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Stryker Operating Results for Quarter and Year Ended December 31, 1999

KALAMAZOO, Mich., Jan. 27 /PRNewswire/ -- Stryker Corporation (NYSE: SYK) reported today that net sales were $559.1 million for the fourth quarter ended December 31, 1999, representing a 74% increase over sales of $321.3 million in the fourth quarter of 1998, and $2,103.7 million for the year ended December 31, 1999, representing a 91% increase over sales of $1,103.2 million for 1998. Net sales for Howmedica, which was acquired on December 4, 1998, were $242.9 million for the fourth quarter and $902.4 million for the year ended December 31, 1999, representing increases of approximately 3% and 7%, respectively, over its sales for the same periods last year. On a pro forma basis, net sales increased 9% in the fourth quarter and 10% for the year.

Excluding nonrecurring charges, net earnings for the fourth quarter increased 44% to $51.7 million from $35.9 million in 1998, basic net earnings per share increased 43% to $.53 and diluted net earnings per share increased 41% to $.52. For the year ended December 31, 1999, net earnings excluding nonrecurring charges increased 13% to $160.5 million from $141.9 million in 1998, basic net earnings per share increased 13% to $1.66 and diluted net earnings per share increased 12% to $1.62. Nonrecurring charges were $12.2 million ($7.9 million net of tax) for the fourth quarter and $217.1 million ($141.1 million net of tax) for the year ended December 31, 1999, as follows:

* Additional cost of sales for inventory stepped-up to fair value in connection with the Howmedica acquisition of $13.0 million in the fourth quarter and $198.2 million in the year. There is no more inventory step-up to be charged off.

* A $5.5 million credit in the fourth quarter to close out the $19.7 million charge recorded in the first quarter for reorganizing Stryker's Japanese distribution operation.

* A $4.7 million charge in the fourth quarter to complete the reorganization of Stryker's distribution channels to accommodate the Howmedica integration.

Including the nonrecurring charges, the Company reported net earnings of $43.8 million ($.44 per diluted share) for the fourth quarter of 1999 and $19.4 million ($.20 per diluted share) for the year ended December 31, 1999.

RESTATEMENT OF 1998 ACQUISITION-RELATED CHARGES

Stryker also announced that it will restate its operating results for the year ended December 31, 1998 to reduce acquisition-related charges by $30.9 million ($20.4 million net of tax). The restatement results from discussions with the Securities and Exchange Commission relating to the accounting for the Company's 1998 acquisition of Howmedica. The Company had provided reserves for the conversion of a portion of its domestic and foreign distributors to direct sales to accommodate the integration with the Howmedica sales force. The cost of the conversions was based on contractual terms or in accordance with plans to complete such conversions. The $30.9 million restatement relates to reserves provided for several foreign distributors where contractual terms had not been reached as of December 31, 1998. As indicated above, the $4.7 million charge recorded in the fourth quarter of 1999 completes the reorganization of Stryker's distribution channels as a result of the Howmedica acquisition.

The impact of the restatement on the fourth quarter and year ended December 31, 1998 follows ($Millions):

                                                  Fourth Quarter       Year
    As previously reported
        Earnings (loss) before income taxes           (103.1)          60.0
        Net earnings (loss)                            (66.4)          39.6
        Net earnings (loss) per share - diluted         (.68)           .40
    As adjusted
        Earnings (loss) before income taxes            (72.2)          90.9
        Net earnings (loss)                            (46.0)          60.0
        Net earnings (loss) per share - diluted         (.47)           .61

A revised Form 10-K for 1998 reflecting the restatement and revised Forms 10-Q for the 1999 period reflecting the related increase in retained earnings are expected to be filed with the Securities and Exchange Commission on or about February 15, 2000.

