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Stryker reports second quarter 2022 operating results

·20 min read
Stryker Corporation
Stryker Corporation

Kalamazoo, Michigan, July 26, 2022 (GLOBE NEWSWIRE) -- Stryker (NYSE:SYK) reported operating results for the second quarter of 2022:

Second Quarter Results

  • Reported net sales increased 4.6% to $4.5 billion

  • Organic net sales increased 6.1%

  • Reported operating income margin of 17.2%

  • Adjusted operating income margin(1) contracted 220 bps to 23.7%

  • Reported EPS increased 11.0% to $1.72

  • Adjusted EPS(1) of $2.25 in line with 2021

 

Second Quarter Net Sales Growth Overview

 

Reported

 

Foreign Currency Exchange

 

Constant Currency

 

Acquisitions / Divestitures

 

Organic

MedSurg and Neurotechnology

8.0

%

 

(2.6)         %

 

10.6

%

 

2.7

%

 

7.9

%

Orthopaedics and Spine

0.5

 

 

        (3.4)       

 

 

3.9

 

 

 

 

3.9

 

Total

4.6

%

 

(3.0)         %

 

7.6

%

 

1.5

%

 

6.1

%

"Despite supply shortages we delivered solid organic sales growth in Q2," said Kevin A. Lobo, Chair and CEO. "Negative foreign currency and inflation, including spot buys of materials pressured our adjusted earnings. We are confident in our full year outlook for revenue; however, we are expecting continued adjusted EPS challenges due to worsening foreign exchange and other macroeconomic conditions."

Sales Analysis

Consolidated net sales of $4.5 billion increased 4.6% in the quarter and 7.6% in constant currency. Organic net sales increased 6.1% in the quarter including 7.5% from increased unit volume partially offset by 1.4% from lower prices.

MedSurg and Neurotechnology net sales of $2.5 billion increased 8.0% in the quarter and 10.6% in constant currency. Organic net sales increased 7.9% in the quarter including 7.8% from increased unit volume and 0.1% from higher prices.

Orthopaedics and Spine net sales of $1.9 billion increased 0.5% in the quarter and 3.9% in constant currency. Organic net sales increased 3.9% in the quarter including 7.1% from increased unit volume partially offset by 3.2% from lower prices.

Earnings Analysis

Reported net earnings of $656 million increased 10.8% in the quarter. Reported net earnings per diluted share of $1.72 increased 11.0% in the quarter. Reported gross profit margin and reported operating income margin were 62.9% and 17.2% in the quarter. Reported net earnings include certain items, such as charges for acquisition and integration-related activities, the amortization of purchased intangible assets, asset write-offs and impairments and 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 63.3% in the quarter, and adjusted operating income margin(1) was 23.7% in the quarter. Adjusted net earnings(1) of $860 million decreased 0.1% in the quarter. Adjusted net earnings per diluted share(1) of $2.25 was in line with 2021.

2022 Outlook

Considering our second quarter results, the strong order book for capital equipment and the sales momentum in our implant businesses, we now expect full year 2022 organic net sales growth to be in the range of 8% to 9%. If foreign currency exchange rates hold near current levels, we expect net sales in the full year will be adversely impacted by approximately 2% to 3% and adjusted net earnings per diluted share(2) will be adversely impacted by approximately $0.25 to $0.30 in the full year. Based on our performance in the second quarter including consideration of the continued supply chain challenges and the inflationary environment, together with our increased sales guidance and continued financial discipline, and most significantly, the anticipated future impact of foreign currency, we now expect adjusted net earnings per diluted share(2) in the range of $9.30 to $9.50 per share.

(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 26, 2022

As previously announced, Stryker will host a conference call on Tuesday, July 26, 2022 at 4:30 p.m., Eastern Time, to discuss the Company's operating results for the quarter ended June 30, 2022 and provide an operational update.

Please register for this conference call at: Stryker's Q2 2022 Earnings call. After registering, a confirmation will be sent via email, including dial-in details and unique conference call access codes required for call entry. Registration is open throughout the live call. To ensure you are connected prior to the beginning of the call, the Company suggests registering a minimum of 15 minutes before the start of the call.

A simultaneous webcast of the call will be accessible via the Investor Relations page of the Company's website at www.stryker.com. For those not planning to ask a question of management, the Company recommends listening via the webcast. Please allow 15 minutes to register, download and install any necessary software.

