|
|
☒
|
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)
|
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
Common Stock, $.10 Par Value
|
|
SYK
|
|
New York Stock Exchange
|
1.125% Notes due 2023
|
|
SYK23
|
|
New York Stock Exchange
|
2.125% Notes due 2027
|
|
SYK27
|
|
New York Stock Exchange
|
2.625% Notes due 2030
|
|
SYK30
|
|
New York Stock Exchange
|
Floating Rate Notes due 2020
|
|
SYK20A
|
|
New York Stock Exchange
|
|
Large accelerated filer
|
☒
|
|
Accelerated filer
|
☐
|
|
|
Non-accelerated filer
|
☐
|
|
Small reporting company
|
☐
|
|
|
|
|
|
Emerging growth company
|
☐
|
|
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
Three Months
|
|
Six Months
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net sales
|
$
|
3,650
|
|
|
$
|
3,322
|
|
|
$
|
7,166
|
|
|
$
|
6,563
|
|
Cost of sales
|
1,270
|
|
|
1,132
|
|
|
2,503
|
|
|
2,236
|
|
||||
Gross profit
|
$
|
2,380
|
|
|
$
|
2,190
|
|
|
$
|
4,663
|
|
|
$
|
4,327
|
|
Research, development and engineering expenses
|
246
|
|
|
216
|
|
|
471
|
|
|
420
|
|
||||
Selling, general and administrative expenses
|
1,282
|
|
|
1,190
|
|
|
2,685
|
|
|
2,426
|
|
||||
Recall charges
|
117
|
|
|
2
|
|
|
130
|
|
|
6
|
|
||||
Amortization of intangible assets
|
122
|
|
|
110
|
|
|
236
|
|
|
212
|
|
||||
Total operating expenses
|
$
|
1,767
|
|
|
$
|
1,518
|
|
|
$
|
3,522
|
|
|
$
|
3,064
|
|
Operating income
|
$
|
613
|
|
|
$
|
672
|
|
|
$
|
1,141
|
|
|
$
|
1,263
|
|
Other income (expense), net
|
(48
|
)
|
|
(49
|
)
|
|
(96
|
)
|
|
(98
|
)
|
||||
Earnings before income taxes
|
$
|
565
|
|
|
$
|
623
|
|
|
$
|
1,045
|
|
|
$
|
1,165
|
|
Income taxes
|
85
|
|
|
171
|
|
|
153
|
|
|
270
|
|
||||
Net earnings
|
$
|
480
|
|
|
$
|
452
|
|
|
$
|
892
|
|
|
$
|
895
|
|
|
|
|
|
|
|
|
|
||||||||
Net earnings per share of common stock:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
1.29
|
|
|
$
|
1.21
|
|
|
$
|
2.39
|
|
|
$
|
2.39
|
|
Diluted
|
$
|
1.26
|
|
|
$
|
1.19
|
|
|
$
|
2.35
|
|
|
$
|
2.35
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding (in millions):
|
|
|
|
|
|
|
|
||||||||
Basic
|
373.9
|
|
|
373.9
|
|
|
373.6
|
|
|
373.9
|
|
||||
Effect of dilutive employee stock options
|
5.6
|
|
|
6.2
|
|
|
5.8
|
|
|
6.5
|
|
||||
Diluted
|
379.5
|
|
|
380.1
|
|
|
379.4
|
|
|
380.4
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash dividends declared per share of common stock
|
$
|
0.52
|
|
|
$
|
0.47
|
|
|
$
|
1.04
|
|
|
$
|
0.94
|
|
|
Three Months
|
|
Six Months
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net earnings
|
$
|
480
|
|
|
$
|
452
|
|
|
$
|
892
|
|
|
$
|
895
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Marketable securities
|
—
|
|
|
—
|
|
|
1
|
|
|
(1
|
)
|
||||
Pension plans
|
(7
|
)
|
|
8
|
|
|
(11
|
)
|
|
2
|
|
||||
Unrealized gains (losses) on designated hedges
|
3
|
|
|
2
|
|
|
(13
|
)
|
|
17
|
|
||||
Financial statement translation
|
(61
|
)
|
|
(57
|
)
|
|
24
|
|
|
(22
|
)
|
||||
Total other comprehensive income (loss), net of tax
|
$
|
(65
|
)
|
|
$
|
(47
|
)
|
|
$
|
1
|
|
|
$
|
(4
|
)
|
Comprehensive income
|
$
|
415
|
|
|
$
|
405
|
|
|
$
|
893
|
|
|
$
|
891
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
1
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
|
June 30
|
|
December 31
|
||||
|
2019
|
|
2018
|
||||
|
(Unaudited)
|
|
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,754
|
|
|
$
|
3,616
|
|
Marketable securities
|
85
|
|
|
83
|
|
||
Accounts receivable, less allowance of $70 ($64 in 2018)
|
2,408
|
|
|
2,332
|
|
||
Inventories:
|
|
|
|
||||
Materials and supplies
|
652
|
|
|
606
|
|
||
Work in process
|
186
|
|
|
149
|
|
||
Finished goods
|
2,360
|
|
|
2,200
|
|
||
Total inventories
|
$
|
3,198
|
|
|
$
|
2,955
|
|
Prepaid expenses and other current assets
|
740
|
|
|
747
|
|
||
Total current assets
|
$
|
8,185
|
|
|
$
|
9,733
|
|
Property, plant and equipment:
|
|
|
|
||||
Land, buildings and improvements
|
1,057
|
|
|
1,041
|
|
||
Machinery and equipment
|
3,421
|
|
|
3,236
|
|
||
Total property, plant and equipment
|
$
|
4,478
|
|
|
$
|
4,277
|
|
Less accumulated depreciation
|
2,091
|
|
|
1,986
|
|
||
Property, plant and equipment, net
|
$
|
2,387
|
|
|
$
|
2,291
|
|
Goodwill
|
8,762
|
|
|
8,563
|
|
||
Other intangibles, net
|
4,184
|
|
|
4,163
|
|
||
Noncurrent deferred income tax assets
|
1,613
|
|
|
1,678
|
|
||
Other noncurrent assets
|
1,223
|
|
|
801
|
|
||
Total assets
|
$
|
26,354
|
|
|
$
|
27,229
|
|
|
|
|
|
||||
Liabilities and shareholders' equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable
|
$
|
616
|
|
|
$
|
646
|
|
Accrued compensation
|
640
|
|
|
917
|
|
||
Income taxes payable