A reconciliation of net earnings excluding non-recurring charges to net earnings (loss) for the fourth quarter and year ended December 31, 1999 and 1998 follows ($Millions):

                                             Fourth Quarter         Year
                                              1999    1998      1999    1998
    Net earnings excluding
      non-recurring charges                   51.7    35.9     160.5   141.9

    Additional cost of sales for inventory
      stepped-up to fair value               (13.0)   (7.8)   (198.2)   (7.8)
    Additional cost of sales for inventory
      repurchased from distributors                  (14.0)            (14.0)
    Write off of purchased research
      and development                                (83.3)            (83.3)
    Credit (charge) for reorganizing
      Stryker's Japanese operation             5.5             (14.2)
    Charges for reorganizing Stryker's
      distribution channels and
      acquisition-related expenses            (4.7)  (19.0)     (4.7)  (19.0)
    Total nonrecurring charges               (12.2) (124.1)   (217.1) (124.1)
    Income tax benefit                         4.3    42.2      76.0    42.2
    Net nonrecurring charges                  (7.9)  (81.9)   (141.1)  (81.9)

    Net earnings (loss)                       43.8   (46.0)     19.4    60.0


                                SALES ANALYSIS

Domestic sales were $322.3 million for the fourth quarter and $1,228.4 million for the year ended December 31, 1999, representing increases of 63% and 69%, respectively, as a result of the Howmedica acquisition and higher shipments of orthopaedic implants, powered surgical instruments and endoscopic equipment. U.S. sales of Howmedica products were $110.2 million for the fourth quarter and $413.9 million for the year ended December 31, 1999, representing increases of 10% and 6%, respectively, over sales for the prior year. On a pro forma basis and excluding a $17.1 million sales credit in the prior year for inventory repurchased from distributors, domestic sales increased 9% in the fourth quarter and 10% for the year.

International sales were $236.8 million for the fourth quarter and $875.3 million for the year ended December 31, 1999, representing increases of 92% and 134%, respectively, as a result of the Howmedica acquisition and higher shipments of Stryker products. International sales of Howmedica products were $132.7 million in the fourth quarter and $488.5 million for the year ended December 31, 1999, representing a decline of 1% and an increase of 7%, respectively, over sales for the prior year periods. On a pro forma basis, international sales increased less than 1% in the fourth quarter and 8% for the year. The impact of foreign currency comparisons to the dollar value of international sales, on a pro forma basis, was unfavorable by $3.8 million, or 2%, in the fourth quarter and favorable by $12.9 million, or 2%, for the year ended December 31, 1999.

Worldwide sales of Orthopaedic Implants were $336.2 million for the fourth quarter and $1,248.2 million for the year ended December 31, 1999 representing increases of 164% and 205%, respectively, as a result of the Howmedica acquisition and higher shipments of reconstructive, trauma and spinal implants. On a pro forma basis and excluding the $17.1 million sales credit in the prior year, sales of Orthopaedic Implants increased 8% in the fourth quarter and 11% for the year.

Worldwide sales of MedSurg Equipment were $195.8 million for the fourth quarter and $733.5 million for the year ended December 31, 1999, representing increases of 20% and 27%, respectively, based on higher shipments of powered surgical instruments and endoscopic systems along with the Leibinger craniomaxillofacial line acquired with Howmedica. On a pro forma basis, sales of MedSurg Equipment increased 4% in the fourth quarter and 8% for the year.

Physical Therapy Services revenue was $27.1 million for the fourth quarter and $122.0 million for the year ended December 31, 1999 representing a decline of 11% for the fourth quarter and an increase of 5% for the year.

ACCOUNTS RECEIVABLE SECURITIZATION

In December 1999, the Company established a one-year securitization facility under which certain domestic accounts receivables are sold on an ongoing basis to a special purpose subsidiary which in turn may sell up to a $130 million interest in such receivables to a third party. As of December 31, 1999, a $97 million interest had been sold under this facility. The transaction is reflected in the balance sheet as a $97 million reduction of accounts receivable and long-term debt. The cost associated with the facility, including the third party's financing cost of issuing its commercial paper backed by these receivables, is included in selling, general and administrative expense.

Stryker Corporation develops, manufactures and markets specialty surgical and medical products, including orthopaedic reconstructive, trauma and spinal implants, powered surgical instruments, endoscopic systems, patient care and handling equipment for the global market and provides outpatient physical therapy services in the United States. The Company's common stock is traded on the New York Stock Exchange under the symbol SYK.