Following the conference call, a replay will be available at (866) 813-9403 (Toll Free) or (929) 458-6194 (International). The replay passcode is 637642. An archive of the webcast will also be available on the Company's website two hours after the live call ends.

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 law 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 Vocera Communications, Inc. (Vocera); the effects of the Vocera transaction on the relationships of the parties 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 United States Food and Drug Administration approval of new products, including Vocera 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 Vocera; our ability to realize anticipated cost savings; and potential negative impacts resulting from environmental, social and governance (ESG) and sustainability related matters. Additional information concerning these and other factors is contained in our filings with the United States 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 Medical and Surgical, Neurotechnology, Orthopaedics and Spine that help improve patient and healthcare outcomes.  Alongside its customers around the world, Stryker impacts more than 100 million patients annually. More information is available at www.stryker.com.

For investor inquiries please contact:

Jason Beach, Vice President, Investor Relations at 269-385-2600 or jason.beach@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

 

 

 

 

 

 

 

 

 

Three Months

 

Six Months

 

 

2022   

 

 

 

2021   

 

 

% Change

 

 

2022   

 

 

 

2021   

 

 

% Change

Net sales

$

      4,493 

 

 

$

4,294

 

 

4.6

%

 

$

8,768

 

 

$

8,247

 

 

6.3

%

Cost of sales

 

1,667

 

 

 

1,522

 

 

9.5

 

 

 

3,208

 

 

 

2,966

 

 

8.2

 

Gross profit

$

2,826

 

 

$

2,772

 

 

1.9

%

 

$

5,560

 

 

$

5,281

 

 

5.3 

%

% of sales

 

62.9

%

 

 

64.6

%

 

 

 

 

63.4

%

 

 

64.0

%

 

 

Research, development and engineering expenses

 

351

 

 

 

310

 

 

13.2

 

 

 

764

 

 

 

598

 

 

27.8

 

Selling, general and administrative expenses

 

1,539

 

 

 

1,505

 

 

2.3

 

 

 

3,249

 

 

 

3,080

 

 

5.5

 

Recall charges

 

4

 

 

 

76

 

 

nm     

 

 

18

 

 

 

82

 

 

nm     

Amortization of intangible assets

 

160

 

 

 

149

 

 

7.4

 

 

 

310

 

 

 

330

 

 

(6.1)

 

Total operating expenses

$

2,054

 

 

$

2,040

 

 

0.7

%

 

$

4,341

 

 

$

4,090

 

 

6.1

%

Operating income

$

772

 

 

$

732

 

 

5.5

%

 

$

1,219

 

 

$

1,191

 

 

2.4

%

% of sales

 

17.2

%

 

 

17.0

%

 

 

 

 

13.9

%

 

 

14.4

%

 

 

Other income (expense), net

 

(52)

 

 

 

(70)

 

 

(25.7)

 

 

 

(113)

 

 

 

(162)

 

 

(30.2)

 

Earnings before income taxes

$

720

 

 

$

662

 

 

8.8

%

 

$

1,106

 

 

$

1,029

 

 

7.5

%

Income taxes

 

64

 

 

 

70

 

 

(8.6)

 

 

 

127

 

 

 

135

 

 

(5.9)

 

Net earnings

$

656

 

 

$

592

 

 

10.8

%

 

$

979

 

 

$

894

 

 

9.5 

%

Net earnings per share of common stock:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.73

 

 

$

1.57

 

 

10.2

%

 

$

2.59

 

 

$

2.37

 

 

9.3

%

Diluted

$

1.72

 

 

$

1.55

 

 

11.0

%

 

$

2.56

 

 

$

2.34

 

 

9.4

%

Weighted-average shares outstanding (in millions):

 

 

 

 

 

 

 

 

 

 

 

Basic

 

378.3

 

 

 

376.9

 

 

 

 

 

378.0

 

 

 

376.6

 

 

 

Diluted

 

382.2

 

 

 

382.3

 

 

 

 

 

382.5

 

 

 

382.0

 

 

 


CONDENSED CONSOLIDATED BALANCE SHEETS

 

June 30

 

December 31

 

 

2022        

 

 

2021        

Assets

 

 

 

Cash and cash equivalents

$

1,044

 

$

2,944

Marketable securities

 

83

 

 

75

Accounts receivable, net

 

3,145

 

 

3,022

Inventories

 

3,749

 

 

3,314

Prepaid expenses and other current assets

 