|
139
|
|
|
158
|
|
||
Dividend payable
|
192
|
|
|
192
|
|
||
Accrued expenses and other liabilities
|
1,820
|
|
|
1,521
|
|
||
Current maturities of debt
|
539
|
|
|
1,373
|
|
||
Total current liabilities
|
$
|
3,946
|
|
|
$
|
4,807
|
|
Long-term debt, excluding current maturities
|
7,974
|
|
|
8,486
|
|
||
Income taxes
|
1,106
|
|
|
1,228
|
|
||
Other noncurrent liabilities
|
1,385
|
|
|
978
|
|
||
Total liabilities
|
$
|
14,411
|
|
|
$
|
15,499
|
|
Shareholders' equity
|
|
|
|
||||
Common stock, $0.10 par value
|
37
|
|
|
37
|
|
||
Additional paid-in capital
|
1,569
|
|
|
1,559
|
|
||
Retained earnings
|
10,967
|
|
|
10,765
|
|
||
Accumulated other comprehensive loss
|
(630
|
)
|
|
(631
|
)
|
||
Total shareholders' equity
|
$
|
11,943
|
|
|
$
|
11,730
|
|
Total liabilities and shareholders' equity
|
$
|
26,354
|
|
|
$
|
27,229
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
2
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
|
Three Months
|
|
Six Months
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Common stock shares outstanding (in millions)
|
|
|
|
|
|
|
|
||||||||
Beginning
|
373.8
|
|
|
373.7
|
|
|
374.4
|
|
|
374.4
|
|
||||
Issuance of common stock under stock option and benefit plans
|
0.3
|
|
|
0.3
|
|
|
1.6
|
|
|
1.5
|
|
||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
(1.9
|
)
|
|
(1.9
|
)
|
||||
Ending
|
374.1
|
|
|
374.0
|
|
|
374.1
|
|
|
374.0
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Common stock
|
|
|
|
|
|
|
|
||||||||
Beginning
|
$
|
37
|
|
|
$
|
37
|
|
|
$
|
37
|
|
|
$
|
37
|
|
Issuance of common stock under stock option and benefit plans
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Ending
|
$
|
37
|
|
|
$
|
37
|
|
|
$
|
37
|
|
|
$
|
37
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
||||||||
Beginning
|
$
|
1,538
|
|
|
$
|
1,486
|
|
|
$
|
1,559
|
|
|
$
|
1,496
|
|
Issuance of common stock under stock option and benefit plans
|
3
|
|
|
(11
|
)
|
|
(45
|
)
|
|
(43
|
)
|
||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
(7
|
)
|
||||
Share-based compensation
|
28
|
|
|
28
|
|
|
63
|
|
|
57
|
|
||||
Ending
|
$
|
1,569
|
|
|
$
|
1,503
|
|
|
$
|
1,569
|
|
|
$
|
1,503
|
|
Retained earnings
|
|
|
|
|
|
|
|
||||||||
Beginning
|
$
|
10,683
|
|
|
$
|
8,201
|
|
|
$
|
10,765
|
|
|
$
|
8,986
|
|
Cumulative effect of accounting changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(759
|
)
|
||||
Net earnings
|
480
|
|
|
452
|
|
|
892
|
|
|
895
|
|
||||
Repurchase of common stock
|
—
|
|
|
—
|
|
|
(299
|
)
|
|
(293
|
)
|
||||
Cash dividends declared
|
(196
|
)
|
|
(176
|
)
|
|
(391
|
)
|
|
(352
|
)
|
||||
Ending
|
$
|
10,967
|
|
|
$
|
8,477
|
|
|
$
|
10,967
|
|
|
$
|
8,477
|
|
Accumulated other comprehensive (loss) income
|
|
|
|
|
|
|
|
||||||||
Beginning
|
$
|
(565
|
)
|
|
$
|
(510
|
)
|
|
$
|
(631
|
)
|
|
$
|
(553
|
)
|
Other comprehensive income (loss)
|
(65
|
)
|
|
(47
|
)
|
|
1
|
|
|
(4
|
)
|
||||
Ending
|
$
|
(630
|
)
|
|
$
|
(557
|
)
|
|
$
|
(630
|
)
|
|
$
|
(557
|
)
|
Total Stryker shareholders' equity
|
$
|
11,943
|
|
|
$
|
9,460
|
|
|
$
|
11,943
|
|
|
$
|
9,460
|
|
Non-controlling interest
|
|
|
|
|
|
|
|
||||||||
Beginning
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
14
|
|
Interest purchased
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
(15
|
)
|
||||
Net earnings attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Foreign currency exchange translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Ending
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total shareholders' equity
|
$
|
11,943
|
|
|
$
|
9,460
|
|
|
$
|
11,943
|
|
|
$
|
9,460
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
3
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
|
Six Months
|
||||||
|
2019
|
|
2018
|
||||
Operating activities
|
|
|
|
||||
Net earnings
|
$
|
892
|
|
|
$
|
895
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
||||
Depreciation
|
153
|
|
|
150
|
|
||
Amortization of intangible assets
|
236
|
|
|
212
|
|
||
Share-based compensation
|
63
|
|
|
57
|
|
||
Recall charges
|
130
|
|
|
6
|
|
||
Sale of inventory stepped-up to fair value at acquisition
|
38
|
|
|
11
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(72
|
)
|
|
115
|
|
||
Inventories
|
(285
|
)
|
|
(294
|
)
|
||
Accounts payable
|
(16
|
)
|
|
65
|
|
||
Accrued expenses and other liabilities
|
(76
|
)
|
|
(190
|
)
|
||
Recall-related payments
|
(34
|
)
|
|
(68
|
)
|
||
Income taxes
|
(86
|
)
|
|
(47
|
)
|
||
Other, net
|
(116
|
)
|
|
34
|
|
||
Net cash provided by operating activities
|
$
|
827
|
|
|
$
|
946
|
|
Investing activities
|
|
|
|
||||
