Kalamazoo, Michigan – July 21, 2016 – Stryker Corporation (SYK) reported operating results for the second quarter of 2016:
Second Quarter Highlights
Net sales grew 16.8% to $2.8 billion (17.0% constant currency)
| Orthopaedics | 4.6 | % | or | 4.8% constant currency |
| MedSurg | 33.8 | % | or | 34.2% constant currency |
| Neurotechnology and Spine | 9.3 | % | or | 9.0% constant currency |
Reported net earnings per diluted share decreased 2.9% to $1.00
Adjusted net earnings per diluted share(1) increased 15.8% to $1.39
“With organic sales growth of 6.6% we delivered another solid quarter, once again demonstrating the strength of our diversified model,” said Kevin A. Lobo, Chairman and Chief Executive Officer. “This growth, combined with strong expense controls, positions us well to deliver on our updated full year financial guidance.”
Sales Analysis
Consolidated net sales of $2.8 billion increased 16.8% in the quarter as reported and 17.0% in constant currency, as foreign currency exchange rates negatively impacted net sales by 0.2%. Excluding the 10.4% impact of acquisitions, net sales in the quarter increased 6.6% in constant currency, including 7.9% from increased unit volume partially offset by 1.3% due to lower prices. Net sales from our recently closed acquisitions, Sage Products LLC and Physio-Control International, Inc., contributed $240 million to our sales in the quarter.
Orthopaedics net sales of $1.1 billion increased 4.6% in the quarter as reported and 4.8% in constant currency, as foreign currency exchange rates negatively impacted net sales by 0.2%. Excluding the 0.3% impact of acquisitions, net sales in the quarter increased 4.5% in constant currency, including 6.7% from increased unit volume partially offset by 2.2% due to lower prices.
MedSurg net sales of $1.3 billion increased 33.8% in the quarter as reported and 34.2% in constant currency, as foreign currency exchange rates negatively impacted net sales by 0.4%. Excluding the 25.7% impact of acquisitions, net sales in the quarter increased 8.5% in constant currency, including 9.0% from increased unit volume partially offset by 0.5% due to lower prices.
Neurotechnology and Spine net sales of $0.5 billion increased 9.3% in the quarter as reported and 9.0% in constant currency, as foreign currency exchange rates favorably impacted net sales by 0.3%. Excluding the 1.5% impact of acquisitions, net sales in the quarter increased 7.5% in constant currency, including 8.5% from increased unit volume partially offset by 1.0% due to lower prices.
Earnings Analysis
Reported net earnings of $380 million decreased 3.1% in the quarter. Reported net earnings per diluted share of $1.00 decreased 2.9% in the quarter. Reported net earnings include certain charges for the amortization of purchased intangible assets, acquisition and integration related activities, Rejuvenate and ABG II recalls and restructuring-related activities. The effect of each of these matters on reported net earnings and net earnings per diluted share appears in the attached reconciliation of actual results to adjusted results. Excluding the impact of these charges, gross profit margin increased in the quarter from 64.9% to 66.2% and operating income margin increased in the quarter from 17.6% to 24.8%.
Excluding the impact of the items described above, adjusted net earnings(2) of $525 million increased 14.6% in the quarter. Adjusted net earnings per diluted share(1) of $1.39 increased 15.8% in the quarter.
2016 Outlook
We now expect 2016 organic sales growth to be in the range of 6.0% – 6.5% compared to our prior target of 5.5% – 6.5% and adjusted net earnings per diluted share(3) to be in the range of $5.70 – $5.80 compared to our prior target of $5.65 – $5.80. For the third quarter we expect adjusted net earnings per diluted share(3) to be in the range of $1.33 – $1.38. If foreign currency exchange rates hold near current levels, we expect a neutral impact on net sales in the third quarter and a negative impact of approximately 1.0% in the full year. We expect a negative impact on adjusted net earnings per diluted share of approximately $0.03 in the third quarter and $0.10 – $0.12 in the full year.
(1) A reconciliation of reported net earnings per diluted share to adjusted net earnings per diluted share, a non-GAAP financial measure, and other important information, appears below.
(2) A reconciliation of reported net earnings to adjusted net earnings, a non-GAAP financial measure, and other important information, appears below.
