U.S. Markets closed
  • S&P 500

    4,432.99
    -40.76 (-0.91%)
     
  • Dow 30

    34,584.88
    -166.44 (-0.48%)
     
  • Nasdaq

    15,043.97
    -137.96 (-0.91%)
     
  • Russell 2000

    2,236.87
    +3.96 (+0.18%)
     
  • Crude Oil

    71.96
    -0.65 (-0.90%)
     
  • Gold

    1,753.90
    -2.80 (-0.16%)
     
  • Silver

    22.42
    -0.33 (-1.44%)
     
  • EUR/USD

    1.1732
    -0.0040 (-0.3402%)
     
  • 10-Yr Bond

    1.3700
    +0.0390 (+2.93%)
     
  • Vix

    20.81
    +2.12 (+11.34%)
     
  • GBP/USD

    1.3737
    -0.0059 (-0.4286%)
     
  • USD/JPY

    109.8950
    +0.1770 (+0.1613%)
     
  • BTC-USD

    48,110.08
    +1,137.16 (+2.42%)
     
  • CMC Crypto 200

    1,193.48
    -32.05 (-2.62%)
     
  • FTSE 100

    6,963.64
    -63.84 (-0.91%)
     
  • Nikkei 225

    30,500.05
    +176.71 (+0.58%)
     

Stryker reports second quarter 2021 operating results

  • Oops!
    Something went wrong.
    Please try again later.
·24 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Kalamazoo, Michigan, July 27, 2021 (GLOBE NEWSWIRE) -- Stryker (NYSE:SYK) reported operating results for the second quarter of 2021:

Second Quarter Results

  • Reported net sales increased 55.4% from 2020 and 17.6% from 2019 to $4.3 billion

  • Organic net sales increased 42.9% from 2020 and 9.3% from 2019

  • Reported operating income margin of 17.0%

  • Adjusted operating income margin(1) of 25.9%

  • Reported EPS of $1.55

  • Adjusted EPS(1) of $2.25

In addition to sales growth analysis versus 2020, we are including sales growth versus 2019 as 2019 provides a more normal baseline for comparison given the variability caused by the COVID-19 pandemic throughout 2020.

Second Quarter Net Sales Growth Overview

From 2020

From 2019

Reported

Foreign Currency Exchange

Constant Currency

Acquisitions

Organic

Reported

Foreign Currency Exchange

Constant Currency

Acquisitions

Organic

Orthopaedics

82.3

%

4.4

%

77.9

%

27.2

%

50.7

%

27.8

%

1.8

%

26.0

%

19.3

%

6.7

%

MedSurg

32.3

2.6

29.7

0.1

29.6

9.4

1.1

8.3

8.3

Neurotechnology and Spine

66.9

4.5

62.4

0.6

61.8

18.0

2.0

16.0

0.5

15.5

Total

55.4

%

3.6

%

51.8

%

8.9

%

42.9

%

17.6

%

1.5

%

16.1

%

6.8

%

9.3

%


"We delivered strong financial results in the second quarter," said Kevin Lobo, Chair and Chief Executive Officer. "Business momentum continues to build as the pandemic moderates and the integration of Wright Medical is pacing ahead of plan. Our positive outlook is reflected in our raised guidance."

Sales Analysis Compared to 2020 and 2019

Consolidated net sales of $4.3 billion increased 55.4% in the quarter and 51.8% in constant currency from 2020. Organic net sales increased 42.9% in the quarter including 43.4% from increased unit volume partially offset by 0.5% from lower prices. From 2019 consolidated net sales increased 17.6% in the quarter and 16.1% in constant currency. Organic net sales increased 9.3% in the quarter including 9.9% from increased unit volume partially offset by 0.6% from lower prices.

Orthopaedics net sales of $1.6 billion increased 82.3% in the quarter and 77.9% in constant currency from 2020. Organic net sales increased 50.7% in the quarter including 52.2% from increased unit volume partially offset by 1.5% from lower prices. From 2019 Orthopaedics net sales increased 27.8% in the quarter and 26.0% in constant currency. Organic net sales increased 6.7% in the quarter including 9.0% from increased unit volume partially offset by 2.3% from lower prices.