Acquisitions, net of cash acquired
|
(260
|
)
|
|
(767
|
)
|
||
Purchases of marketable securities
|
(37
|
)
|
|
(145
|
)
|
||
Proceeds from sales of marketable securities
|
34
|
|
|
117
|
|
||
Purchases of property, plant and equipment
|
(287
|
)
|
|
(278
|
)
|
||
Net cash used in investing activities
|
$
|
(550
|
)
|
|
$
|
(1,073
|
)
|
Financing activities
|
|
|
|
||||
Proceeds (payments) on short-term borrowings, net
|
6
|
|
|
(7
|
)
|
||
Proceeds from issuance of long-term debt
|
—
|
|
|
595
|
|
||
Payments on long-term debt
|
(1,341
|
)
|
|
(600
|
)
|
||
Dividends paid
|
(390
|
)
|
|
(352
|
)
|
||
Repurchases of common stock
|
(307
|
)
|
|
(300
|
)
|
||
Cash paid for taxes from withheld shares
|
(111
|
)
|
|
(96
|
)
|
||
Payments to purchase noncontrolling interest
|
—
|
|
|
(14
|
)
|
||
Other financing, net
|
8
|
|
|
2
|
|
||
Net cash (used in) provided by financing activities
|
$
|
(2,135
|
)
|
|
$
|
(772
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
(4
|
)
|
|
(2
|
)
|
||
Change in cash and cash equivalents
|
$
|
(1,862
|
)
|
|
$
|
(901
|
)
|
Cash and cash equivalents at beginning of period
|
3,616
|
|
|
2,542
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,754
|
|
|
$
|
1,641
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
4
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
Net Sales by Product Line
|
|
|
|
|
|
||||||||
|
Three Months
|
|
Six Months
|
||||||||||
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Orthopaedics:
|
|
|
|
|
|
||||||||
Knees
|
$
|
440
|
|
$
|
422
|
|
|
$
|
879
|
|
$
|
841
|
|
Hips
|
343
|
|
336
|
|
|
679
|
|
667
|
|
||||
Trauma and Extremities
|
394
|
|
387
|
|
|
790
|
|
776
|
|
||||
Other
|
96
|
|
83
|
|
|
175
|
|
160
|
|
||||
|
$
|
1,273
|
|
$
|
1,228
|
|
|
$
|
2,523
|
|
$
|
2,444
|
|
MedSurg:
|
|
|
|
|
|
||||||||
Instruments
|
$
|
520
|
|
$
|
438
|
|
|
$
|
998
|
|
$
|
850
|
|
Endoscopy
|
480
|
|
448
|
|
|
950
|
|
892
|
|
||||
Medical
|
542
|
|
505
|
|
|
1,073
|
|
1,016
|
|
||||
Sustainability
|
75
|
|
64
|
|
|
140
|
|
124
|
|
||||
|
$
|
1,617
|
|
$
|
1,455
|
|
|
$
|
3,161
|
|
$
|
2,882
|
|
Neurotechnology and Spine:
|
|
|
|
|
|
||||||||
Neurotechnology
|
$
|
483
|
|
$
|
437
|
|
|
$
|
948
|
|
$
|
847
|
|
Spine
|
277
|
|
202
|
|
|
534
|
|
390
|
|
||||
|
$
|
760
|
|
$
|
639
|
|
|
$
|
1,482
|
|
$
|
1,237
|
|
Total
|
$
|
3,650
|
|
$
|
3,322
|
|
|
$
|
7,166
|
|
$
|
6,563
|
|
Net Sales by Geography
|
|
|
|
|
|
||||||||
|
Three Months 2019
|
|
Three Months 2018
|
||||||||||
|
United States
|
International
|
|
United States
|
International
|
||||||||
Orthopaedics:
|
|
|
|
|
|
||||||||
Knees
|
$
|
324
|
|
$
|
116
|
|
|
$
|
304
|
|
$
|
118
|
|
Hips
|
219
|
|
124
|
|
|
207
|
|
129
|
|
||||
Trauma and Extremities
|
252
|
|
142
|
|
|
242
|
|
145
|
|
||||
Other
|
79
|
|
17
|
|
|
68
|
|
15
|
|
||||
|
$
|
874
|
|
$
|
399
|
|
|
$
|
821
|
|
$
|
407
|
|
MedSurg:
|
|
|
|
|
|
||||||||
Instruments
|
$
|
414
|
|
$
|
106
|
|
|
$
|
339
|
|
$
|
99
|
|
Endoscopy
|
383
|
|
97
|
|
|
354
|
|
94
|
|
||||
Medical
|
430
|
|
112
|
|
|
384
|
|
121
|
|
||||
Sustainability
|
75
|
|
—
|
|
|
63
|
|
1
|
|
||||
|
$
|
1,302
|
|
$
|
315
|
|
|
$
|
1,140
|
|
$
|
315
|
|
Neurotechnology and Spine:
|
|
|
|
|
|
||||||||
Neurotechnology
|
$
|
311
|
|
$
|
172
|
|
|
$
|
280
|
|
$
|
158
|
|
Spine
|
208
|
|
69
|
|
|
144
|
|
57
|
|
||||
|
$
|
519
|
|
$
|
241
|
|
|
$
|
424
|
|
$
|
215
|
|
Total
|
$
|
2,695
|
|
$
|
955
|
|
|
$
|
2,385
|
|
$
|
937
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
5
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
Net Sales by Geography
|
|
|
|
|
|
||||||||
|
Six Months 2019
|
|
Six Months 2018
|
||||||||||
|
United States
|
International
|
|
United States
|
International
|
||||||||
Orthopaedics:
|
|
|
|
|
|
||||||||
Knees
|
$
|
644
|
|
$
|
235
|
|
|
$
|
605
|
|
$
|
236
|
|
Hips
|
432
|
|
247
|
|
|
412
|
|
255
|
|
||||
Trauma and Extremities
|
506
|
|
284
|
|
|
487
|
|
289
|
|
||||
Other
|
142
|
|
33
|
|
|
131
|
|
29
|
|
||||
|
$
|
1,724
|
|
$
|
799
|
|
|
$
|
1,635
|
|
$
|
809
|
|
MedSurg:
|
|
|
|
|
|
||||||||
Instruments
|
$
|
795
|
|
$
|
203
|
|
|
$
|
655
|
|
$
|
195
|
|
Endoscopy
|
759
|
|
191
|
|
|
703
|
|
189
|
|
||||
Medical
|
846
|
|
227
|
|
|
765
|
|
251
|
|
||||
Sustainability
|
139
|
|
1
|
|
|
123
|
|
1
|
|
||||
|
$
|
2,539
|
|
$
|
622
|
|
|
$
|
2,246
|
|
$
|
636
|
|
Neurotechnology and Spine:
|
|
|
|
|
|
||||||||
Neurotechnology
|
$
|
608
|
|
$
|
340
|
|
|
$
|
536
|
|
$
|
312
|
|
Spine
|
403
|
|
131
|
|
|
282
|
|
107
|
|
||||
|
$
|
1,011
|
|
$
|
471
|
|
|
$
|
818
|
|
$
|
419
|
|
Total
|
$
|
5,274
|
|
$
|
1,892
|
|
|
$
|
4,699
|
|
$
|
1,864
|
|
Three Months 2019
|
