STRYKER REPORTS THIRD QUARTER 2018 OPERATING RESULTS
Reported net sales increased 7.9% to $3.2 billion
Organic net sales increased 7.9%
Reported operating income margin of 17.8%
Adjusted operating income margin(1) expanded 60 bps (40 bps excluding ASC 606(2)) to 24.9%
Reported EPS increased 36.0% to $1.55
Adjusted EPS(3) increased 11.2% to $1.69, at the high end of guidance range
Kalamazoo, Michigan - October 25, 2018 - Stryker (NYSE:SYK) reported operating results for the third quarter of 2018:
Third Quarter Highlights
2018 Net Sales Growth Overview
Excluding ASC 606 Adoption(2)
Foreign Currency Exchange
Neurotechnology and Spine
"We had another impressive quarter, as our talented teams continue to deliver strong results and execute on acquisitions," said Kevin A. Lobo, Chairman and Chief Executive Officer. "The strength of our operating model and culture is evident in the consistency of our performance over time, and we remain optimistic about the future."
Sales Analysis (percentages exclude ASC 606(2) adoption impact)
Consolidated net sales of $3.2 billion increased 8.8% in the quarter and 9.8% in constant currency. Organic net sales increased 7.9% in the quarter including 9.5% from increased unit volume partially offset by 1.6% from lower prices.
Orthopaedics net sales of $1.2 billion increased 4.0% in the quarter and 5.0% in constant currency. Organic net sales increased 5.0% in the quarter including 7.6% from increased unit volume partially offset by 2.6% from lower prices.
MedSurg net sales of $1.4 billion increased 9.5% in the quarter and 10.4% in constant currency. Organic net sales increased 8.8% in the quarter including 9.5% from increased unit volume partially offset by 0.7% from lower prices.
Neurotechnology and Spine net sales of $0.6 billion increased 17.4% in the quarter and 18.3% in constant currency. Organic net sales increased 11.9% in the quarter including 13.5% from increased unit volume partially offset by 1.6% from lower prices.
Reported net earnings of $590 million increased 35.9% in the quarter. Reported net earnings per diluted share of $1.55 increased 36.0% in the quarter. Reported net earnings include certain items, such as charges for acquisition and integration-related activities, the amortization of purchased intangible assets, restructuring-related and other charges, costs to comply with European Medical Devices Regulation, Rejuvenate and other recall-related matters, regulatory and legal matters and tax matters. The effect of each of these matters on reported net earnings and net earnings per diluted share appear in the reconciliation of GAAP to non-GAAP financial measures. Excluding the aforementioned items decreases gross profit margin from 66.5% to 66.3% in the quarter and increases operating income margin from 17.8% to 24.9%(1), including a 20 basis point favorable impact related to the adoption of the new revenue recognition standard(2). Excluding the impact of the items described above, adjusted net earnings(4) of $643 million increased 11.2% in the quarter. Adjusted net earnings per diluted share(3) of $1.69 increased 11.2% in the quarter.
Based on our year-to-date performance we now expect 2018 organic net sales growth, which excludes the impact related to adoption of the new revenue recognition standard(2), to be at the high end of the range of 7.0% to 7.5% and expect adjusted net earnings per diluted share(5) to be in the range of $7.25 to $7.30. In 2018 our calculation of organic net sales growth excludes the impact of adopting ASC 606(2), which includes primarily the reclassification of costs previously reported within selling expenses to a reduction of sales, which for 2017 was approximately $112 million ($28 million per quarter). For the fourth quarter we expect adjusted net earnings per diluted share(5) to be in the range of $2.13 to $2.18. If foreign currency exchange rates hold near current levels, we expect net sales in the fourth quarter will be negatively impacted by approximately 1.0% and full year will be positively impacted by approximately 0.5%, and net earnings per diluted share will be neutral in the fourth quarter and positively impacted by $0.05 in the full year.
(1) A reconciliation of operating income to adjusted operating income, a non-GAAP financial measure, and other important information accompanies this press release.
(2) Consistent with previous press releases and financial disclosures, we adopted Accounting Standards Update 2014-09, Revenue From Contracts with Customers, as well as related amendments (ASC 606), issued by the Financial Accounting Standards Board on a modified retrospective basis, effective January 1, 2018. The impact of the adoption of ASC 606 related primarily to the reclassification of certain costs previously presented as selling, general and administrative expenses to net sales.
The following information was filed by Stryker Corp (SYK) on Thursday, October 25, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.