804

 

 

662

Total current assets

$

8,825

 

$

10,017

Property, plant and equipment, net

 

2,803

 

 

2,833

Goodwill and other intangibles, net

 

20,360

 

 

17,758

Noncurrent deferred income tax assets

 

1,625

 

 

1,760

Other noncurrent assets

 

2,419

 

 

2,263

Total assets

$

36,032

 

$

34,631

Liabilities and shareholders' equity

 

 

 

Current liabilities

$

4,404

 

$

4,549

Long-term debt, excluding current maturities

 

13,374

 

 

12,472

Income taxes

 

787

 

 

913

Other noncurrent liabilities

 

1,793

 

 

1,820

Shareholders' equity

 

15,674

 

 

14,877

Total liabilities and shareholders' equity

$

36,032

 

$

34,631


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Six Months

 

 

2022            

 

 

 

2021             

 

Operating activities

 

 

 

Net earnings

$

979

 

 

$

894

 

Depreciation

 

185

 

 

 

187

 

Amortization of intangible assets

 

310

 

 

 

330

 

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

 

(742)

 

 

 

(81)

 

Net cash provided by operating activities

$

732

 

 

$

1,330

 

Investing activities

 

 

 

Acquisitions, net of cash acquired

$

(2,563)

 

 

$

(104)

 

Purchases of property, plant and equipment

 

(262)

 

 

 

(189)

 

Other investing, net

 

(9)

 

 

 

(5)

 

Net cash used in investing activities

$

(2,834)

 

 

$

(298)

 

Financing activities

 

 

 

Borrowings (payments) of debt, net

$

872

 

 

$

(1,153)

 

Payments of dividends

 

(525

)

 

 

(475)

 

Other financing, net

 

(107

)

 

 

(101)

 

Net cash provided by (used in) financing activities

$

240

 

 

$

(1,729)

 

Effect of exchange rate changes on cash and cash equivalents

 

(38

)

 

 

(5)

 

Change in cash and cash equivalents

$

(1,900

)

 

$

(702)

 

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

 

 

2022    

 

2021    

 

As Reported

Constant
Currency

 

 

2022    

 

2021    

 

As Reported

Constant
Currency

Geographic:

 

 

 

 

 

 

 

 

 

 

 

United States

$

3,311

$

3,100

 

6.8

%

6.8

%

 

$

6,416

$

5,884

 

9.0

%

9.0

%

International

 

1,182

 

1,194

 

(1.0)

 

9.7

 

 

 

2,352

 

2,363

 

(0.5)

 

7.8

 

Total

$

4,493

$

4,294

 

4.6

%

7.6

%

 

$

8,768

$

8,247

 

6.3

%

8.7

%

Segment:

 

 

 

 

 

 

 

 

 

 

 

MedSurg and Neurotechnology

$

2,549

$

2,359

 

8.0

%

10.6

%

 

$

4,972

$

4,550

 

9.3

%

11.3

%

Orthopaedics and Spine

 

1,944

 

1,935

 

0.5

 

3.9

 

 

 

3,796

 

3,697

 

2.7

 

5.4

 

Total

$

4,493

$

4,294

 

4.6

%

7.6

%

 

$

8,768

$

8,247

 

6.3

%

8.7

%


SUPPLEMENTAL SALES GROWTH ANALYSIS

 

Three Months

 

 

 

 

 

 

United States

 

International

 

 

 

Percentage Change

 

 

2022    

 

2021    

 

As Reported

Constant Currency

 

As Reported

 

As Reported

Constant Currency

MedSurg and Neurotechnology:

 

 

 

 

 

 

 

 

 

 

Instruments

$

563

$

517

 

8.9

%

11.3

%

 

12.3

%

 

(3.1)   %

7.7

%

Endoscopy

 

600

 

518

 

15.7

 

18.2

 

 

16.2

 

 

13.8

 

25.8

 

Medical

 

666

 

640

 

4.1

 

6.2

 

 

10.0

 

 

(14.6)

 

(6.1)

 

Neurovascular

 

306

 

301

 

1.6

 

    7.2

 

 

(1.8)

 

 

3.7

 

12.9

 

Neuro Cranial

 

337

 

310

 

     8.5

 

10.3

 

 

     9.4

 

 

    4.1

 

     14.7

 

Other

 

77

 

73

 

5.8

 

5.8

 

 

4.9

 

 

68.5

 