Marketable Securities
|
Pension Plans
|
Hedges
|
Financial Statement Translation
|
Total
|
||||||||||
Beginning
|
$
|
(3
|
)
|
$
|
(141
|
)
|
$
|
34
|
|
$
|
(455
|
)
|
$
|
(565
|
)
|
OCI
|
—
|
|
(10
|
)
|
3
|
|
(66
|
)
|
(73
|
)
|
|||||
Income taxes
|
—
|
|
2
|
|
2
|
|
5
|
|
9
|
|
|||||
Reclassifications to:
|
|
|
|
|
|
||||||||||
Other expense
|
—
|
|
2
|
|
—
|
|
—
|
|
2
|
|
|||||
Income taxes
|
—
|
|
(1
|
)
|
(2
|
)
|
—
|
|
(3
|
)
|
|||||
Net OCI
|
$
|
—
|
|
$
|
(7
|
)
|
$
|
3
|
|
$
|
(61
|
)
|
$
|
(65
|
)
|
Ending
|
$
|
(3
|
)
|
$
|
(148
|
)
|
$
|
37
|
|
$
|
(516
|
)
|
$
|
(630
|
)
|
Three Months 2018
|
Marketable Securities
|
Pension Plans
|
Hedges
|
Financial Statement Translation
|
Total
|
||||||||||
Beginning
|
$
|
(5
|
)
|
$
|
(140
|
)
|
$
|
43
|
|
$
|
(408
|
)
|
$
|
(510
|
)
|
OCI
|
(1
|
)
|
6
|
|
3
|
|
(57
|
)
|
(49
|
)
|
|||||
Income taxes
|
—
|
|
2
|
|
(1
|
)
|
—
|
|
1
|
|
|||||
Reclassifications to:
|
|
|
|
|
|
||||||||||
Cost of sales
|
—
|
|
—
|
|
(1
|
)
|
—
|
|
(1
|
)
|
|||||
Other income
|
1
|
|
2
|
|
—
|
|
—
|
|
3
|
|
|||||
Income taxes
|
—
|
|
(2
|
)
|
1
|
|
—
|
|
(1
|
)
|
|||||
Net OCI
|
$
|
—
|
|
$
|
8
|
|
$
|
2
|
|
$
|
(57
|
)
|
$
|
(47
|
)
|
Ending
|
$
|
(5
|
)
|
$
|
(132
|
)
|
$
|
45
|
|
$
|
(465
|
)
|
$
|
(557
|
)
|
Six Months 2019
|
Marketable Securities
|
Pension Plans
|
Hedges
|
Financial Statement Translation
|
Total
|
||||||||||
Beginning
|
$
|
(4
|
)
|
$
|
(137
|
)
|
$
|
50
|
|
$
|
(540
|
)
|
$
|
(631
|
)
|
OCI
|
1
|
|
(16
|
)
|
(16
|
)
|
28
|
|
(3
|
)
|
|||||
Income taxes
|
—
|
|
3
|
|
8
|
|
(4
|
)
|
7
|
|
|||||
Reclassifications to:
|
|
|
|
|
|
||||||||||
Cost of sales
|
—
|
|
—
|
|
(2
|
)
|
—
|
|
(2
|
)
|
|||||
Other expense
|
—
|
|
3
|
|
—
|
|
—
|
|
3
|
|
|||||
Income taxes
|
—
|
|
(1
|
)
|
(3
|
)
|
—
|
|
(4
|
)
|
|||||
Net OCI
|
$
|
1
|
|
$
|
(11
|
)
|
$
|
(13
|
)
|
$
|
24
|
|
$
|
1
|
|
Ending
|
$
|
(3
|
)
|
$
|
(148
|
)
|
$
|
37
|
|
$
|
(516
|
)
|
$
|
(630
|
)
|
Six Months 2018
|
Marketable Securities
|
Pension Plans
|
Hedges
|
Financial Statement Translation
|
Total
|
||||||||||
Beginning
|
$
|
(4
|
)
|
$
|
(134
|
)
|
$
|
28
|
|
$
|
(443
|
)
|
$
|
(553
|
)
|
OCI
|
(2
|
)
|
(4
|
)
|
24
|
|
(34
|
)
|
(16
|
)
|
|||||
Income taxes
|
—
|
|
3
|
|
(6
|
)
|
12
|
|
9
|
|
|||||
Reclassifications to:
|
|
|
|
|
|
||||||||||
Cost of sales
|
—
|
|
—
|
|
(2
|
)
|
—
|
|
(2
|
)
|
|||||
Other income
|
1
|
|
4
|
|
—
|
|
—
|
|
5
|
|
|||||
Income taxes
|
—
|
|
(1
|
)
|
1
|
|
—
|
|
—
|
|
|||||
Net OCI
|
$
|
(1
|
)
|
$
|
2
|
|
$
|
17
|
|
$
|
(22
|
)
|
$
|
(4
|
)
|
Ending
|
$
|
(5
|
)
|
$
|
(132
|
)
|
$
|
45
|
|
$
|
(465
|
)
|
$
|
(557
|
)
|
June 2019
|
Designated
|
Non-Designated
|
Total
|
||||||
Gross notional amount
|
$
|
842
|
|
$
|
4,928
|
|
$
|
5,770
|
|
Maximum term in days
|
|
|
586
|
|
|||||
Fair value:
|
|
|
|
||||||
Other current assets
|
$
|
9
|
|
$
|
93
|
|
$
|
102
|
|
Other noncurrent assets
|
1
|
|
—
|
|
1
|
|
|||
Other current liabilities
|
(8
|
)
|
(15
|
)
|
(23
|
)
|
|||
Other noncurrent liabilities
|
(1
|
)
|
—
|
|
(1
|
)
|
|||
Total fair value
|
$
|
1
|
|
$
|
78
|
|
$
|
79
|
|
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
|
)
|
|||
Total fair value
|
$
|
11
|
|
$
|
46
|
|
$
|
57
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
6
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
|
Three Months
|
|
Six Months
|
||||||||||
Recorded in:
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Cost of sales
|
$
|
—
|
|
$
|
1
|
|
|
$
|
2
|
|
$
|
2
|
|
Other income (expense), net
|
(2
|
)
|
(2
|
)
|
|
(4
|
)
|
(4
|
)
|
||||
Total
|
$
|
(2
|
)
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
$
|
(2
|
)
|
Assets Measured at Fair Value
|
June
|
December
|
||||
2019
|
2018
|
|||||
Cash and cash equivalents
|
$
|
1,754
|
|
$
|
3,616
|
|
Trading marketable securities
|
139
|
|
118
|
|
||
Level 1 - Assets
|
$
|
1,893
|
|
$
|
3,734
|
|
Available-for-sale marketable securities:
|
|
|
||||
Corporate and asset-backed debt securities
|
$
|
38
|
|
$
|
38
|
|
United States agency debt securities
|
6
|
|
11
|
|
||
United States Treasury debt securities
|
32
|
|
23
|
|
||
Certificates of deposit
|
9
|
|
11
|
|
||
Total available-for-sale marketable securities
|
$
|
85
|
|
$
|
83
|
|
Foreign currency exchange forward contracts
|
103
|
|
77
|
|
||
Level 2 - Assets
|
$
|
188
|
|
$
|
160
|
|
Total assets measured at fair value
|
$
|
2,081
|
|
$
|
3,894
|
|
Liabilities Measured at Fair Value
|
June
|
December
|
||||
2019
|
2018
|
|||||
Deferred compensation arrangements
|
$
|
139
|
|
$
|
118
|
|
Level 1 - Liabilities
|
$
|
139
|
|
$
|
118
|
|
Foreign currency exchange forward contracts
|
$
|
24
|
|
$
|
20
|
|