MedSurg net sales of $1.7 billion increased 32.3% in the quarter and 29.7% in constant currency from 2020. Organic net sales increased 29.6% in the quarter including 29.5% from increased unit volume and 0.1% from higher prices. From 2019 MedSurg net sales increased 9.4% in the quarter and 8.3% in constant currency. Organic net sales increased 8.3% in the quarter including 7.9% from increased unit volume and 0.4% from higher prices.

Neurotechnology and Spine net sales of $0.9 billion increased 66.9% in the quarter and 62.4% in constant currency from 2020. Organic net sales increased 61.8% in the quarter including 62.4% from increased unit volume partially offset by 0.6% from lower prices. From 2019 Neurotechnology and Spine net sales increased 18.0% in the quarter and 16.0% in constant currency. Organic net sales increased 15.5% in the quarter including 15.4% from increased unit volume and 0.1% from higher prices.

Earnings Analysis Compared to 2020

Reported net earnings (loss) of $592 million increased from ($83) million in the quarter. Reported net earnings (loss) per diluted share of $1.55 increased from ($0.22) in the quarter. Reported gross profit margin and reported operating income margin were 64.6% and 17.0% in the quarter. Reported net earnings (loss) 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 certain medical device regulations, recall-related matters, regulatory and legal matters and tax matters. Excluding the aforementioned items, adjusted gross profit margin(1) was 66.0% in the quarter, and adjusted operating income margin(1) was 25.9% in the quarter. Adjusted net earnings(1) of $861 million increased from $245 million in the quarter. Adjusted net earnings per diluted share(1) of $2.25 increased from $0.64 in the quarter.

2021 Outlook

We continue to monitor and evaluate the impact the global response to the COVID-19 pandemic has had, and will continue to have, on our operations and financial results. As we recover from the pandemic, we now expect 2021 organic net sales growth to be in the range of 9% to 10% from 2019, and now expect adjusted net earnings per diluted share(2) to be in the range of $9.25 to $9.40, including the full year impact of the acquisition of Wright Medical. Consistent with the pricing environment experienced in both 2019 and 2020, we expect continued unfavorable price reductions of approximately 1% in 2021. If foreign currency exchange rates hold near current levels, we expect EPS will be positively impacted by approximately $0.10 for the full year. This guidance assumes an ongoing recovery in our key geographies leading to more normalized elective procedure levels continuing into the second half of 2021. As previously announced, we will not be providing quarterly guidance.

(1) A reconciliation of the non-GAAP financial measures: adjusted gross profit margin, adjusted operating income and adjusted operating income margin, adjusted net earnings and adjusted net earnings per diluted share, to the most directly comparable GAAP measures: gross profit margin, operating income and operating income margin, net earnings and net earnings per diluted share, and other important information accompanies this press release.

(2) We are unable to present a quantitative reconciliation of our expected net earnings per diluted share to expected adjusted net earnings per diluted share as we are unable to predict with reasonable certainty and without unreasonable effort the impact and timing of restructuring-related and other charges, acquisition-related expenses and fair value adjustments to inventory and the outcome of certain regulatory, legal and tax matters. The financial impact of these items is uncertain and is dependent on various factors, including timing, and could be material to our Consolidated Statements of Earnings.

Conference Call on Tuesday, July 27, 2021

As previously announced, Stryker will host a conference call on Tuesday, July 27, 2021 at 4:30 p.m., Eastern Time, to discuss the Company's operating results for the quarter ended June 30, 2021 and provide an operational update.

To participate in the conference call dial (877) 702-4565 (domestic) or (647) 689-5532 (international) and be prepared to provide conference ID number 4044998 to the operator.

A simultaneous webcast of the call will be accessible via the company's website at www.stryker.com. The call will be archived on the Investor Relations page of this site.

