10-QPeriod: Q2 FY2005

STRYKER CORP Quarterly Report for Q2 Ended Jun 30, 2005

Filed August 1, 2005For Securities:SYK

Summary

Stryker Corporation reported strong financial results for the period ending June 30, 2005. Net sales increased by 17% year-over-year for both the second quarter and the first six months, driven by robust performance in both the Orthopaedic Implants and MedSurg Equipment segments. The company also saw significant growth in net earnings, up 21% for the quarter and 24% for the six-month period, indicating effective cost management and operational efficiency. Key drivers of this growth included strong shipments across various product lines, including reconstructive, trauma, and spine implants, as well as powered surgical instruments and endoscopic products. The company's outlook for 2005 remains optimistic, with projected diluted EPS of approximately $1.75 and expected net sales growth of 14% to 15%. Stryker continues to invest in future growth through acquisitions, product development, and facility expansions, while maintaining a solid liquidity position with significant borrowing capacity.

Key Highlights

  • 1Net sales for the six months ended June 30, 2005, increased 17% to $2,421.1 million compared to $2,078.1 million in the prior year.
  • 2Net earnings for the six months increased 24% to $357.4 million, with diluted EPS rising to $0.87 from $0.70.
  • 3The Orthopaedic Implants segment saw a 14% sales increase for the first half, driven by strong performance in reconstructive, trauma, and spine systems.
  • 4The MedSurg Equipment segment reported a 23% sales increase for the first half, fueled by powered surgical instruments and endoscopic products.
  • 5The company acquired eTrauma.com Corp. for approximately $50.0 million, expanding its endoscopic and medical video imaging product offerings.
  • 6Stryker anticipates full-year 2005 diluted EPS to approximate $1.75 and net sales growth of 14% to 15%.
  • 7The company maintained a strong liquidity position with $118.4 million in cash and cash equivalents and $819.3 million in additional borrowing capacity.

Frequently Asked Questions

Sales growth was primarily driven by strong shipments across both the Orthopaedic Implants and MedSurg Equipment segments. Specifically, reconstructive, trauma, and spine implant systems, along with powered surgical instruments and endoscopic products, showed significant increases. The acquisition of eTrauma.com Corp. also contributed to the growth in the MedSurg segment.

Stryker projects optimistic growth for the full year 2005. The company expects diluted net earnings per share to approximate $1.75 and anticipates a net sales increase in the range of 14% to 15%, supported by strong performance in its core segments and favorable foreign currency exchange rates.

Stryker demonstrated strong liquidity. While the company invested in acquisitions and capital expenditures, it generated significant cash from operations ($219.2 million for the first six months). At June 30, 2005, the company had $118.4 million in cash and cash equivalents and $819.3 million in available borrowing capacity under its credit facilities, indicating a solid financial position to fund future growth.

The company is cooperating with the Department of Justice regarding investigations into its Physiotherapy Associates subsidiary's billing practices and is also responding to a subpoena requesting documents related to consulting and remuneration agreements with orthopedic surgeons. While these matters are ongoing, the company does not anticipate material losses beyond amounts already provided.