Level 2 - Liabilities
|
$
|
24
|
|
$
|
20
|
|
Contingent consideration:
|
|
|
||||
Beginning
|
$
|
117
|
|
$
|
32
|
|
Additions
|
165
|
|
77
|
|
||
Change in estimate
|
(2
|
)
|
15
|
|
||
Settlements
|
(9
|
)
|
(7
|
)
|
||
Ending
|
$
|
271
|
|
$
|
117
|
|
Level 3 - Liabilities
|
$
|
271
|
|
$
|
117
|
|
Total liabilities measured at fair value
|
$
|
434
|
|
$
|
255
|
|
Fair Value of Available for Sale Securities by Maturity
|
||||||
|
June 2019
|
December 2018
|
||||
Due in one year or less
|
$
|
44
|
|
$
|
51
|
|
Due after one year through three years
|
$
|
41
|
|
$
|
32
|
|
Securities in a Continuous Unrealized Loss Position
|
||||
|
Number of Investments
|
Fair Value
|
||
Corporate and asset-backed
|
19
|
$
|
10
|
|
United States agency
|
4
|
4
|
|
|
United States Treasury
|
5
|
6
|
|
|
Total
|
28
|
$
|
20
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
7
|
STRYKER CORPORATION
|
|
2019 Second 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
|
|
|
June
|
||||
|
|
2019
|
|||||
Right-of-use assets
|
|
|
$
|
357
|
|
||
Lease liabilities, current
|
|
|
$
|
88
|
|
||
Lease liabilities, non-current
|
|
|
$
|
269
|
|
||
|
|
|
|
||||
Other information
|
|
|
|
||||
Weighted-average remaining lease term
|
|
|
5.9 years
|
|
|||
Weighted-average discount rate
|
|
|
3.44
|
%
|
|||
|
|
|
|
||||
|
|
|
|
||||
|
Three Months 2019
|
|
Six Months 2019
|
||||
Operating lease cost
|
$
|
34
|
|
|
68
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
8
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
|
Three Months
|
|
Six Months
|
||||||||||
|
2019
|
2018
|
|
2019
|
2018
|
||||||||
Orthopaedics
|
$
|
1,273
|
|
$
|
1,228
|
|
|
$
|
2,523
|
|
$
|
2,444
|
|
MedSurg
|
1,617
|
|
1,455
|
|
|
3,161
|
|
2,882
|
|
||||
Neurotechnology and Spine
|
760
|
|
639
|
|
|
1,482
|
|
1,237
|
|
||||
Net sales
|
$
|
3,650
|
|
$
|
3,322
|
|
|
$
|
7,166
|
|
$
|
6,563
|
|
Orthopaedics
|
$
|
448
|
|
$
|
437
|
|
|
$
|
885
|
|
$
|
866
|
|
MedSurg
|
404
|
|
326
|
|
|
781
|
|
627
|
|
||||
Neurotechnology and Spine
|
214
|
|
181
|
|
|
413
|
|
359
|
|
||||
Segment operating income
|
$
|
1,066
|
|
$
|
944
|
|
|
$
|
2,079
|
|
$
|
1,852
|
|
Items not allocated to segments:
|
|
|
|
|
|
||||||||
Corporate and other
|
(122
|
)
|
(89
|
)
|
|
(254
|
)
|
(187
|
)
|
||||
Acquisition and integration-related charges
|
(53
|
)
|
(24
|
)
|
|
(191
|
)
|
(41
|
)
|
||||
Amortization of intangible assets
|
(122
|
)
|
(110
|
)
|
|
(236
|
)
|
(212
|
)
|
||||
Restructuring-related charges
|
(42
|
)
|
(22
|
)
|
|
(98
|
)
|
(85
|
)
|
||||
Medical device regulations
|
(12
|
)
|
(2
|
)
|
|
(19
|
)
|
(3
|
)
|
||||
Recall-related matters
|
(117
|
)
|
(2
|
)
|
|
(130
|
)
|
(6
|
)
|
||||
Regulatory and legal matters
|
15
|
|
(23
|
)
|
|
(10
|
)
|
(55
|
)
|
||||
Consolidated operating income
|
$
|
613
|
|
$
|
672
|
|
|
$
|
1,141
|
|
$
|
1,263
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
9
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
Three Months
|
|
Six Months
|
||||||||||||||||||||||
|
|
|
Percent Net Sales
|
Percentage
|
|
|
|
Percent Net Sales
|
Percentage
|
||||||||||||||||
|
2019
|
2018
|
2019
|
2018
|
Change
|
|
2019
|
2018
|
2019
|
2018
|
Change
|
||||||||||||||
Net sales
|
$
|
3,650
|
|
$
|
3,322
|
|
100.0
|
%
|
100.0
|
%
|
9.9
|
%
|
|
$
|
7,166
|
|
$
|
6,563
|
|
100.0
|
%
|
100.0
|
%
|
9.2
|
%
|
Gross profit
|
2,380
|
|
2,190
|
|
65.2
|
|
65.9
|
|
8.7
|
|
|
4,663
|
|
4,327
|
|
65.1
|
|
65.9
|
|
7.8
|
|
||||
Research, development and engineering expenses
|
246
|
|
216
|
|
6.7
|
|
6.5
|
|
13.9
|
|
|
471
|
|
420
|
|
6.6
|
|
6.4
|
|
12.1
|
|
||||
Selling, general and administrative expenses
|
1,282
|
|
1,190
|
|
35.1
|
|
35.8
|
|
7.7
|
|
|
2,685
|
|
2,426
|
|
37.5
|
|
37.0
|
|
10.7
|
|
||||
Recall charges
|
117
|
|
2
|
|
3.2
|
|
0.1
|
|
nm
|
|
|
130
|
|
6
|
|
1.8
|
|
0.1
|
|
nm
|
|
||||
Amortization of intangible assets
|
122
|
|
110
|
|
3.3
|
|
3.3
|
|
10.9
|
|
|
236
|
|
212
|
|
3.3
|
|
3.2
|
|
11.3
|
|
||||
Other income (expense), net
|
(48
|
)
|
(49
|
)
|
(1.3
|
)
|
(1.5
|
)
|
(2.0
|
)
|
|
(96
|
)
|
(98
|
)
|
(1.3
|
)
|
(1.5
|
)
|
(2.0
|
)
|
||||
Income taxes
|
85
|
|
171
|
|
|
|
(50.3
|
)
|
|
153
|
|
270
|
|
|
|
(43.3
|
)
|
||||||||
Net earnings
|
$
|
480
|
|
$
|
452
|
|
13.2
|
%
|
13.6
|
%
|
6.2
|
%
|
|
$
|
892
|
|
$
|
895
|
|
12.4
|
%
|
13.6
|
%
|
(0.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net earnings per diluted share
|
$
|
1.26
|
|
$
|
1.19
|
|
|
|
5.9
|
%
|
|
$
|
2.35
|
|
$
|
2.35
|
|
|
|
—
|
|
||||
Adjusted net earnings per diluted share(1)
|
$
|
1.98
|
|
$
|
1.76
|
|
|
|
12.5
|
%
|
|
$
|
3.86
|
|
$
|
3.44
|
|
|
|
12.2
|
%
