10-KPeriod: FY2009

STRYKER CORP Annual Report, Year Ended Dec 31, 2009

Filed February 26, 2010For Securities:SYK

Summary

Stryker Corporation's 2009 10-K report reveals a company with stable net sales of $6.72 billion, showing minimal growth year-over-year, largely due to the economic downturn impacting its MedSurg Equipment segment. Despite this, the Orthopaedic Implants segment demonstrated resilience with a 4% increase in sales, driven by strong performance in hip, knee, trauma, and spinal implant systems. The company made a significant strategic acquisition of Ascent Healthcare Solutions for $525 million in cash, aiming to bolster its MedSurg segment. Stryker also managed its expenses effectively, reducing R&D spending as a percentage of sales and controlling SG&A expenses, which, combined with a patent litigation gain, helped offset some of the impacts from restructuring charges and higher cost of sales. Investors should note the ongoing regulatory scrutiny, including FDA warning letters at several facilities, though one has been resolved. The company also highlighted its strong liquidity position and access to credit facilities to fund future operations and growth initiatives.

Financial Highlights

53 data points
Beta

Revenue

$6.72B

67.5% Gross Margin

Net Income

$1.11B

16.5% Net Margin

EPS (Diluted)

$2.77

Total Assets

$9.07B

Cash & Equivalents

$659.00M

Free Cash Flow

$1.33B

Financial Statements
Beta
Revenue$6.72B
Cost of Revenue$2.18B
Gross Profit$4.54B
R&D Expenses$336.00M
SG&A Expenses$2.51B
Operating Expenses$2.94B
Operating Income$1.59B
Interest Expense$14.00M
Net Income$1.11B
EPS (Basic)$2.79
EPS (Diluted)$2.77
Shares Outstanding (Basic)397.40M
Shares Outstanding (Diluted)399.40M

Key Highlights

  • 1Stryker reported stable net sales of $6.72 billion for the year ended December 31, 2009, with minimal year-over-year growth.
  • 2The Orthopaedic Implants segment showed robust performance, with net sales increasing by 4% to $4.12 billion, driven by strong demand across various implant categories.
  • 3The MedSurg Equipment segment experienced a 5% decline in net sales to $2.60 billion, primarily attributed to the general economic slowdown impacting hospital capital budgets.
  • 4A significant strategic move was the acquisition of Ascent Healthcare Solutions, Inc. for $525 million in an all-cash transaction, aimed at enhancing the MedSurg Equipment segment.
  • 5Research, Development, and Engineering (R&D) expenses decreased by 9% to $336.2 million, representing 5.0% of net sales, down from 5.5% in the prior year, reflecting cost control measures and a focus on compliance initiatives.
  • 6The company reported net earnings of $1.11 billion, a slight decrease of 4% compared to the prior year, with diluted EPS of $2.77.
  • 7Stryker continues to navigate regulatory challenges, having received FDA warning letters for several facilities, though one was resolved. The company is cooperating with the FDA to address observations.

Frequently Asked Questions

The acquisition of Ascent Healthcare Solutions, Inc. for $525 million was completed at the end of 2009. While it significantly expanded Stryker's presence in the reprocessing and remanufacturing of medical devices, its financial impact on net sales and operating income for the year 2009 was not material as it was a partial-year acquisition. However, it is expected to enhance the MedSurg Equipment segment and provide cost savings opportunities for customers.

The Orthopaedic Implants segment saw a 4% increase in sales to $4.12 billion. This growth was primarily driven by higher shipments across various implant systems, including hips (with strong performance from Trident, X3 Polyethylene, Accolade, and Restoration Modular Hip System), knees (particularly the Triathlon Knee System), trauma (Gamma 3 Hip Fracture System, SPS Calcaneal Foot Plating System, VariAx Distal Radius System), and spinal implant systems (thoracolumbar, interbody, and cervical implants).

The MedSurg Equipment segment experienced a 5% decrease in net sales, reaching $2.60 billion. The primary challenge was the general economic slowdown in the United States, which led to a significant contraction in hospital capital budgets. This reduced demand for certain MedSurg products, especially capital equipment which represents about 60% of the segment's sales, to a degree not previously seen in recessionary periods.

In 2009, Stryker reduced its R&D expenditures by 9% to $336.2 million, representing 5.0% of net sales, down from 5.5% in 2008. This reduction was attributed to tight control over discretionary spending and a focused allocation of R&D resources towards compliance initiatives. Despite the decrease, the company continued to introduce new products in both its Orthopaedic Implants and MedSurg Equipment segments.