10-QPeriod: Q1 FY2020

STRYKER CORP Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 1, 2020For Securities:SYK

Summary

Stryker Corporation reported its first quarter 2020 results, demonstrating resilience despite the onset of the COVID-19 pandemic. Net sales grew 2.0% year-over-year to $3.59 billion, with a 2.9% increase in constant currency. Net earnings rose 19.7% to $493 million, translating to diluted earnings per share (EPS) of $1.30, a 19.3% increase from the prior year. The company managed operational expenses effectively, with selling, general, and administrative expenses decreasing 5.2%, contributing to an operating income increase of 20.3%. Despite the positive top-line growth and earnings improvement, the company noted significant impacts from the pandemic, particularly in March 2020, which led to a substantial decrease in elective medical procedures. This is expected to continue affecting results. Stryker also provided an update on its financial position, including amending its primary credit facility to increase the leverage ratio and securing a new 364-day revolving credit facility, indicating proactive measures to maintain financial flexibility.

Financial Highlights

51 data points
Beta

Revenue

$3.59B

65.0% Gross Margin

Net Income

$493.00M

13.7% Net Margin

EPS (Diluted)

$1.30

Total Assets

$29.44B

Cash & Equivalents

$3.96B

Free Cash Flow

$447.00M

Financial Statements
Beta
Revenue$3.59B
Cost of Revenue$1.26B
Gross Profit$2.33B
R&D Expenses$254.00M
SG&A Expenses$1.33B
Operating Expenses$1.70B
Operating Income$635.00M
Net Income$493.00M
EPS (Basic)$1.32
EPS (Diluted)$1.30
Shares Outstanding (Basic)374.80M
Shares Outstanding (Diluted)379.70M

Key Highlights

  • 1Net sales increased by 2.0% to $3.59 billion in Q1 2020, compared to $3.52 billion in Q1 2019.
  • 2Diluted earnings per share (EPS) rose by 19.3% to $1.30 from $1.09 in the prior year.
  • 3Operating income saw a significant increase of 20.3% to $635 million.
  • 4The company experienced a 5.2% decrease in selling, general, and administrative expenses.
  • 5Despite global disruptions from COVID-19, the company's Orthopaedics segment sales were largely flat, while MedSurg and Neurotechnology and Spine segments showed growth.
  • 6Stryker proactively amended its credit facility and secured a new 364-day revolving credit facility to ensure financial flexibility.
  • 7The company anticipates continued negative impacts from COVID-19 due to the deferral of elective medical procedures.

Frequently Asked Questions

The COVID-19 pandemic had a significant negative impact, particularly in March 2020, leading to the deferral of elective medical procedures. This affected sales volumes across most segments, although overall net sales still grew by 2.0%. The company's response to the pandemic also influenced operational expenses and supply chain dynamics.

Stryker anticipates continued negative impacts from the COVID-19 pandemic, especially due to the suspension of elective medical procedures. The company has taken measures to ensure financial flexibility, including amending credit facilities, and is closely monitoring the situation's evolving effects on operations and financial results.

On April 30, 2020, Stryker amended its primary credit facility to increase the leverage ratio financial covenant from 3.5:1 to 4.5:1. Additionally, the company entered into a new 364-day revolving credit facility for up to $1.5 billion, enhancing its liquidity and financial flexibility.

The Orthopaedics segment experienced a slight decrease of 2.1% in net sales. MedSurg segment sales grew by 6.2%, driven by Instruments and Medical products. The Neurotechnology and Spine segment saw a modest increase of 0.7% in net sales. The company noted that most businesses experienced significant declines in March 2020 due to the pandemic.