)
|
$
|
43
|
|
$
|
(408
|
)
|
$
|
(510
|
)
|
March 2019
|
Designated
|
Non-Designated
|
Total
|
||||||
Gross notional amount
|
$
|
844
|
|
$
|
4,529
|
|
$
|
5,373
|
|
Maximum term in days
|
|
|
586
|
|
|||||
Fair value:
|
|
|
|
||||||
Other current assets
|
$
|
8
|
|
$
|
100
|
|
$
|
108
|
|
Other noncurrent assets
|
—
|
|
16
|
|
16
|
|
|||
Other current liabilities
|
(12
|
)
|
(5
|
)
|
(17
|
)
|
|||
Other noncurrent liabilities
|
(1
|
)
|
—
|
|
(1
|
)
|
|||
Total fair value
|
$
|
(5
|
)
|
$
|
111
|
|
$
|
106
|
|
December 2018
|
Designated
|
Non-Designated
|
Total
|
||||||
Gross notional amount
|
$
|
870
|
|
$
|
5,466
|
|
$
|
6,336
|
|
Maximum term in days
|
|
|
586
|
|
|||||
Fair value:
|
|
|
|
||||||
Other current assets
|
$
|
15
|
|
$
|
28
|
|
$
|
43
|
|
Other noncurrent assets
|
1
|
|
33
|
|
34
|
|
|||
Other current liabilities
|
(5
|
)
|
(15
|
)
|
(20
|
)
|
|||
Other noncurrent liabilities
|
—
|
|
—
|
|
—
|
|
|||
Total fair value
|
$
|
11
|
|
$
|
46
|
|
$
|
57
|
|
|
Three Months
|
|||||
Recorded in:
|
2019
|
2018
|
||||
Cost of sales
|
$
|
2
|
|
$
|
1
|
|
Other income (expense), net
|
(2
|
)
|
(2
|
)
|
||
Total
|
$
|
—
|
|
$
|
(1
|
)
|
Assets Measured at Fair Value
|
March
|
December
|
||||
2019
|
2018
|
|||||
Cash and cash equivalents
|
$
|
1,674
|
|
$
|
3,616
|
|
Trading marketable securities
|
132
|
|
118
|
|
||
Level 1 - Assets
|
$
|
1,806
|
|
$
|
3,734
|
|
Available-for-sale marketable securities:
|
|
|
||||
Corporate and asset-backed debt securities
|
$
|
36
|
|
$
|
38
|
|
United States agency debt securities
|
10
|
|
11
|
|
||
United States Treasury debt securities
|
28
|
|
23
|
|
||
Certificates of deposit
|
10
|
|
11
|
|
||
Total available-for-sale marketable securities
|
$
|
84
|
|
$
|
83
|
|
Foreign currency exchange forward contracts
|
124
|
|
77
|
|
||
Level 2 - Assets
|
$
|
208
|
|
$
|
160
|
|
Total assets measured at fair value
|
$
|
2,014
|
|
$
|
3,894
|
|
Liabilities Measured at Fair Value
|
March
|
December
|
||||
2019
|
2018
|
|||||
Deferred compensation arrangements
|
$
|
132
|
|
$
|
118
|
|
Level 1 - Liabilities
|
$
|
132
|
|
$
|
118
|
|
Foreign currency exchange forward contracts
|
$
|
18
|
|
$
|
20
|
|
Level 2 - Liabilities
|
$
|
18
|
|
$
|
20
|
|
Contingent consideration:
|
|
|
||||
Beginning
|
$
|
117
|
|
$
|
32
|
|
Additions
|
128
|
|
77
|
|
||
Change in estimate
|
—
|
|
15
|
|
||
Settlements
|
(1
|
)
|
(7
|
)
|
||
Ending
|
$
|
244
|
|
$
|
117
|
|
Level 3 - Liabilities
|
$
|
244
|
|
$
|
117
|
|
Total liabilities measured at fair value
|
$
|
394
|
|
$
|
255
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
6
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
7
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
•
|
We elected the package of practical expedients available for transition which allow us to not reassess whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.
|
•
|
We did not elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset.
|
•
|
For all asset classes, we elected to not recognize a right-of-use asset and lease liability for short-term leases.