74.5

 

 

$

2,549

$

2,359

 

8.0

%

10.6

%

 

10.9

%

 

(0.1)   %

9.9

%

Orthopaedics and Spine:

 

 

 

 

 

 

 

 

 

 

Knees

$

500

$

474

 

5.5

%

8.7

%

 

5.3

%

 

6.2

%

18.6

%

Hips

 

364

 

353

 

3.2

 

7.6

 

 

4.5

 

 

1.2

 

13.0

 

Trauma and Extremities

 

676

 

674

 

0.2

 

3.4

 

 

3.1

 

 

(6.5)

 

4.4

 

Spine

 

290

 

307

 

(5.1)

 

(2.3)

 

 

(3.6)

 

 

(8.9)

 

1.0

 

Other

 

114

 

127

 

(10.8)

 

(7.3)

 

 

(13.8)

 

 

0.1

 

16.3

 

 

$

1,944

$

1,935

 

0.5

%

3.9

%

 

1.6

%

 

(2.0)   %

9.5

%

Total

$

     4,493

$

     4,294

 

4.6

%

7.6

%

 

6.8

%

 

(1.0)   %

9.7

%


 

 

Six Months

 

 

 

 

 

 

 

United States

 

International

 

 

 

 

Percentage Change

 

 

2022   

 

2021   

 

As Reported

Constant Currency

 

As Reported

 

As Reported

Constant Currency

MedSurg and Neurotechnology:

 

 

 

 

 

 

 

 

 

 

Instruments

$

1,091

$

986

 

10.7

%

12.7

%

 

14.3

%

 

(1.4)  %

7.0

%

Endoscopy

 

1,138

 

987

 

15.3

 

17.5

 

 

17.1

 

 

9.2

 

18.9

 

Medical

 

1,330

 

1,262

 

5.4

 

7.0

 

 

10.5

 

 

(10.7)

 

(4.3)

 

Neurovascular

 

607

 

590

 

2.7

 

6.9

 

 

(1.6)

 

 

5.4

 

12.2

 

Neuro Cranial

 

660

 

591

 

11.6

 

13.1

 

 

13.5

 

 

3.8

 

11.7

 

Other

 

146

 

134

 

8.8

 

8.8

 

 

8.1

 

 

57.6

 

60.7

 

 

$

4,972

$

4,550

 

9.3

%

11.3

%

 

12.4

%

 

0.8

%

8.5

%

Orthopaedics and Spine:

 

 

 

 

 

 

 

 

 

 

Knees

$

964

$

886

 

8.8

%

11.5

%

 

10.9

%

 

3.2

%

13.1

%

Hips

 

691

 

662

 

4.5

 

8.1

 

 

6.3

 

 

1.5

 

10.9

 

Trauma and Extremities

 

1,361

 

1,314

 

3.6

 

6.2

 

 

6.7

 

 

(3.7)

 

4.8

 

Spine

 

569

 

585

 

(2.6)

 

(0.3)

 

 

(0.1)

 

 

(8.5)

 

(0.7)

 

Other

 

211

 

250

 

(15.5)

 

(13.0)

 

 

(18.4)

 

 

(5.5)

 

5.9

 

 

$

3,796

$

3,697

 

2.7

%

5.4

%

 

4.7

%

 

(1.9) 

7.2

%

Total

$

8,768

$

8,247

 

6.3

%

8.7

%

 

9.0

%

 

(0.5)  

7.8

%

Note: The three and six months 2022 had the same number of selling days as 2021.

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, acquisitions and divestitures, which affect the comparability and trend of sales. Percentage organic sales growth is calculated by translating current year and prior year results at the same foreign currency exchange rate excluding the impact of acquisitions and divestitures. 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.

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 2022

Gross Profit

Selling, General & Administrative Expenses

Research, Development & Engineering Expenses

Operating Income

Other Income (Expense), Net

Net Earnings

Effective
Tax Rate

Diluted EPS

Reported

$

2,826

 

$

1,539

 

$

351

 

$

772

 

$

(520)

 

$

656

 

8.9

%

$

1.72

 

Reported percent net sales

 

62.9

%

 

34.3

%

 

7.8

%

 

17.2

%

(1.2) %

 

14.6

%

 

 

Acquisition and integration-related costs (a)

 

 

 

 

 

 

 

 

Inventory stepped-up to fair value

 

7

 

 

 

 

 

 