A recording of the call will also be available from 8:00 p.m., Eastern Time, on Tuesday, July 27, 2021, until 11:59 p.m., Eastern Time, on Tuesday, August 3, 2021. To hear this recording, you may dial (800) 585-8367 (domestic) or (416) 621-4642 (international) and enter conference ID number 4044998.

Caution Concerning Forward-Looking Statements

This press release contains information that includes or is based on forward-looking statements within the meaning of the federal securities laws that are subject to various risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in such statements. Such factors include, but are not limited to: the impact on our operations and financial results of the COVID-19 pandemic and any related policies and actions by governments or other third parties; unexpected liabilities, costs, charges or expenses in connection with the acquisition of Wright Medical Group N.V. ("Wright"); the effects of the Wright acquisition on the parties' relationships with employees, customers, other business partners or governmental entities; weakening of economic conditions that could adversely affect the level of demand for our products; pricing pressures generally, including cost-containment measures that could adversely affect the price of or demand for our products; changes in foreign exchange markets; legislative and regulatory actions; unanticipated issues arising in connection with clinical studies and otherwise that affect U.S. Food and Drug Administration approval of new products, including Wright products; potential supply disruptions; changes in reimbursement levels from third-party payors; a significant increase in product liability claims; the ultimate total cost with respect to recall-related matters; the impact of investigative and legal proceedings and compliance risks; resolution of tax audits; the impact of the federal legislation to reform the United States healthcare system; costs to comply with medical device regulations; changes in financial markets; changes in the competitive environment; our ability to integrate and realize the anticipated benefits of acquisitions in full or at all or within the expected timeframes, including the acquisition of Wright; and our ability to realize anticipated cost savings. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We disclaim any intention or obligation to publicly update or revise any forward-looking statement to reflect any change in our expectations or in events, conditions or circumstances on which those expectations may be based, or that affect the likelihood that actual results will differ from those contained in the forward-looking statements.

Stryker is one of the world's leading medical technology companies and, together with its customers, is driven to make healthcare better. The Company offers innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine that help improve patient and hospital outcomes. More information is available at www.stryker.com.

For investor inquiries please contact:

Preston Wells, Vice President, Investor Relations at 269-385-2600 or preston.wells@stryker.com

For media inquiries please contact:

Yin Becker, Vice President, Chief Corporate Affairs Officer at 269-385-2600 or yin.becker@stryker.com

STRYKER CORPORATION

For the Three and Six Months June 30

(Unaudited - Millions of Dollars, Except Per Share Amounts)

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

Three Months

Six Months

2021

2020

% Change

2021

2020

% Change

Net sales

$

4,294

$

2,764

55.4

%

$

8,247

$

6,352

29.8

%

Cost of sales

1,522

1,216

25.2

2,966

2,473

19.9

Gross profit

$

2,772

$

1,548

79.1

%

$

5,281

$

3,879

36.1

%

% of sales

64.6

%

56.0

%

64.0

%

61.1

%

Research, development and engineering expenses

310

233

33.0

598

487

22.8

Selling, general and administrative expenses

1,505

1,225

22.9

3,080

2,555

20.5

Recall charges

76

nm

82

(6

)

nm

Amortization of intangible assets

149

110

35.5

330

228

44.7

Total operating expenses

$

2,040

$

1,568

30.1

%

$

4,090

$

3,264

25.3

%

Operating income (loss)

$

732

$

(20

)

nm

$

1,191

$

615

93.7

%

% of sales

17.0

%

(0.7

)

%

14.4

%

9.7

%

Other income (expense), net

(70

)

(67

)

4.5

(162

)

(112

)

44.6

Earnings (loss) before income taxes

$

662

$

(87

)

nm

$

1,029

$

503

104.6

%

Income taxes

70

(4

)

nm

135

93

45.2

Net earnings (loss)

$

592

$

(83

)

nm

$

894

$

410

118.0

%

Net earnings (loss) per share of common stock:

Basic

$

1.57

$

(0.22

)

nm

$

2.37

$

1.09

117.4

%

Diluted

$

1.55

$

(0.22

)

nm

$

2.34

$

1.08

116.7

%

Weighted-average shares outstanding (in millions):

