Summary
This 10-Q/A filing from Stryker Corporation for the period ending June 30, 1999, reflects the significant impact of the Howmedica acquisition completed in late 1998. While reported net sales show a substantial increase of 101% for the six months ended June 30, 1999, this is largely driven by the acquisition. However, the company reported a net loss of $24.5 million for the first six months of 1999, a stark contrast to the $71.3 million net earnings in the prior year. This loss is primarily attributable to substantial non-recurring costs, including $127.9 million in additional cost of sales due to inventory stepped-up to fair value from the Howmedica acquisition and restructuring charges. Excluding these non-recurring items, adjusted net earnings were approximately flat year-over-year, with a slight increase in adjusted EPS. Investors should note the significant increase in long-term debt and interest expense resulting from the acquisition financing. The balance sheet shows a decrease in total assets and total liabilities compared to the end of 1998, partly due to a restatement of 1998 financial statements related to acquisition charges. Key balance sheet items impacted by the Howmedica acquisition include goodwill, other intangibles, and acquisition-related reserves. While the company is facing increased debt and interest expenses, its liquidity remains stable, supported by cash on hand and available credit facilities. The company is also actively managing integration costs and restructuring efforts related to the Howmedica acquisition, with a focus on completing these initiatives to realize the full benefits of the acquisition.
Key Highlights
- 1Stryker Corporation reported a net loss of $24.5 million for the six months ended June 30, 1999, compared to a net profit of $71.3 million in the prior year, largely due to significant acquisition-related costs.
- 2Net sales increased by 101% to $1,045.7 million for the six months ended June 30, 1999, driven by the Howmedica acquisition, which contributed approximately 86% of the sales increase.
- 3The company incurred $127.9 million in additional cost of sales for inventory stepped-up to fair value from the Howmedica acquisition during the first six months of 1999.
- 4Restructuring charges and other acquisition-related expenses totaled $19.7 million in the first quarter of 1999.
- 5Long-term debt increased significantly to $1,400.3 million as of June 30, 1999, leading to a substantial rise in interest expense to $63.9 million for the six months ended June 30, 1999.
- 6The company's liquidity is considered stable, with $79.6 million in cash and marketable securities and $204.9 million in available borrowing capacity under its credit facilities as of June 30, 1999.
- 7Stryker announced a restatement of its 1998 financial statements related to acquisition charges stemming from discussions with the SEC regarding the Howmedica acquisition.