01—Abstract
Summary
Summary of the 10-K filed February 6, 2020. Cited figures are marked; the original filing is the authoritative source.
Stryker Corporation's 2019 Form 10-K report details a year of robust growth and strategic investments.
The company achieved a reported net sales increase of 9.4%, reaching $14.88 billiona, driven by strong performance across its Orthopaedics, MedSurg, and Neurotechnology and Spine segments. Excluding the impact of acquisitions and currency fluctuations, sales grew by 9.0% on a constant currency basis, primarily due to increased unit volume. Financially, Stryker reported net earnings of $2.08 billion, or $5.48 per diluted share.
However, excluding certain non-recurring items and acquisition-related costs, adjusted net earnings grew by 13.0% to $3.14 billionb. The company continued its capital allocation strategy, investing $802 million in acquisitions, paying $778 million in dividends, and repurchasing $307 million in stock. A significant development was the announcement of a definitive agreement to acquire Wright Medical Group N.V. for approximately $5.4 billion, expected to close in the second half of 2020, which will bolster Stryker's extremities and biologics offerings.
02—Key points
Key Highlights
- Stryker reported net sales of $14.88 billion in 2019, a 9.4% increase year-over-year, with constant currency sales growth of 10.7%.
- The company's three key segments - Orthopaedics, MedSurg, and Neurotechnology and Spine - all demonstrated significant sales growth, with Neurotechnology and Spine showing the strongest performance at 19.2%.
- Net earnings for 2019 were $2.08 billion, or $5.48 per diluted share, though adjusted net earnings (excluding certain items) saw a 13.0% increase.
- Stryker announced its intent to acquire Wright Medical Group N.V. for approximately $5.4 billion, a strategic move to expand its extremities and biologics portfolio within the Orthopaedics segment.
- The company continued its capital allocation priorities, investing $802 million in acquisitions, returning $778 million to shareholders via dividends, and repurchasing $307 million of its own stock.
- Recall charges for the year were $192 million, primarily related to previously disclosed hip stem and femoral head recalls, a significant increase from $23 million in 2018.
- Stryker's strong cash generation enabled continued investment in R&D (6.5% of net sales), supporting future innovation and product development.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Stryker Corp kept $0.14.
- Revenue$14.88B100.0%
- Cost of revenue−$5.19B34.9%
- Gross profit$9.70B65.1%
- Operating costs−$6.98B46.9%
- Operating income$2.71B18.2%
- Interest, other & tax−$630.0M4.2%
- Net income$2.08B14.0%
Where FY2019 revenue went
$14.88B- SG&A: $5.36B, 36% of revenue
- Cost of revenue: $5.19B, 35% of revenue
- Net income: $2.08B, 14% of revenue
- R&D: $971.0M, 6.5% of revenue
- Other operating costs: $656.0M, 4.4% of revenue
- Interest, other & tax: $630.0M, 4.2% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 6, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $14.88B$13.60B | +9.4% |
| Cost of Revenue | $5.19B$4.66B | +11.3% |
| Gross Profit | $9.70B$8.94B | +8.5% |
| R&D Expenses | $971.00M$862.00M | +12.6% |
| SG&A Expenses | $5.36B$5.10B | +5.0% |
| Operating Expenses | $6.98B$6.40B | +9.1% |
| Operating Income | $2.71B$2.54B | +6.9% |
| Interest Expense | $287.00M$264.00M | +8.7% |
| Net Income | $2.08B$3.55B | −41.4% |
| EPS (Basic) | $5.57$9.50 | −41.4% |
| EPS (Diluted) | $5.48$9.34 | −41.3% |
| Shares Outstanding (Basic) | 374.00M374.10M | 0.0% |
| Shares Outstanding (Diluted) | 379.90M380.30M | −0.1% |
05—Questions
Frequently Asked Questions
What were Stryker's primary growth drivers in 2019?
Stryker's primary growth drivers in 2019 were increased unit volume across its key product lines, particularly in medical, instruments, endoscopy, neurotechnology, knees, hips, and trauma and extremities. Acquisitions also contributed significantly to sales growth, with the Neurotechnology and Spine segment showing particularly strong organic growth.
What is the significance of the announced Wright Medical Group acquisition?
The announced acquisition of Wright Medical Group N.V. for approximately $5.4 billion is a significant strategic move for Stryker. It is expected to strengthen Stryker's position in the extremities and biologics market, integrating Wright's portfolio into Stryker's Orthopaedics segment and offering significant expansion opportunities.
How did recall charges impact Stryker's financial results in 2019?
Recall charges, net of insurance proceeds, increased significantly to $192 million in 2019, compared to $23 million in 2018. These charges were primarily related to voluntary recalls of the Rejuvenate and ABGII Modular-Neck hip stems and LFIT V40 femoral heads. While impacting reported net earnings, the company has accrued reserves to cover estimated future losses related to these matters.
What is Stryker's approach to capital allocation?
Stryker's capital allocation strategy prioritizes acquisitions, dividends, and share repurchases. In 2019, the company invested $802 million in acquisitions, paid $778 million in dividends to shareholders, and utilized $307 million for share repurchases. However, with the issuance of substantial Euro-denominated notes, Stryker announced its intention to suspend its share repurchase program for 2020 and 2021.
06—Continue