Basic

376.9

375.5

376.6

375.1

Diluted

382.3

375.5

382.0

379.9


CONDENSED CONSOLIDATED BALANCE SHEETS

June 30

December 31

2021

2020

Assets

Cash and cash equivalents

$

2,241

$

2,943

Marketable securities

84

81

Accounts receivable, net

2,714

2,701

Inventories

3,431

3,494

Prepaid expenses and other current assets

562

488

Total current assets

$

9,032

$

9,707

Property, plant and equipment, net

2,738

2,752

Goodwill and other intangibles, net

18,063

18,332

Noncurrent deferred income tax assets

1,751

1,530

Other noncurrent assets

2,114

2,009

Total assets

$

33,698

$

34,330

Liabilities and shareholders' equity

Current liabilities

$

4,252

$

5,041

Long-term debt, excluding current maturities

12,734

13,230

Income taxes

927

990

Other noncurrent liabilities

1,965

1,985

Shareholders' equity

13,820

13,084

Total liabilities and shareholders' equity

$

33,698

$

34,330


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months

2021

2020

Operating activities

Net earnings

$

894

$

410

Depreciation

187

163

Amortization of intangible assets

330

228

Changes in operating assets, liabilities, income taxes payable and other, net

(81

)

410

Net cash provided by operating activities

$

1,330

$

1,211

Investing activities

Acquisitions, net of cash acquired

$

(104

)

$

(26

)

Purchases of property, plant and equipment

(189

)

(253

)

Change in marketable securities, net

(3

)

8

Other investing, net

(2

)

(9

)

Net cash used in investing activities

$

(298

)

$

(280

)

Financing activities

Borrowings (payments) of debt, net

$

(1,153

)

$

1,801

Dividends paid

(475

)

(431

)

Repurchases of common stock

Other financing, net

(101

)

(82

)

Net cash provided by (used in) financing activities

$

(1,729

)

$

1,288

Effect of exchange rate changes on cash and cash equivalents

(5

)

(17

)

Change in cash and cash equivalents

$

(702

)

$

2,202

nm - not meaningful

STRYKER CORPORATION

For the Three and Six Months June 30

(Unaudited - Millions of Dollars)


SALES GROWTH ANALYSIS

Three Months

Six Months

Percentage Change

Percentage Change

2021

2020

As Reported

Constant
Currency

2021

2020

As Reported

Constant
Currency

Geographic:

United States

$

3,100

$

1,966

57.7

%

57.7

%

$

5,884

$

4,609

27.7

%

27.7

%

International

1,194

798

49.7

37.9

2,363

1,743

35.6

25.6

Total

$

4,294

$

2,764

55.4

%

51.8

%

$

8,247

$

6,352

29.8

%

27.1

%

Segment:

Orthopaedics

$

1,628

$

894

82.3

%

77.9

%

$

3,112

$

2,116

47.1

%

43.7

%

MedSurg

1,748

1,324

32.3

29.7

3,369

2,946

14.5

12.5

Neurotechnology and Spine

918

546

66.9

62.4

1,766

1,290

36.5

33.0

Total

$

4,294

$

2,764

55.4

%

51.8

%

$

8,247

$

6,352

29.8

%

27.1

%


SUPPLEMENTAL SALES GROWTH ANALYSIS

Three Months

United States

International

Percentage Change

2021

2020

As Reported

Constant Currency

As Reported

As Reported

Constant Currency

Orthopaedics:

Knees

$

474

$

241

96.4

%

92.2

%

95.2

%

100.0

%

83.8

%

Hips

353

216

63.3

58.7

57.0

74.8

61.5

Trauma and Extremities

674

330

104.2

98.5

128.0

63.7

50.7

Other

127

107

20.9

19.6

4.3

179.6

159.7

$

1,628

$

894

82.3

%

77.9

%

83.6

%

79.4

%

65.4

%

MedSurg:

Instruments

$

517

$

328

58.8

%

55.8

%

61.0

%

51.7

%

39.4

%

Endoscopy

518

316

64.0

61.2

61.0

76.2

62.4

Medical

640

632

1.4

(1.1

)

