10-KPeriod: FY2019

STRYKER CORP Annual Report, Year Ended Dec 31, 2019

Filed February 6, 2020For Securities:SYK

Summary

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 billion, 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 billion. 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.

Financial Highlights

52 data points
Beta

Revenue

$14.88B

65.1% Gross Margin

Net Income

$2.08B

14.0% Net Margin

EPS (Diluted)

$5.48

Total Assets

$30.17B

Cash & Equivalents

$4.34B

Free Cash Flow

$1.54B

Financial Statements
Beta
Revenue$14.88B
Cost of Revenue$5.19B
Gross Profit$9.70B
R&D Expenses$971.00M
SG&A Expenses$5.36B
Operating Expenses$6.98B
Operating Income$2.71B
Interest Expense$287.00M
Net Income$2.08B
EPS (Basic)$5.57
EPS (Diluted)$5.48
Shares Outstanding (Basic)374.00M
Shares Outstanding (Diluted)379.90M

Key Highlights

  • 1Stryker reported net sales of $14.88 billion in 2019, a 9.4% increase year-over-year, with constant currency sales growth of 10.7%.
  • 2The 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%.
  • 3Net 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.
  • 4Stryker 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.
  • 5The 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.
  • 6Recall 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.
  • 7Stryker's strong cash generation enabled continued investment in R&D (6.5% of net sales), supporting future innovation and product development.

Frequently Asked Questions

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.

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.

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.

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.