                             STRYKER CORPORATION
                           CONDENSED SALES ANALYSIS
         For the Three Month Period and Year Ended December 31, 1999
                          (Unaudited - In Millions)


                       Fourth Quarter             Year Ended December 31
                   1999      1998     %         1999        1998        %

    Domestic (A)  $322.3    $197.9   62.9      $1,228.4    $728.9     68.5
    International  236.8     123.4   91.9         875.3     374.3    133.8
      Total       $559.1    $321.3   74.0      $2,103.7  $1,103.2     90.7

    Orthopaedic
     Implants (A) $336.2    $127.5  163.7      $1,248.2    $409.6    204.7
    MedSurg
     Equipment     195.8     163.2   20.0         733.5     577.8     26.9
    Physical Therapy
     Services       27.1      30.6  (11.4)        122.0     115.8      5.4
      Total       $559.1    $321.3   74.0      $2,103.7  $1,103.2     90.7


                         Fourth Quarter             Year Ended December 31
                          Pro-Forma (B)                  Pro Forma (B)
                   1999      1998      %          1999      1998        %

    Domestic (A)  $322.3    $277.5   16.1      $1,228.4  $1,098.6     11.8
    International  236.8     236.1    0.3         875.3     807.0      8.5
      Total       $559.1    $513.6    8.9      $2,103.7  $1,905.6     10.4

    Orthopaedic
     Implants (A) $336.2    $295.4   13.8      $1,248.2  $1,111.5     12.3
    MedSurg
     Equipment     195.8     187.6    4.4         733.5     678.3      8.1
    Physical Therapy
     Services       27.1      30.6  (11.4)        122.0     115.8      5.4
      Total       $559.1    $513.6    8.9      $2,103.7  $1,905.6     10.4

    NOTES:

(A) Includes a $17.1 million sales credit in the fourth quarter of 1998 for inventory repurchased from distributors.

(B) The pro forma sales information includes Howmedica's sales for a comparable period but does not necessarily reflect the consolidated sales that would have occurred had Stryker and Howmedica operated as a combined entity during that period.

                             STRYKER CORPORATION
                       CONDENSED STATEMENT OF EARNINGS
         For the Three Month Period and Year Ended December 31, 1999
              (Unaudited - In Millions Except Per Share Amounts)


                                               FOURTH QUARTER
                                   1999            1998 (B)            %
                              AMOUNT     %     AMOUNT      %         CHANGE

    NET SALES                 $559.1   100.0   $321.3   100.0         74.0

        Cost of sales (A)      217.0    38.8    149.3    46.5         45.3

        GROSS PROFIT           342.1    61.2    172.0    53.5         98.9

        Research, development
         and engineering        26.8     4.8     19.6     6.1         36.7
        Selling, general and
         administrative        213.4    38.2    112.1    34.9         90.4

        Purchased research
         and development                         83.3    25.9       (100.0)

        Acquisition-related
         and restructuring
         charges (credit)       (0.8)   (0.1)    19.0     5.9           --

                               239.4    42.8    234.0    72.8          2.3

    Other income (expense):

        Interest expense       (29.3)   (5.2)    (9.8)   (3.1)       199.0

        Intangibles
         amortization           (8.5)   (1.5)    (3.7)   (1.2)       129.7

        Other                    2.4     0.4      3.3     1.0           --

                               (35.4)   (6.3)   (10.2)   (3.2)       247.1

        EARNINGS (LOSS) BEFORE
         INCOME TAXES           67.3    12.0    (72.2)  (22.5)          --

    Income taxes (credit)       23.5    34.9    (26.2)   36.3           --

    NET EARNINGS (LOSS)        $43.8     7.8   $(46.0)  (14.3)          --

    BASIC EARNINGS (LOSS)
     PER SHARE                 $0.45           ($0.48)                  --

    DILUTED EARNINGS (LOSS)
     PER SHARE                 $0.44           ($0.47)                  --

    Basic Average Outstanding
     Shares                     97.1             96.5

    Diluted Average Outstanding
     Shares                     99.6             98.3