7.6

(14.5

)

(22.2

)

Sustainability

73

48

51.6

51.4

50.9

127.5

102.6

$

1,748

$

1,324

32.3

%

29.7

%

36.4

%

19.6

%

9.4

%

Neurotechnology and Spine:

Neurotechnology

$

611

$

369

65.6

%

60.9

%

75.1

%

52.8

%

42.3

%

Spine

307

177

69.6

65.6

69.8

69.0

55.9

$

918

$

546

66.9

%

62.4

%

73.1

%

56.9

%

45.8

%

Total

$

4,294

$

2,764

55.4

%

51.8

%

57.7

%

49.7

%

37.9

%


Six Months

United States

International

Percentage Change

2021

2020

As Reported

Constant Currency

As Reported

As Reported

Constant Currency

Orthopaedics:

Knees

$

886

$

673

31.7

%

29.0

%

28.4

%

41.3

%

30.6

%

Hips

662

532

24.4

21.1

19.1

33.8

24.5

Trauma and Extremities

1,314

722

81.9

77.2

95.3

57.0

45.2

Other

250

189

33.0

31.5

17.6

140.3

124.5

$

3,112

$

2,116

47.1

%

43.7

%

46.3

%

49.0

%

38.1

%

MedSurg:

Instruments

$

986

$

841

17.7

%

15.6

%

14.8

%

28.4

%

18.4

%

Endoscopy

987

771

28.1

26.1

23.3

47.5

36.9

Medical

1,262

1,219

3.5

1.3

5.9

(3.2

)

(11.2

)

Sustainability

134

115

16.6

16.5

16.0

85.3

71.3

$

3,369

$

2,946

14.5

%

12.5

%

13.6

%

17.7

%

8.5

%

Neurotechnology and Spine:

Neurotechnology

$

1,181

$

852

38.7

%

34.9

%

37.9

%

39.8

%

30.5

%

Spine

585

438

32.2

29.4

26.4

48.4

37.6

$

1,766

$

1,290

36.5

%

33.0

%

33.4

%

42.0

%

32.4

%

Total

$

8,247

$

6,352

29.8

%

27.1

%

27.7

%

35.6

%

25.6

%


STRYKER CORPORATION

For the Three and Six Months June 30

(Unaudited - Millions of Dollars)


SALES GROWTH ANALYSIS

Three Months

Six Months

Percentage Change

Percentage Change

2021

2019

As Reported

Constant
Currency

2021

2019

As Reported

Constant
Currency

Geographic:

United States

$

3,100

$

2,695

15.0

%

15.0

%

$

5,884

$

5,274

11.6

%

11.6

%

International

1,194

955

25.0

19.1

2,363

1,892

24.9

19.4

Total

$

4,294

$

3,650

17.6

%

16.1

%

$

8,247

$

7,166

15.1

%

13.7

%

Segment:

Orthopaedics

$

1,628

$

1,273

27.8

%

26.0

%

$

3,112

$

2,523

23.3

%

21.6

%

MedSurg

1,748

1,601

9.4

8.3

3,369

3,128

7.8

6.8

Neurotechnology and Spine

918

776

18.0

16.0

1,766

1,515

16.4

14.4

Total

$

4,294

$

3,650

17.6

%

16.1

%

$

8,247

$

7,166

15.1

%

13.7

%


SUPPLEMENTAL SALES GROWTH ANALYSIS

Three Months

United States

International

Percentage Change

2021

2019

As Reported

Constant Currency

As Reported

As Reported

Constant Currency

Orthopaedics:

Knees

$

474

$

440

7.7

%

6.3

%

7.8

%

7.5

%

2.1

%

Hips

353

343

2.7

1.0

0.7

6.2

1.5

Trauma and Extremities

674

394

70.7

67.9

87.4

40.9

33.7

Other

127

96

33.2

32.1

26.5

64.2

57.5

$

1,628

$

1,273

27.8

%

26.0

%

30.8

%

21.4

%

15.6

%

MedSurg:

Instruments

$

517

$

504

3.0

%

1.8

%

0.9

%

11.1

%

5.5

%

Endoscopy

518

480

7.9

7.2

6.1

15.1

11.4

Medical

640

542

18.2

16.7

13.4

37.0

29.7

Sustainability

73

75

(2.5

)

(2.6

)

(2.9

)

39.1

27.7

$

1,748

$

1,601

9.4

%

8.3

%

6.4

%

21.6

%

16.0

%

Neurotechnology and Spine:

Neurotechnology

$

611

$

484

26.2

%

23.9

%

18.4

%

40.5

%

33.8

%

Spine

307

292

4.4

2.9

(1.7

)

23.2

16.9

$

918

$

776

18.0

%

16.0

%

10.1

%

35.4

%

28.8

%

Total

$

4,294

$

3,650

17.6

%

16.1

%

15.0

%

25.0

%

19.1

%


Six Months

United States

International

Percentage Change

2021

2019

As Reported

Constant Currency

As Reported

As Reported

Constant Currency

Orthopaedics:

Knees

$

886

$

879

0.8

%

(0.5

)

%

(0.2

)

%

3.5

%

(1.3

)

%

Hips

662

679

(2.6

)

(4.1

)

(5.9

)

3.1

(1.2

)

Trauma and Extremities

1,314

790

66.3

63.7

80.6

40.7

34.1

Other

250

175

43.3

42.2

36.5

72.4

66.5

$

3,112

$

2,523

23.3

%

21.6

%

25.1

%

19.4

%

14.2

%

MedSurg:

Instruments

$

986

$

965

2.4

%

1.3

%

(1.0

)

%

15.7

%

10.3

%

Endoscopy

987

950

3.9

3.3

0.3

18.5

15.4

Medical

1,262

1,073

17.6

16.3

13.5

33.0

26.7

Sustainability

134

140

(4.1

)

(4.2

)

(4.5

)

30.2

21.0

$

3,369

$

3,128

7.8

%

6.8

%

4.1

%

23.0

%

17.9

%

Neurotechnology and Spine:

Neurotechnology

$

1,181

$

953

24.0

%

21.7

%

15.2

%

39.7

%

33.4

%

Spine

585

562

3.5

2.1

(4.5

)

28.6

22.3

$

1,766

$

1,515

16.4

%

14.4

%

7.1

%

36.5

%

30.2

%

Total

$

8,247

$

7,166

15.1

%

13.7

%

11.6

%

24.9

%

19.4

%

Note: Second quarter 2021 had the same number of selling days as 2020 and 2019. The six months 2021 had one less selling day than 2020 and the same number of selling days as 2019.

SUPPLEMENTAL INFORMATION - RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

We supplement the reporting of our financial information determined under accounting principles generally accepted in the United States (GAAP) with certain non-GAAP financial measures, including: percentage sales growth; percentage sales growth in constant currency; percentage organic sales growth; adjusted gross profit; adjusted selling, general and administrative expenses; adjusted research, development and engineering expenses; adjusted operating income; adjusted other income (expense), net; adjusted effective income tax rate; adjusted net earnings; adjusted net earnings per diluted share (Diluted EPS); free cash flow; and free cash flow conversion. We believe these non-GAAP financial measures provide meaningful information to assist investors and shareholders in understanding our financial results and assessing our prospects for future performance. Management believes percentage sales growth in constant currency and the other adjusted measures described above are important indicators of our operations because they exclude items that may not be indicative of or are unrelated to our core operating results and provide a baseline for analyzing trends in our underlying businesses. Management uses these non-GAAP financial measures for reviewing the operating results of reportable business segments and analyzing potential future business trends in connection with our budget process and bases certain management incentive compensation on these non-GAAP financial measures.