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
10
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
Geographic and Segment Net Sales
|
Three Months
|
|
Six Months
|
||||||||||||||||||
|
|
|
Percentage Change
|
|
|
|
Percentage Change
|
||||||||||||||
|
2019
|
2018
|
As Reported
|
Constant
Currency |
|
2019
|
2018
|
As Reported
|
Constant
Currency |
||||||||||||
Geographic:
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
$
|
2,695
|
|
$
|
2,385
|
|
13.0
|
%
|
13.0
|
%
|
|
$
|
5,274
|
|
$
|
4,699
|
|
12.2
|
%
|
12.2
|
%
|
International
|
955
|
|
937
|
|
1.9
|
|
7.8
|
|
|
1,892
|
|
1,864
|
|
1.5
|
|
8.0
|
|
||||
Total
|
$
|
3,650
|
|
$
|
3,322
|
|
9.9
|
%
|
11.5
|
%
|
|
$
|
7,166
|
|
$
|
6,563
|
|
9.2
|
%
|
11.1
|
%
|
Segment:
|
|
|
|
|
|
|
|
|
|
||||||||||||
Orthopaedics
|
$
|
1,273
|
|
$
|
1,228
|
|
3.7
|
%
|
5.6
|
%
|
|
$
|
2,523
|
|
$
|
2,444
|
|
3.2
|
%
|
5.3
|
%
|
MedSurg
|
1,617
|
|
1,455
|
|
11.1
|
|
12.5
|
|
|
3,161
|
|
2,882
|
|
9.7
|
|
11.3
|
|
||||
Neurotechnology and Spine
|
760
|
|
639
|
|
18.9
|
|
20.8
|
|
|
1,482
|
|
1,237
|
|
19.8
|
|
22.0
|
|
||||
Total
|
$
|
3,650
|
|
$
|
3,322
|
|
9.9
|
%
|
11.5
|
%
|
|
$
|
7,166
|
|
$
|
6,563
|
|
9.2
|
%
|
11.1
|
%
|
Supplemental Net Sales Growth Information
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
|
Three Months
|
|
Six Months
|
||||||||||||||||||||||||||||||
|
|
Percentage Change
|
|
|
Percentage Change
|
||||||||||||||||||||||||||||
|
|
|
|
United States
|
International
|
|
|
|
|
United States
|
International
|
||||||||||||||||||||||
|
2019
|
2018
|
As Reported
|
Constant Currency
|
As Reported
|
As Reported
|
Constant Currency
|
|
2019
|
2018
|
As Reported
|
Constant Currency
|
As Reported
|
As Reported
|
Constant Currency
|
||||||||||||||||||
Orthopaedics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Knees
|
$
|
440
|
|
$
|
422
|
|
4.2
|
%
|
5.8
|
%
|
6.6
|
%
|
(2.0
|
)%
|
3.8
|
%
|
|
$
|
879
|
|
$
|
841
|
|
4.5
|
%
|
6.4
|
%
|
6.6
|
%
|
(0.8
|
)%
|
5.9
|
%
|
Hips
|
343
|
|
336
|
|
1.9
|
|
4.0
|
|
5.4
|
|
(3.6
|
)
|
1.8
|
|
|
679
|
|
667
|
|
1.7
|
|
4.1
|
|
4.7
|
|
(3.0
|
)
|
3.1
|
|
||||
Trauma and Extremities
|
394
|
|
387
|
|
2.0
|
|
4.0
|
|
4.5
|
|
(2.1
|
)
|
3.2
|
|
|
790
|
|
776
|
|
1.8
|
|
4.1
|
|
3.9
|
|
(1.7
|
)
|
4.3
|
|
||||
Other
|
96
|
|
83
|
|
16.6
|
|
17.9
|
|
17.4
|
|
13.4
|
|
20.1
|
|
|
175
|
|
160
|
|
9.6
|
|
10.9
|
|
8.8
|
|
13.0
|
|
20.7
|
|
||||
|
$
|
1,273
|
|
$
|
1,228
|
|
3.7
|
%
|
5.6
|
%
|
6.5
|
%
|
(2.0
|
)%
|
3.6
|
%
|
|
$
|
2,523
|
|
$
|
2,444
|
|
3.2
|
%
|
5.3
|
%
|
5.5
|
%
|
(1.3
|
)%
|
5.0
|
%
|
MedSurg:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Instruments
|
$
|
520
|
|
$
|
438
|
|
18.8
|
%
|
20.3
|
%
|
22.4
|
%
|
6.4
|
%
|
12.8
|
%
|
|
$
|
998
|
|
$
|
850
|
|
17.5
|
%
|
19.2
|
%
|
21.6
|
%
|
3.9
|
%
|
10.9
|
%
|
Endoscopy
|
480
|
|
448
|
|
7.3
|
|
8.9
|
|
8.4
|
|
3.2
|
|
10.9
|
|
|
950
|
|
892
|
|
6.5
|
|
8.2
|
|
8.0
|
|
1.1
|
|
9.2
|
|
||||
Medical
|
542
|
|
505
|
|
7.1
|
|
8.5
|
|
11.9
|
|
(8.1
|
)
|
(2.5
|
)
|
|
1,073
|
|
1,016
|
|
5.6
|
|
7.2
|
|
10.6
|
|
(9.7
|
)
|
(3.6
|
)
|
||||
Sustainability
|
75
|
|
64
|
|
16.4
|
|
16.4
|
|
16.0
|
|
75.9
|
|
82.6
|
|
|
140
|
|
124
|
|
12.8
|
|
12.8
|
|
12.3
|
|
95.0
|
|
103.3
|
|
||||
|
$
|
1,617
|
|
$
|
1,455
|
|
11.1
|
%
|
12.5
|
%
|
14.2
|
%
|
—
|
%
|
6.4
|
%
|
|
$
|
3,161
|
|
$
|
2,882
|
|
9.7
|
%
|
11.3
|
%
|
13.1
|
%
|
(2.2
|
)%
|
4.8
|
%
|
Neurotechnology and Spine:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Neurotechnology
|
$
|
483
|
|
$
|
437
|
|
10.3
|
%
|
12.2
|
%
|
11.2
|
%
|
8.7
|
%
|
14.1
|
%
|
|
$
|
948
|
|
$
|
847
|
|
11.9
|
%
|
14.1
|
%
|
13.5
|
%
|
9.1
|
%
|
15.1
|
%
|
Spine
|
277
|
|
202
|
|
37.5
|
|
39.3
|
|
43.8
|
|
21.5
|
|
27.7
|
|
|
534
|
|
390
|
|
36.9
|
|
39.0
|
|
42.4
|
|
22.5
|
|
29.7
|
|
||||
|
$
|
760
|
|
$
|
639
|
|
18.9
|
%
|
20.8
|
%
|
22.3
|
%
|
12.1
|
%
|
17.7
|
%
|
|
$
|
1,482
|
|
$
|
1,237
|
|
19.8
|
%
|
22.0
|
%
|
23.5
|
%
|
12.5
|
%
|
18.9
|
%
|
Total
|
$
|
3,650
|
|
$
|
3,322
|
|
9.9
|
%
|
11.5
|
%
|
13.0
|
%
|
1.9
|
%
|
7.8
|
%
|
|
$
|
7,166
|
|
$
|
6,563
|
|
9.2
|
%
|
11.1
|
%
|
12.2
|
%
|
1.5
|
%
|
8.0
|
%
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
11
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
2,380
|
|
$
|
2,190
|
|
65.2
|
%
|
65.9
|
%
|
Inventory stepped up to fair value
|
14
|
|
5
|
|
0.4
|
|
0.2
|
|
||
Restructuring-related and other charges
|
6
|
|
—
|
|
0.2
|
|
—
|
|
||
Medical device regulations
|
1
|
|
—
|
|
—
|
|
—
|
|
||
Adjusted
|
$
|
2,401
|
|
$
|
2,195
|
|
65.8
|
%
|
66.1
|
%
|
|
|
Percent Net Sales
|
||||||||
Six Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
4,663
|
|
$
|
4,327