|
•
|
For all asset classes, we elected to not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component.
|
•
|
The determination of the discount rate used in a lease is our incremental borrowing rate which is based on what we would normally pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments.
|
Leases
|
March
|
||
2019
|
|||
Right-of-use assets
|
$
|
355
|
|
Lease liabilities, current
|
89
|
|
|
Lease liabilities, non-current
|
258
|
|
|
|
|
||
Other information
|
|
||
Weighted-average remaining lease term
|
5.5 years
|
|
|
Weighted-average discount rate
|
3.63
|
%
|
|
|
|
||
|
|
||
|
Three Months 2019
|
||
Operating lease cost
|
$
|
34
|
|
Estimated Amortization Expense
|
||||||||||||||
Remainder
of 2019 |
2020
|
2021
|
2022
|
2023
|
||||||||||
$
|
333
|
|
$
|
422
|
|
$
|
409
|
|
$
|
401
|
|
$
|
381
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
8
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
|
Three Months
|
|||||
|
2019
|
2018
|
||||
Orthopaedics
|
$
|
1,250
|
|
$
|
1,216
|
|
MedSurg
|
1,544
|
|
1,427
|
|
||
Neurotechnology and Spine
|
722
|
|
598
|
|
||
Net sales
|
$
|
3,516
|
|
$
|
3,241
|
|
Orthopaedics
|
$
|
437
|
|
$
|
429
|
|
MedSurg
|
377
|
|
301
|
|
||
Neurotechnology and Spine
|
199
|
|
178
|
|
||
Segment operating income
|
$
|
1,013
|
|
$
|
908
|
|
Items not allocated to segments:
|
|
|
||||
Corporate and other
|
(132
|
)
|
(99
|
)
|
||
Acquisition and integration-related charges
|
(138
|
)
|
(17
|
)
|
||
Amortization of intangible assets
|
(114
|
)
|
(102
|
)
|
||
Restructuring-related charges
|
(56
|
)
|
(63
|
)
|
||
Medical device regulations
|
(7
|
)
|
—
|
|
||
Recall-related matters
|
(13
|
)
|
(4
|
)
|
||
Regulatory and legal matters
|
(25
|
)
|
(32
|
)
|
||
Consolidated operating income
|
$
|
528
|
|
$
|
591
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
9
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
Three Months
|
|||||||||||
|
|
|
Percent Net Sales
|
Percentage
|
||||||||
|
2019
|
2018
|
2019
|
2018
|
Change
|
|||||||
Net sales
|
$
|
3,516
|
|
$
|
3,241
|
|
100.0
|
%
|
100.0
|
%
|
8.5
|
%
|
Gross profit
|
2,283
|
|
2,137
|
|
64.9
|
|
65.9
|
|
6.8
|
|
||
Research, development and engineering expenses
|
225
|
|
204
|
|
6.4
|
|
6.3
|
|
10.3
|
|
||
Selling, general and administrative expenses
|
1,403
|
|
1,236
|
|
39.9
|
|
38.1
|
|
13.5
|
|
||
Recall charges
|
13
|
|
4
|
|
0.4
|
|
0.1
|
|
225.0
|
|
||
Amortization of intangible assets
|
114
|
|
102
|
|
3.2
|
|
3.1
|
|
11.8
|
|
||
Other income (expense), net
|
(48
|
)
|
(49
|
)
|
(1.4
|
)
|
(1.5
|
)
|
(2.0
|
)
|
||
Income taxes
|
68
|
|
99
|
|
|
|
(31.3
|
)
|
||||
Net earnings
|
