10-QPeriod: Q3 FY2008

STRYKER CORP Quarterly Report for Q3 Ended Sep 30, 2008

Filed November 3, 2008For Securities:SYK

Summary

Stryker Corporation (SYK) reported strong performance in its Q3 2008 filing, with net sales increasing by 14% year-over-year to $1.65 billion. This growth was driven by robust performance in both its Orthopaedic Implants and MedSurg Equipment segments, with notable strength in knee implants and surgical equipment. Net earnings from continuing operations saw a significant 20% increase to $273.8 million, translating to diluted EPS of $0.66. The company also highlighted a substantial share repurchase program, demonstrating a commitment to returning value to shareholders. However, investors should note the ongoing challenges related to investments in auction-rate securities, which are currently illiquid due to market conditions, although the company believes this will not impact its operational funding. Operationally, Stryker demonstrated solid execution across its product lines, with significant contributions from both domestic and international markets. The company's outlook for the full year 2008 remains optimistic, projecting a 22% increase in diluted EPS, indicating continued confidence in its growth trajectory despite broader economic uncertainties. The company is also proactively addressing regulatory matters and quality systems improvements, showcasing a commitment to compliance and operational excellence.

Financial Highlights

27 data points
Beta

Revenue

$1.65B

67.2% Gross Margin

Net Income

$273.80M

16.6% Net Margin

EPS (Diluted)

$0.66

Free Cash Flow

$288.50M

Financial Statements
Beta
Revenue$1.65B
Cost of Revenue$541.70M
Gross Profit$1.11B
R&D Expenses$92.60M
SG&A Expenses$644.80M
Operating Expenses$747.20M
Operating Income$364.10M
Net Income$273.80M
EPS (Basic)$0.67
EPS (Diluted)$0.66
Shares Outstanding (Basic)409.70M
Shares Outstanding (Diluted)415.80M

Key Highlights

  • 1Net sales increased by 14% to $1.65 billion in Q3 2008 compared to the prior year period.
  • 2Net earnings from continuing operations rose by 20% to $273.8 million, with diluted EPS of $0.66.
  • 3Strong growth was observed in both the Orthopaedic Implants (12% increase) and MedSurg Equipment (16% increase) segments.
  • 4The company repurchased 9.1 million shares of common stock for $596 million during the third quarter of 2008.
  • 5Domestic sales increased by 13% year-over-year, while international sales grew by 15% reported and 10% on a constant currency basis.
  • 6The company expects full-year 2008 diluted EPS to approximate $2.88, a 22% increase over 2007.
  • 7Investments in auction-rate securities remain illiquid due to market conditions, valued at $152.1 million as of September 30, 2008.

Frequently Asked Questions

Stryker reported a strong Q3 2008 with net sales up 14% to $1.65 billion and net earnings from continuing operations up 20% to $273.8 million. Diluted EPS was $0.66.

Stryker repurchased 9.1 million shares for $596 million in Q3 2008 as part of a $750 million authorization, and completed this program in October with an additional $154 million repurchase. A new $250 million program was also authorized.

Due to global credit market liquidity issues starting in February 2008, auctions for Stryker's ARS investments have failed. While interest payments are being received, the securities are illiquid. The company has $152.1 million invested in ARS at fair value and believes this will not impact its ability to fund operations. They are evaluating an offer from UBS to sell these securities at par beginning in June 2010.

Stryker is responding to subpoenas from the DOJ regarding false IRB approvals, sales of OP-1, and off-label promotion. The company also received FDA warning letters regarding quality systems at manufacturing facilities. Additionally, ongoing investigations by the DOJ and HHS related to consulting contracts and remuneration with orthopedic surgeons continue, with Stryker actively cooperating and defending its position.