To measure percentage sales growth in constant currency, we remove the impact of changes in foreign currency exchange rates that affect the comparability and trend of sales. Percentage sales growth in constant currency is calculated by translating current and prior year results at the same foreign currency exchange rate. To measure percentage organic sales growth, we remove the impact of changes in foreign currency exchange rates and acquisitions, which affect the comparability and trend of sales. Percentage organic sales growth is calculated by translating current year results at prior year average foreign currency exchange rates excluding the impact of acquisitions. To measure earnings performance on a consistent and comparable basis, we exclude certain items that affect the comparability of operating results and the trend of earnings. To measure free cash flow, we adjust cash provided by operating activities by the amount of purchases of property, plant and equipment and proceeds from long-lived asset disposals and remove the impact of certain legal settlements and recall payments. To measure free cash flow conversion we divide free cash flow by adjusted net earnings.

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported sales growth, gross profit, selling, general and administrative expenses, research, development and engineering expenses, operating income, other income (expense), net, effective income tax rate, net earnings and net earnings per diluted share, the most directly comparable GAAP financial measures. These non-GAAP financial measures are an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the reconciliations to corresponding GAAP financial measures below, provide a more complete understanding of our business. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

The following reconciles the non-GAAP financial measures discussed above with the most directly comparable GAAP financial measures. The weighted-average diluted shares outstanding used in the calculation of non-GAAP net earnings per diluted share are the same as those used in the calculation of reported net earnings per diluted share for the respective period, except for 4.3 million anti-dilutive shares excluded from reported net loss per dilutive share for the three months 2020.

STRYKER CORPORATION

For the Three and Six Months June 30

(Unaudited - Millions of Dollars, Except Per Share Amounts)

Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures

Three Months 2021

Gross Profit

Selling, General & Administrative Expenses

Research, Development & Engineering Expenses

Operating Income

Other income (expense), net

Net Earnings

Effective
Tax Rate

Diluted EPS

Reported

$

2,772

$

1,505

$

310

$

732

$

(70

)

$

592

10.6

%

$

1.55

Reported percent net sales

64.6

%

35.0

%

7.2

%

17.0

%

(1.6

)

%

13.8

%

Acquisition and integration-related charges (a)

Inventory stepped-up to fair value

58

58

43

0.6

0.11

Other acquisition and integration-related

(62

)

62

51

0.1

0.13

Amortization of purchased intangible assets

149

113

1.4

0.29

Restructuring-related and other charges (b)

2

(16

)

17

15

(0.1

)

0.03

Medical device regulations (c)

(26

)

26

21

0.1

0.06

Recall-related matters (d)

76

68

(0.4

)

0.18

Regulatory and legal matters (e)

9

(9

)

(3

)

(12

)

0.3

(0.03

)

Tax matters (f)

(30

)

4.4

(0.07

)

Adjusted

$

2,832

$

1,436

$

284

$

1,111

$

(73

)

$

861

17.0

%

$

2.25

Adjusted percent net sales

66.0

%

33.4

%

6.6

%

25.9

%

(1.7

)

%

20.1

%


Three Months 2020

Gross Profit

Selling, General & Administrative Expenses

Research, Development & Engineering Expenses

Operating Income (Loss)

Other income (expense), net

Net Earnings (Loss)

Effective
Tax Rate

Diluted EPS

Reported

$

1,548

$

1,225

$

233

$

(20

)

$

(67

)

$

(83

)

4.6

%

$

(0.22

)

Reported percent net sales

56.0

%

44.3

%

8.4

%

(0.7

)

%

(2.4

)

%

(3.0

)

%

Acquisition and integration-related charges (a)

Inventory stepped-up to fair value

3

3

1

(0.5

)

Other acquisition and integration-related

(16

)

16

12

(2.0

)

0.03

Amortization of purchased intangible assets

110

88

(7.0

)

0.23

Restructuring-related and other charges (b)

32

(178

)

209

170

(10.7

)

0.45

Medical device regulations (c)

(23

)

22

18

(2.4

)

0.05

Recall-related matters (d)

Regulatory and legal matters (e)

(5

)

5

6

2.3

0.02

Tax matters (f)

7

33

30.1

0.08

Adjusted

$

1,583

$

1,026

$

210

$

345

$

(60

)