$
|
412
|
|
$
|
443
|
|
11.7
|
%
|
13.7
|
%
|
(7.0
|
)%
|
|
|
|
|
|
|
|||||||
Net earnings per diluted share
|
$
|
1.09
|
|
$
|
1.16
|
|
|
|
(6.0
|
)%
|
||
Adjusted net earnings per diluted share
(1)
|
$
|
1.88
|
|
$
|
1.68
|
|
|
|
11.9
|
%
|
Geographic and Segment Net Sales
|
Three Months
|
|||||||||
|
|
|
Percentage Change
|
|||||||
|
2019
|
2018
|
As Reported
|
Constant
Currency |
||||||
Geographic:
|
|
|
|
|
||||||
United States
|
$
|
2,579
|
|
$
|
2,314
|
|
11.5
|
%
|
11.5
|
%
|
International
|
937
|
|
927
|
|
1.1
|
|
8.3
|
|
||
Total
|
$
|
3,516
|
|
$
|
3,241
|
|
8.5
|
%
|
10.6
|
%
|
Segment:
|
|
|
|
|
||||||
Orthopaedics
|
$
|
1,250
|
|
$
|
1,216
|
|
2.8
|
%
|
5.1
|
%
|
MedSurg
|
1,544
|
|
1,427
|
|
8.2
|
|
10.0
|
|
||
Neurotechnology and Spine
|
722
|
|
598
|
|
20.7
|
|
23.2
|
|
||
Total
|
$
|
3,516
|
|
$
|
3,241
|
|
8.5
|
%
|
10.6
|
%
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
10
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
Supplemental Net Sales Growth Information
|
||||||||||||||||
|
Three Months
|
|||||||||||||||
|
|
Percentage Change
|
||||||||||||||
|
|
|
|
United States
|
International
|
|||||||||||
|
2019
|
2018
|
As Reported
|
Constant Currency
|
As Reported
|
As Reported
|
Constant Currency
|
|||||||||
Orthopaedics:
|
|
|
|
|
|
|
|
|||||||||
Knees
|
$
|
439
|
|
$
|
419
|
|
4.9
|
%
|
7.0
|
%
|
6.6
|
%
|
0.5
|
%
|
8.1
|
%
|
Hips
|
336
|
|
331
|
|
1.5
|
|
4.1
|
|
4.0
|
|
(2.4
|
)
|
4.4
|
|
||
Trauma and Extremities
|
396
|
|
389
|
|
1.7
|
|
4.1
|
|
3.4
|
|
(1.2
|
)
|
5.4
|
|
||
Other
|
79
|
|
77
|
|
2.1
|
|
3.5
|
|
(0.3
|
)
|
12.5
|
|
21.4
|
|
||
|
$
|
1,250
|
|
$
|
1,216
|
|
2.8
|
%
|
5.1
|
%
|
4.4
|
%
|
(0.6
|
)%
|
6.5
|
%
|
MedSurg:
|
|
|
|
|
|
|
|
|||||||||
Instruments
|
$
|
478
|
|
$
|
412
|
|
16.1
|
%
|
18.0
|
%
|
20.6
|
%
|
1.2
|
%
|
8.9
|
%
|
Endoscopy
|
470
|
|
444
|
|
5.7
|
|
7.5
|
|
7.5
|
|
(1.0
|
)
|
7.5
|
|
||
Medical
|
531
|
|
511
|
|
4.0
|
|
5.8
|
|
9.2
|
|
(11.2
|
)
|
(4.6
|
)
|
||
Sustainability
|
65
|
|
60
|
|
9.0
|
|
9.0
|
|
8.4
|
|
117.6
|
|
128.2
|
|
||
|
$
|
1,544
|
|
$
|
1,427
|
|
8.2
|
%
|
10.0
|
%
|
11.9
|
%
|
(4.4
|
)%
|
3.1
|
%
|
Neurotechnology and Spine:
|
|
|
|
|
|
|
||||||||||
Neurotechnology
|
$
|
465
|
|
$
|
410
|
|
13.6
|
%
|
16.1
|
%
|
16.0
|
%
|
9.5
|
%
|
16.2
|
%
|
Spine
|
257
|
|
188
|
|
36.3
|
|
38.6
|
|
40.9
|
|
23.6
|
|
32.0
|
|
||
|
$
|
722
|
|
$
|
598
|
|
20.7
|
%
|
23.2
|
%
|
24.7
|
%
|
12.9
|
%
|
20.1
|
%
|
Total
|
$
|
3,516
|
|
$
|
3,241
|
|
8.5
|
%
|
10.6
|
%
|
11.5
|
%
|
1.1
|
%
|
8.3
|
%
|
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
2,283
|
|
$
|
2,137
|
|
64.9
|
%
|
65.9
|
%
|
Inventory stepped up to fair value
