10-QPeriod: Q1 FY2011

STRYKER CORP Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 4, 2011For Securities:SYK

Summary

Stryker Corporation's first quarter 2011 report (10-Q) shows a significant increase in net sales, driven by a strong performance in its MedSurg and Neurotechnology and Spine segments, bolstered by the recent acquisition of Boston Scientific's Neurovascular division. While reported net earnings saw a slight decrease, adjusted net earnings and earnings per share demonstrated robust growth, reflecting the successful integration of the acquisition and effective operational management. Despite a decrease in cash and cash equivalents due to the substantial acquisition, the company maintains a solid financial position with significant marketable securities and access to credit facilities, ensuring liquidity for ongoing operations and future investments. The company also continues to focus on innovation and product development, as evidenced by increased R&D spending, positioning it for sustained growth in the dynamic medical technology market.

Financial Highlights

51 data points
Beta

Revenue

$2.02B

65.8% Gross Margin

Net Income

$308.00M

15.3% Net Margin

EPS (Diluted)

$0.78

Total Assets

$11.23B

Cash & Equivalents

$735.10M

Free Cash Flow

$149.00M

Financial Statements
Beta
Revenue$2.02B
Cost of Revenue$689.00M
Gross Profit$1.33B
R&D Expenses$111.00M
SG&A Expenses$765.00M
Operating Expenses$903.00M
Operating Income$423.00M
Net Income$308.00M
EPS (Basic)$0.79
EPS (Diluted)$0.78
Shares Outstanding (Basic)390.00M
Shares Outstanding (Diluted)394.20M

Key Highlights

  • 1Net sales increased by 12% to $2,015.2 million, driven by strong performance in MedSurg and Neurotechnology & Spine segments, significantly boosted by the acquisition of the Neurovascular division.
  • 2Reported net earnings decreased by 4% to $307.4 million, but adjusted net earnings (excluding acquisition and integration costs) increased by 10% to $353.4 million.
  • 3Adjusted diluted earnings per share rose by 13% to $0.90, indicating improved profitability on an adjusted basis.
  • 4The company completed a significant acquisition of Boston Scientific's Neurovascular division for $1.45 billion, expanding its presence in the neurotechnology market.
  • 5Operating income decreased by 5% to $423.5 million, impacted by increased R&D, SG&A expenses, and higher intangibles amortization due to recent acquisitions.
  • 6Cash provided by operating activities decreased to $204.5 million from $274.8 million in the prior year period, largely due to increased working capital needs.
  • 7The company repurchased approximately $250.1 million of its common stock during the quarter under its share repurchase program.

Frequently Asked Questions

The acquisition of Boston Scientific's Neurovascular division for $1.45 billion significantly boosted Stryker's sales, particularly in the Neurotechnology and Spine segment, contributing 43% to its growth. While it also led to increased intangible amortization and acquisition/integration costs, which impacted reported net earnings, the adjusted net earnings and adjusted EPS showed substantial growth, indicating a positive underlying operational performance.

The Reconstructive segment saw a modest 2% sales increase (0% constant currency), with hip implants growing but knee implants slightly declining. The MedSurg segment showed strong growth of 13% (12% constant currency), driven by surgical equipment and patient handling products. The Neurotechnology and Spine segment experienced exceptional growth of 48% (46% constant currency), largely due to the recent acquisition.

Despite a significant decrease in cash and cash equivalents due to the Neurovascular acquisition payment, Stryker maintains substantial liquidity with $735.1 million in cash and $2.15 billion in marketable securities. Operating cash flow decreased compared to the prior year, partly due to working capital changes, but the company believes its current cash, anticipated future cash flows, and available credit facilities are sufficient to meet its obligations and capital needs.

Stryker is involved in several legal and regulatory matters, including income tax assessments related to profit allocation in Europe and cost-sharing arrangements with Irish entities, DOJ subpoenas regarding sales/marketing practices for specific devices, and ongoing shareholder derivative and class action lawsuits. The company believes it is acting in accordance with applicable laws and is vigorously defending its positions, but acknowledges that adverse outcomes could materially impact future results.