$

245

14.4

%

$

0.64

Adjusted percent net sales

57.3

%

37.1

%

7.6

%

12.5

%

(2.2

)

%

8.9

%


Six Months 2021

Gross Profit

Selling, General & Administrative Expenses

Research, Development & Engineering Expenses

Operating Income

Other income (expense), net

Net Earnings

Effective
Tax Rate

Diluted EPS

Reported

$

5,281

$

3,080

$

598

$

1,191

$

(162

)

$

894

13.1

%

$

2.34

Reported percent net sales

64.0

%

37.3

%

7.3

%

14.4

%

(2.0

)

%

10.8

%

Acquisition and integration-related charges (a)

Inventory stepped-up to fair value

137

137

103

1.1

0.27

Other acquisition and integration-related

(232

)

232

180

1.6

0.47

Amortization of purchased intangible assets

330

264

1.6

0.69

Restructuring-related and other charges (b)

(31

)

31

11

33

0.3

0.08

Medical device regulations (c)

1

(44

)

45

37

0.2

0.10

Recall-related matters (d)

82

73

(0.3

)

0.19

Regulatory and legal matters (e)

9

(9

)

(3

)

(12

)

0.2

(0.03

)

Tax matters (f)

26

(2.6

)

0.07

Adjusted

$

5,419

$

2,826

$

554

$

2,039

$

(154

)

$

1,598

15.2

%

$

4.18

Adjusted percent net sales

65.7

%

34.3

%

6.7

%

24.7

%

(1.9

)

%

19.4

%


Six Months 2020

Gross Profit

Selling, General & Administrative Expenses

Research, Development & Engineering Expenses

Operating Income

Other income (expense), net

Net Earnings

Effective
Tax Rate

Diluted EPS

Reported

$

3,879

$

2,555

$

487

$

615

$

(112

)

$

410

18.5

%

$

1.08

Reported percent net sales

61.1

%

40.2

%

7.7

%

9.7

%

(1.8

)

%

6.5

%

Acquisition and integration-related charges (a)

Inventory stepped-up to fair value

9

9

6

0.2

0.02

Other acquisition and integration-related

(47

)

47

36

0.7

0.09

Amortization of purchased intangible assets

228

184

2.4

0.48

Restructuring-related and other charges (b)

36

(227

)

263

212

2.6

0.56

Medical device regulations (c)

1

(46

)

46

36

0.8

0.09

Recall-related matters (d)

(6

)

(4

)

(0.1

)

(0.01

)

Regulatory and legal matters (e)

(5

)

5

6

(0.4

)

0.02

Tax matters (f)

7

58

(10.4

)

0.15

Adjusted

$

3,925

$

2,276

$

441

$

1,207

$

(105

)

$

944

14.3

%

$

2.48

Adjusted percent net sales

61.8

%

35.8

%

6.9

%

19.0

%

(1.7

)

%

14.9

%


(a)

Charges represent certain acquisition and integration-related costs associated with acquisitions.

(b)

Charges represent the costs associated with the termination of sales relationships in certain countries, workforce reductions, elimination of product lines, certain long-lived asset impairments and associated costs and other restructuring-related activities.

(c)

Charges represent the 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 new medical device regulations in the European Union and China.

(d)

Charges represent changes in our best estimate of the minimum end of the range of probable loss to resolve certain recall-related matters.

(e)

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.

(f)

Benefits and charges represent the accounting impact of certain significant and discrete tax items, including adjustments related to the Tax Cuts and Jobs Act of 2017, and the transfer of certain intellectual properties between tax jurisdictions.


Six Months

2021

2020

Cash provided by operating activities

$

1,330

$

1,211

Net earnings

894

410

Conversion

148.8

%

295.4

%

Cash provided by operating activities

$

1,330

$

1,211

Purchases of property, plant and equipment

(189

)

(253

)

Proceeds from long-lived asset disposals

7

Recall payments

163

12

Free cash flow

$

1,311

$

970

Adjusted net earnings

1,598

944

Free cash flow conversion

82.0

%

102.8

%