                                        YEAR ENDED DECEMBER 31
                                   1999            1998 (B)            %
                              AMOUNT     %     AMOUNT      %         CHANGE

    NET SALES               $2,103.7  100.0  $1,103.2   100.0         90.7

        Cost of sales (A)      989.7   47.0     472.1    42.8        109.6


        GROSS PROFIT         1,114.0   53.0     631.1    57.2         76.5

        Research, development and
         engineering           105.2    5.0      61.0     5.5         72.5
        Selling, general and
         administrative        808.4   38.4     373.6    33.9        116.4

        Purchased research
         and development                         83.3     7.6       (100.0)

        Acquisition-related
         and restructuring
         charges (credit)       18.9    0.9      19.0     1.7         (0.5)

                               932.5   44.3     536.9    48.7         73.7

    Other income (expense):

        Interest expense      (122.6)  (5.8)    (12.2)   (1.1)          --

        Intangibles
         amortization          (33.9)  (1.6)     (7.6)   (0.7)       346.1

        Other                    4.8    0.2      16.5     1.5           --

                              (151.7)  (7.2)     (3.3)   (0.3)          --


        EARNINGS (LOSS) BEFORE
         INCOME TAXES           29.8    1.4      90.9     8.2        (67.2)

    Income taxes (credit)       10.4   34.9      30.9    34.0        (66.3)


    NET EARNINGS (LOSS)        $19.4    0.9     $60.0     5.4        (67.7)


    BASIC EARNINGS (LOSS)
     PER SHARE                 $0.20             $0.62               (67.7)

    DILUTED EARNINGS (LOSS)
     PER SHARE                 $0.20             $0.61               (67.2)

    Basic Average Outstanding
     Shares                     96.9              96.3

    Diluted Average Outstanding
     Shares                     99.3              98.1


    NOTES:

(A) Includes $13.0 million for the fourth quarter of 1999 ($7.8 million for the fourth quarter of 1998) and $198.2 million for the year ended December 31, 1999 ($7.8 million for the year ended December 31, 1998) of additional cost of sales for inventory stepped-up to fair value in connection with the Howmedica acquisition and $14.0 million cost of inventory repurchased from distributors for the fourth quarter of 1998 and for the year ended December 31, 1998.

(B) Reflects the fourth quarter of 1998 restatement to reduce acquisition-related charges by $30.9 million ($20.4 million net of tax) and reclassifications to conform with the 1999 presentation.

    PRELIMINARY

                             STRYKER CORPORATION
                           CONDENSED BALANCE SHEET
                              December 31, 1999
                          (Unaudited - In Millions)

                                                 Dec 31          Dec 31
                                                 1999            1998 (A)
    ASSETS
    CURRENT ASSETS

      Cash and investments                       $89.5           $142.2

      Accounts receivable (net)                  377.7            425.6

      Inventories                                386.1            591.0

      Other current assets                       265.0            179.5

        TOTAL CURRENT ASSETS                   1,118.3          1,338.3

    PROPERTY, PLANT AND EQUIPMENT (net)          391.5            429.5

    GOODWILL AND OTHER INTANGIBLES (net)         901.8            898.0

    DEFERRED CHARGES (net)                        92.6            131.8

    OTHER ASSETS                                  81.1             77.8

      TOTAL ASSETS                            $2,585.3         $2,875.4


    LIABILITIES AND STOCKHOLDERS' EQUITY

    CURRENT LIABILITIES                         $674.4           $668.5

    LONG-TERM DEBT                             1,181.1          1,488.0

    OTHER LIABILITIES                             58.3             46.3

    STOCKHOLDERS' EQUITY                         671.5            672.6

      TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY                    $2,585.3         $2,875.4

    NOTES:

(A) Reflects the restatement of 1998 to reduce acquisition-related charges and reclassifications to conform with the 1999 presentation.
SOURCE Stryker Corporation
Web site: http: //www.strykercorp.com
CONTACT: David J. Simpson, Vice President, Chief Financial Officer and Secretary of Stryker Corporation, 616-385-2600