|
24
|
|
6
|
|
0.7
|
|
0.2
|
|
||
Restructuring-related and other charges
|
5
|
|
5
|
|
0.2
|
|
0.2
|
|
||
Medical device regulations
|
—
|
|
1
|
|
—
|
|
—
|
|
||
Adjusted
|
$
|
2,312
|
|
$
|
2,149
|
|
65.8
|
%
|
66.3
|
%
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
1,403
|
|
$
|
1,236
|
|
39.9
|
%
|
38.1
|
%
|
Other acquisition and integration-related
|
(114
|
)
|
(11
|
)
|
(3.2
|
)
|
(0.3
|
)
|
||
Restructuring-related and other charges
|
(52
|
)
|
(58
|
)
|
(1.5
|
)
|
(1.8
|
)
|
||
Regulatory and legal matters
|
(25
|
)
|
(32
|
)
|
(0.7
|
)
|
(1.0
|
)
|
||
Adjusted
|
$
|
1,212
|
|
$
|
1,135
|
|
34.5
|
%
|
35.0
|
%
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
11
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
528
|
|
$
|
591
|
|
15.0
|
%
|
18.2
|
%
|
Inventory stepped up to fair value
|
24
|
|
6
|
|
0.7
|
|
0.2
|
|
||
Other acquisition and integration-related
|
114
|
|
11
|
|
3.2
|
|
0.4
|
|
||
Amortization of purchased intangible assets
|
114
|
|
102
|
|
3.2
|
|
3.2
|
|
||
Restructuring-related and other charges
|
56
|
|
63
|
|
1.6
|
|
1.9
|
|
||
Medical device regulations
|
7
|
|
1
|
|
0.2
|
|
—
|
|
||
Recall-related matters
|
13
|
|
4
|
|
0.4
|
|
0.1
|
|
||
Regulatory and legal matters
|
25
|
|
32
|
|
0.8
|
|
1.0
|
|
||
Adjusted
|
$
|
881
|
|
$
|
810
|
|
25.1
|
%
|
25.0
|
%
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
412
|
|
$
|
443
|
|
11.7
|
%
|
13.7
|
%
|
Inventory stepped up to fair value
|
19
|
|
4
|
|
0.5
|
|
0.1
|
|
||
Other acquisition and integration-related
|
88
|
|
9
|
|
2.5
|
|
0.3
|
|
||
Amortization of purchased intangible assets
|
91
|
|
83
|
|
2.6
|
|
2.6
|
|
||
Restructuring-related and other charges
|
50
|
|
50
|
|
1.5
|
|
1.6
|
|
||
Medical device regulations
|
6
|
|
1
|
|
0.2
|
|
—
|
|
||
Recall-related matters
|
10
|
|
3
|
|
0.3
|
|
0.1
|
|
||
Regulatory and legal matters
|
19
|
|
24
|
|
0.5
|
|
0.7
|
|
||
Tax matters
|
19
|
|
21
|
|
0.5
|
|
0.6
|
|
||
Adjusted
|
$
|
714
|
|
$
|
638
|
|
20.3
|
%
|
19.7
|
%
|
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.
|
Medical Device Regulations.
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 and China regulations for medical devices.
|
5.
|
Recall-related matters
. Our best estimate of the minimum of the range of probable loss to resolve the Rejuvenate, LFIT V40 and other product recalls.
|
6.
|
Regulatory and legal matters
. Our best estimate of the minimum of the range of probable loss to resolve certain regulatory matters and other legal settlements.
|
7.
|
Tax matters
. Charges represent the impact of accounting for certain significant and discrete tax items.