|
|
65.1
|
%
|
65.9
|
%
|
Inventory stepped up to fair value
|
38
|
|
11
|
|
0.5
|
|
0.2
|
|
||
Restructuring-related and other charges
|
11
|
|
5
|
|
0.2
|
|
0.1
|
|
||
Medical device regulations
|
1
|
|
1
|
|
—
|
|
—
|
|
||
Adjusted
|
$
|
4,713
|
|
$
|
4,344
|
|
65.8
|
%
|
66.2
|
%
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
246
|
|
$
|
216
|
|
6.7
|
%
|
6.5
|
%
|
Medical device regulations
|
(11
|
)
|
(2
|
)
|
(0.3
|
)
|
(0.1
|
)
|
||
Adjusted
|
$
|
235
|
|
$
|
214
|
|
6.4
|
%
|
6.4
|
%
|
|
|
Percent Net Sales
|
||||||||
Six Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
471
|
|
$
|
420
|
|
6.6
|
%
|
6.4
|
%
|
Medical device regulations
|
(18
|
)
|
(2
|
)
|
(0.3
|
)
|
—
|
|
||
Adjusted
|
$
|
453
|
|
$
|
418
|
|
6.3
|
%
|
6.4
|
%
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
1,282
|
|
$
|
1,190
|
|
35.1
|
%
|
35.8
|
%
|
Other acquisition and integration-related
|
(39
|
)
|
(19
|
)
|
(1.0
|
)
|
(0.5
|
)
|
||
Restructuring-related and other charges
|
(36
|
)
|
(22
|
)
|
(1.0
|
)
|
(0.7
|
)
|
||
Regulatory and legal matters
|
15
|
|
(23
|
)
|
0.4
|
|
(0.7
|
)
|
||
Adjusted
|
$
|
1,222
|
|
$
|
1,126
|
|
33.5
|
%
|
33.9
|
%
|
|
|
Percent Net Sales
|
||||||||
Six Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
2,685
|
|
$
|
2,426
|
|
37.5
|
%
|
37.0
|
%
|
Other acquisition and integration-related
|
(153
|
)
|
(30
|
)
|
(2.2
|
)
|
(0.5
|
)
|
||
Restructuring-related and other charges
|
(88
|
)
|
(80
|
)
|
(1.2
|
)
|
(1.2
|
)
|
||
Regulatory and legal matters
|
(10
|
)
|
(55
|
)
|
(0.1
|
)
|
(0.8
|
)
|
||
Adjusted
|
$
|
2,434
|
|
$
|
2,261
|
|
34.0
|
%
|
34.5
|
%
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
12
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
613
|
|
$
|
672
|
|
16.8
|
%
|
20.2
|
%
|
Inventory stepped up to fair value
|
14
|
|
5
|
|
0.4
|
|
0.2
|
|
||
Other acquisition and integration-related
|
39
|
|
19
|
|
1.1
|
|
0.5
|
|
||
Amortization of purchased intangible assets
|
122
|
|
110
|
|
3.3
|
|
3.3
|
|
||
Restructuring-related and other charges
|
42
|
|
22
|
|
1.2
|
|
0.6
|
|
||
Medical device regulations
|
12
|
|
2
|
|
0.3
|
|
0.1
|
|
||
Recall-related matters
|
117
|
|
2
|
|
3.2
|
|
0.1
|
|
||
Regulatory and legal matters
|
(15
|
)
|
23
|
|
(0.4
|
)
|
0.7
|
|
||
Adjusted
|
$
|
944
|
|
$
|
855
|
|
25.9
|
%
|
25.7
|
%
|
|
|
Percent Net Sales
|
||||||||
Six Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
1,141
|
|
$
|
1,263
|
|
15.9
|
%
|
19.2
|
%
|
Inventory stepped up to fair value
|
38
|
|
11
|
|
0.5
|
|
0.2
|
|
||
Other acquisition and integration-related
|
153
|
|
30
|
|
2.1
|
|
0.5
|
|
||
Amortization of purchased intangible assets
|
236
|
|
212
|
|
3.4
|
|
3.2
|
|
||
Restructuring-related and other charges
|
98
|
|
85
|
|
1.4
|
|
1.3
|
|
||
Medical device regulations
|
19
|
|
3
|
|
0.3
|
|
—
|
|
||
Recall-related matters
|
130
|
|
6
|
|
1.8
|
|
0.1
|
|
||
Regulatory and legal matters
|
10
|
|
55
|
|
0.1
|
|
0.9
|
|
||
Adjusted
|
$
|
1,825
|
|
$
|
1,665
|
|
25.5
|
%
|
25.4
|
%
|
|
|
Percent Net Sales
|
||||||||
Three Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
480
|
|
$
|
452
|
|
13.2
|
%
|
13.6
|
%
|
Inventory stepped up to fair value
|
10
|
|
3
|
|
0.3
|
|
0.1
|
|
||
Other acquisition and integration-related
|
30
|
|
15
|
|
0.8
|
|
0.5
|
|
||
Amortization of purchased intangible assets
|
98
|
|
88
|
|
2.7
|
|
2.6
|
|
||
Restructuring-related and other charges
|
32
|
|
17
|
|
0.9
|
|
0.5
|
|
||
Medical device regulations
|
9
|
|
1
|
|
0.2
|
|
—
|
|
||
Recall-related matters
|
106
|
|
2
|
|
2.9
|
|
0.1
|
|
||
Regulatory and legal matters
|
(14
|
)
|
18
|
|
(0.4
|
)
|
0.6
|
|
||
Tax matters
|
1
|
|
74
|
|
—
|
|
2.2
|
|
||
Adjusted
|
$
|
752
|
|
$
|
670
|
|
20.6
|
%
|
20.2
|
%
|
|
|
Percent Net Sales
|
||||||||
Six Months
|
2019
|
2018
|
2019
|
2018
|
||||||
Reported
|
$
|
892
|
|
$
|
895
|
|
12.4
|
%
|
13.6
|
%
|
Inventory stepped up to fair value
|
29
|
|
7
|
|
0.4
|
|
0.1
|
|
||
Other acquisition and integration-related
|
118
|
|
24
|
|
1.7
|
|
0.4
|
|
||
Amortization of purchased intangible assets
|
189
|
|
171
|
|
2.6
|
|
2.6
|
|
||
Restructuring-related and other charges
|
82
|
|
67
|
|
1.2
|
|
1.0
|
|
||
Medical device regulations
|
15
|
|
2
|
|
0.2
|
|
—
|
|
||
Recall-related matters
|
116
|
|
5
|
|
1.6
|
|
0.1
|
|
||
Regulatory and legal matters
|
5
|
|
42
|
|
0.1
|
|
0.7
|
|
||
Tax matters
|
20
|
|
95
|
|
0.3
|
|
1.4
|
|
||
Adjusted
|
$
|
1,466
|
|
$
|
1,308
|
|
20.5
|
%
|
19.9
|
%
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
13
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
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.