7

 

 

 

 

5

 

0.1

 

 

0.01

 

Other acquisition and integration-related

 

 

 

(30)

 

 

 

 

30

 

 

 

 

23

 

0.4

 

 

0.06

 

Amortization of purchased intangible assets

 

 

 

— 

 

 

 

 

160

 

 

 

 

124

 

2.0

 

 

0.33

 

Restructuring-related and other charges (b)

 

8

 

 

(54)

 

 

 

 

62

 

 

 

 

56

 

(0.4)

 

 

0.15

 

Medical device regulations (c)

 

2

 

 

(2)

 

 

(28)

 

 

32

 

 

 

 

26

 

0.2

 

 

0.07

 

Recall-related matters (d)

 

 

 

 

 

 

 

4

 

 

 

 

3

 

0.1

 

 

 

Regulatory and legal matters (e)

 

 

 

 

 

 

 

(4)

 

 

 

 

(4)

 

 

 

(0.02

)

Tax matters (f)

 

 

 

 

 

 

 

 

 

(12)

 

 

(29)

 

2.6

 

 

(0.07

)

Adjusted

$

2,843

 

$

1,457

 

$

323 

 

$

1,063

 

$

(64)

 

$

860

 

13.9

%

$

2.25

 

Adjusted percent net sales

 

63.3

%

 

32.4

%

 

7.2

%

 

23.7

%

(1.4)%

 

19.1

%

 

 


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 costs (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

%

 

 


Six Months 2022

Gross Profit

Selling, General & Administrative Expenses

Research, Development & Engineering Expenses

Operating Income

Other Income (Expense), Net

Net Earnings

Effective
Tax Rate

Diluted EPS

Reported

$

5,560

 

$

3,249 

 

$

764

 

$

1,219

 

$

(113)

 

$

979

 

11.5

%

$

2.56

Reported percent net sales

 

63.4

%

 

37.1

%

 

8.7

%

 

13.9

%

(1.3)%

 

11.2

%

 

 

Acquisition and integration-related costs (a)

 

 

 

 

 

 

 

 

Inventory stepped-up to fair value

 

12

 

 

 

 

 

 

12

 

 

 

 

9

 

0.1

 

 

0.02

Other acquisition and integration-related

 

 

 

(174)

 

 

 

 

174

 

 

 

 

128

 

2.0

 

 

0.33

Amortization of purchased intangible assets

 

 

 

 

 

 

 

310

 

 

 

 

239

 

2.6

 

 

0.63

Restructuring-related and other charges (b)

 

10

 

 

(82)

 

 

(79)

 

 

171

 

 

 

 

140

 

0.6

 

 

0.37

Medical device regulations (c)

 

2

 

 

(2)

 

 

(56)

 

 

60

 

 

 

 

50

 

0.2

 

 

0.13

Recall-related matters (d)

 

 

 

 

 

 

 

18

 

 

 

 

14

 

0.2

 

 

0.04

Regulatory and legal matters (e)

 

 

 

(33)

 

 

 

 

33

 

 

 

 

24

 

0.4

 

 

0.06

Tax matters (f)

 

 

 

 

 

 

 

 

 

(12)

 

 

29

 

(3.7)

 

 

0.08

Adjusted

$

5,584 

 

$

 2,958

 

$

629

 

$

1,997

 

$

(125) 

 

$

1,612

 

13.9

%

$

4.22

Adjusted percent net sales

 

63.7

%

 

33.7

%

 

7.2

%

 

22.8

%

(1.4)   %

 

18.4

%

 

 


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 costs (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

%

 

 


(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 and intangible asset write-offs and 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 transfer of certain intellectual properties between tax jurisdictions.


Six Months

 

2022      

 

 

 

2021      

 

Cash provided by operating activities

$

732

 

 

$

1,330

 

Net earnings

 

979

 

 

 

894

 

Conversion

 

74.8

%

 

 

148.8

%

 

 

 

 

Cash provided by operating activities

$

732

 

 

$

1,330

 

Purchases of property, plant and equipment

 

(262)

 

 

 

(189)

 

Proceeds from long-lived asset disposals

 

2

 

 

 

7

 

Recall payments

 

19

 

 

 

163

 

Free cash flow

$

491

 

 

$

1,311 

 

Adjusted net earnings

 

1,612

 

 

 

1,598

 

Free cash flow conversion

 

30.5

%

 

 

82.0

%