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
12
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
|
Three Months 2018
|
Gross Profit
|
Selling, General & Administrative Expenses
|
Amortization of Intangible Assets
|
Operating Income
|
Net Earnings
|
Effective
Tax Rate |
Diluted EPS
|
|||||||||||||
Reported
|
$
|
2,137
|
|
$
|
1,236
|
|
$
|
102
|
|
$
|
591
|
|
$
|
443
|
|
18.3
|
%
|
$
|
1.16
|
|
Reported percent net sales
|
65.9
|
%
|
38.1
|
%
|
3.1
|
%
|
18.2
|
%
|
13.7
|
%
|
|
|
||||||||
Acquisition and integration-related charges:
|
|
|
|
|
|
|
|
|||||||||||||
Inventory stepped up to fair value
|
6
|
|
—
|
|
—
|
|
6
|
|
4
|
|
0.2
|
|
0.01
|
|
||||||
Other acquisition and integration-related
|
—
|
|
(11
|
)
|
—
|
|
11
|
|
9
|
|
—
|
|
0.02
|
|
||||||
Amortization of purchased intangible assets
|
—
|
|
—
|
|
(102
|
)
|
102
|
|
83
|
|
0.4
|
|
0.22
|
|
||||||
Restructuring-related and other charges
|
5
|
|
(58
|
)
|
—
|
|
63
|
|
50
|
|
0.5
|
|
0.13
|
|
||||||
Medical device regulations
|
1
|
|
—
|
|
—
|
|
1
|
|
1
|
|
—
|
|
—
|
|
||||||
Recall-related matters
|
—
|
|
—
|
|
—
|
|
4
|
|
3
|
|
0.1
|
|
0.01
|
|
||||||
Regulatory and legal matters
|
—
|
|
(32
|
)
|
—
|
|
32
|
|
24
|
|
0.5
|
|
0.07
|
|
||||||
Tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
21
|
|
(3.9
|
)
|
0.06
|
|
||||||
Adjusted
|
$
|
2,149
|
|
$
|
1,135
|
|
$
|
—
|
|
$
|
810
|
|
$
|
638
|
|
16.1
|
%
|
$
|
1.68
|
|
Adjusted percent net sales
|
66.3
|
%
|
35.0
|
%
|
—
|
%
|
25.0
|
%
|
19.7
|
%
|
|
|
|
Three Months
|
2019
|
2018
|
||||
Net cash provided by operating activities
|
$
|
313
|
|
$
|
297
|
|
Net cash used in investing activities
|
(303
|
)
|
(849
|
)
|
||
Net cash (used in) provided by financing activities
|
(1,947
|
)
|
145
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(5
|
)
|
44
|
|
||
Change in cash and cash equivalents
|
$
|
(1,942
|
)
|
$
|
(363
|
)
|
Three Months
|
2019
|
2018
|
||||
Total dividends paid to common shareholders
|
$
|
195
|
|
$
|
176
|
|
Total amount paid to repurchase common stock
|
$
|
307
|
|
$
|
300
|
|
Shares of repurchased common stock (in millions)
|
1.9
|
|
1.9
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
13
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Total Number of Shares
(in millions) |
|
|
|||||||
2019 Period
|
Total Number of Shares Purchased
|
Purchased
as Part of Public Announced Plans |
Average
Price Paid Per Share |
Approximate Dollar Value of Shares that may yet be Purchased Under the Plans
|
||||||
January
|
1.9
|
|
1.9
|
|
$
|
161.35
|
|
$
|
1,033
|
|
February
|
—
|
|
—
|
|
—
|
|
1,033
|
|
||
March
|
—
|
|
—
|
|
—
|
|
$
|
1,033
|
|
|
Total
|
1.9
|
|
1.9
|
|
$
|
161.35
|
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
14
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
ITEM 6.
|
EXHIBITS
|
|
|
15
|
STRYKER CORPORATION
|
|
2019 First Quarter Form 10-Q
|
|
|
|
STRYKER CORPORATION
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
Date:
|
April 24, 2019
|
|
/s/ KEVIN A. LOBO
|
|
|
|
Kevin A. Lobo
|
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
|
|
|
|
Date:
|
April 24, 2019
|
|
/s/ GLENN S. BOEHNLEIN
|
|
|
|
Glenn S. Boehnlein
|
|
|
|
Vice President, Chief Financial Officer
|
|
|
16
|
Date:
|
April 24, 2019
|
/s/ KEVIN A. LOBO
|
|
|
Kevin A. Lobo
|
|
|
Chairman and Chief Executive Officer
|
Date:
|
April 24, 2019
|
/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:
|
April 24, 2019
|
/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:
|
April 24, 2019
|
/s/ GLENN S. BOEHNLEIN
|
|
|
Glenn S. Boehnlein
|
|
|
Vice President, Chief Financial Officer
|