|
|
Three Months 2018
|
Gross Profit
|
Selling, General & Administrative Expenses
|
Research, Development & Engineering Expenses
|
Operating Income
|
Net Earnings
|
Effective
Tax Rate |
Diluted EPS
|
|||||||||||||
Reported
|
$
|
2,190
|
|
$
|
1,190
|
|
$
|
216
|
|
$
|
672
|
|
$
|
452
|
|
27.4
|
%
|
$
|
1.19
|
|
Reported percent net sales
|
65.9
|
%
|
35.8
|
%
|
6.5
|
%
|
20.2
|
%
|
13.6
|
%
|
|
|
||||||||
Acquisition and integration-related charges:
|
|
|
|
|
|
|
|
|||||||||||||
Inventory stepped up to fair value
|
5
|
|
—
|
|
—
|
|
5
|
|
3
|
|
0.1
|
|
0.01
|
|
||||||
Other acquisition and integration-related
|
—
|
|
(19
|
)
|
—
|
|
19
|
|
15
|
|
—
|
|
0.04
|
|
||||||
Amortization of purchased intangible assets
|
—
|
|
—
|
|
—
|
|
110
|
|
88
|
|
0.6
|
|
0.23
|
|
||||||
Restructuring-related and other charges
|
—
|
|
(22
|
)
|
—
|
|
22
|
|
17
|
|
0.3
|
|
0.05
|
|
||||||
Medical device regulations
|
—
|
|
—
|
|
(2
|
)
|
2
|
|
1
|
|
—
|
|
0.01
|
|
||||||
Recall-related matters
|
—
|
|
—
|
|
—
|
|
2
|
|
2
|
|
—
|
|
—
|
|
||||||
Regulatory and legal matters
|
—
|
|
(23
|
)
|
—
|
|
23
|
|
18
|
|
0.3
|
|
0.04
|
|
||||||
Tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
74
|
|
(11.9
|
)
|
0.19
|
|
||||||
Adjusted
|
$
|
2,195
|
|
$
|
1,126
|
|
$
|
214
|
|
$
|
855
|
|
$
|
670
|
|
16.8
|
%
|
$
|
1.76
|
|
Adjusted percent net sales
|
66.1
|
%
|
33.9
|
%
|
6.4
|
%
|
25.7
|
%
|
20.2
|
%
|
|
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
14
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
Six Months 2019
|
Gross Profit
|
Selling, General & Administrative Expenses
|
Research, Development & Engineering Expenses
|
Operating Income
|
Net Earnings
|
Effective
Tax Rate |
Diluted EPS
|
|||||||||||||
Reported
|
$
|
4,663
|
|
$
|
2,685
|
|
$
|
471
|
|
$
|
1,141
|
|
$
|
892
|
|
14.6
|
%
|
$
|
2.35
|
|
Reported percent net sales
|
65.1
|
%
|
37.5
|
%
|
6.6
|
%
|
15.9
|
%
|
12.4
|
%
|
|
|
||||||||
Acquisition and integration-related charges:
|
|
|
|
|
|
|
|
|||||||||||||
Inventory stepped up to fair value
|
38
|
|
—
|
|
—
|
|
38
|
|
29
|
|
0.3
|
|
0.08
|
|
||||||
Other acquisition and integration-related
|
—
|
|
(153
|
)
|
—
|
|
153
|
|
118
|
|
1.2
|
|
0.31
|
|
||||||
Amortization of purchased intangible assets
|
—
|
|
—
|
|
—
|
|
236
|
|
189
|
|
1.1
|
|
0.50
|
|
||||||
Restructuring-related and other charges
|
11
|
|
(88
|
)
|
—
|
|
98
|
|
82
|
|
0.1
|
|
0.21
|
|
||||||
Medical device regulations
|
1
|
|
—
|
|
(18
|
)
|
19
|
|
15
|
|
0.1
|
|
0.04
|
|
||||||
Recall-related matters
|
—
|
|
—
|
|
—
|
|
130
|
|
116
|
|
(0.6
|
)
|
0.31
|
|
||||||
Regulatory and legal matters
|
—
|
|
(10
|
)
|
—
|
|
10
|
|
5
|
|
0.3
|
|
0.01
|
|
||||||
Tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
20
|
|
(1.9
|
)
|
0.05
|
|
||||||
Adjusted
|
$
|
4,713
|
|
$
|
2,434
|
|
$
|
453
|
|
$
|
1,825
|
|
$
|
1,466
|
|
15.2
|
%
|
$
|
3.86
|
|
Adjusted percent net sales
|
65.8
|
%
|
34.0
|
%
|
6.3
|
%
|
25.5
|
%
|
20.5
|
%
|
|
|
Six Months 2018
|
Gross Profit
|
Selling, General & Administrative Expenses
|
Research, Development & Engineering Expenses
|
Operating Income
|
Net Earnings
|
Effective
Tax Rate |
Diluted EPS
|
|||||||||||||
Reported
|
$
|
4,327
|
|
$
|
2,426
|
|
$
|
420
|
|
$
|
1,263
|
|
$
|
895
|
|
23.2
|
%
|
$
|
2.35
|
|
Reported percent net sales
|
65.9
|
%
|
37.0
|
%
|
6.4
|
%
|
19.2
|
%
|
13.6
|
%
|
|
|
||||||||
Acquisition and integration-related charges:
|
|
|
|
|
|
|
|
|||||||||||||
Inventory stepped up to fair value
|
11
|
|
—
|
|
—
|
|
11
|
|
7
|
|
0.2
|
|
0.02
|
|
||||||
Other acquisition and integration-related
|
—
|
|
(30
|
)
|
—
|
|
30
|
|
24
|
|
—
|
|
0.06
|
|
||||||
Amortization of purchased intangible assets
|
—
|
|
—
|
|
—
|
|
212
|
|
171
|
|
0.5
|
|
0.45
|
|
||||||
Restructuring-related and other charges
|
5
|
|
(80
|
)
|
—
|
|
85
|
|
67
|
|
0.4
|
|
0.18
|
|
||||||
Medical device regulations
|
1
|
|
—
|
|
(2
|
)
|
3
|
|
2
|
|
—
|
|
0.01
|
|
||||||
Recall-related matters
|
—
|
|
—
|
|
—
|
|
6
|
|
5
|
|
—
|
|
0.01
|
|
||||||
Regulatory and legal matters
|
—
|
|
(55
|
)
|
—
|
|
55
|
|
42
|
|
0.4
|
|
0.11
|
|
||||||
Tax matters
|
—
|
|
—
|
|
—
|
|
—
|
|
95
|
|
(8.2
|
)
|
0.25
|
|
||||||
Adjusted
|
$
|
4,344
|
|
$
|
2,261
|
|
$
|
418
|
|
$
|
1,665
|
|
$
|
1,308
|
|
16.5
|
%
|
$
|
3.44
|
|
Adjusted percent net sales
|
66.2
|
%
|
34.5
|
%
|
6.4
|
%
|
25.4
|
%
|
19.9
|
%
|
|
|
|
Six Months
|
2019
|
2018
|
||||
Net cash provided by operating activities
|
$
|
827
|
|
$
|
946
|
|
Net cash used in investing activities
|
(550
|
)
|
(1,073
|
)
|
||
Net cash (used in) provided by financing activities
|
(2,135
|
)
|
(772
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(4
|
)
|
(2
|
)
|
||
Change in cash and cash equivalents
|
$
|
(1,862
|
)
|
$
|
(901
|
)
|
Six Months
|
2019
|
2018
|
||||
Total dividends paid to common shareholders
|
$
|
390
|
|
$
|
352
|
|
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.
|
15
|
STRYKER CORPORATION
|
|
2019 Second 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
|
ITEM 6.
|
EXHIBITS
|
Dollar amounts are in millions except per share amounts or as otherwise specified.
|
16
|
STRYKER CORPORATION
|
|
2019 Second Quarter Form 10-Q
|
|
|
|
STRYKER CORPORATION
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
Date:
|
July 26, 2019
|
|
/s/ KEVIN A. LOBO
|
|
|
|
Kevin A. Lobo
|
|
|
|
Chairman and Chief Executive Officer
|
|
|
|
|
|
|
|
|
Date:
|
July 26, 2019
|
|
/s/ GLENN S. BOEHNLEIN
|
|
|
|
Glenn S. Boehnlein
|
|
|
|
Vice President, Chief Financial Officer
|
|
|
17
|
Date:
|
July 26, 2019
|
/s/ KEVIN A. LOBO
|
|
|
Kevin A. Lobo
|
|
|
Chairman and Chief Executive Officer
|
Date:
|
July 26, 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:
|
July 26, 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:
|
July 26, 2019
|
/s/ GLENN S. BOEHNLEIN
|
|
|
Glenn S. Boehnlein
|
|
|
Vice President, Chief Financial Officer
|