KALAMAZOO, Mich., April 18 /PRNewswire-FirstCall/ -- Stryker Corporation reported operating results for the quarter ended March 31, 2007 as follows:
First Quarter Highlights -- Net sales increased 12.7% (10.9% constant currency) to $1,489 million -- Orthopaedic Implant sales increased 12.6% (10.3% constant currency) -- MedSurg Equipment sales increased 15.3% (14.1% constant currency) -- Net earnings increased 65.1% from $148 million to $244 million and adjusted net earnings increased 21.6% from $200 million to $244 million -- Diluted net earnings per share increased 63.9% from $.36 to $.59 and adjusted diluted net earnings per share increased 20.4% from $.49 to $.59
"Our U.S. orthopaedic implant franchises delivered another strong quarter, up 14% collectively, leading us to a strong start in 2007," commented Stephen P. MacMillan, President and Chief Executive Officer. "Our MedSurg franchises also had a very good quarter, especially in international markets where combined sales of our Instruments and Endoscopy products grew 19% on a constant currency basis."
Net sales were $1,489.3 million for the first quarter of 2007, representing a 12.7% increase over net sales of $1,320.9 million for the first quarter of 2006. On a constant currency basis, net sales increased 10.9% for the first quarter.
Net earnings for the first quarter of 2007 were $243.5 million, representing a 65.1% increase over net earnings of $147.5 million for the first quarter of 2006. Diluted net earnings per share for the first quarter of 2007 increased 63.9% to $.59 compared to $.36 for the first quarter of 2006.
The Company's first quarter 2006 net earnings were reduced by a $52.7 million charge to write off purchased in-process research and development associated with the acquisition of Sightline Technologies, Ltd. (Sightline).
Excluding the first quarter 2006 impact of the $52.7 million charge to write off purchased in-process research and development, net earnings for the first quarter of 2007 of $243.5 million increased by 21.6% over adjusted net earnings of $200.2 million for the first quarter of 2006 and diluted net earnings per share for the first quarter of 2007 of $.59 increased by 20.4% over adjusted diluted net earnings per share of $.49 for the first quarter of 2006.
Sales Analysis
Domestic sales were $977.0 million for the first quarter of 2007, representing an increase of 12.6% as a result of higher shipments of Orthopaedic Implants and MedSurg Equipment.
International sales were $512.3 million for the first quarter of 2007, representing an increase of 13.1% as a result of higher shipments of Orthopaedic Implants and MedSurg Equipment. The impact of foreign currency comparisons to the dollar value of international sales was favorable by $24.2 million in the first quarter of 2007. On a constant currency basis, international sales increased 7.7% in the first quarter of 2007.
Worldwide sales of Orthopaedic Implants were $860.0 million for the first quarter of 2007, representing an increase of 12.6% based on higher shipments of reconstructive (hip, knee and shoulder), trauma, spinal and craniomaxillofacial implant systems; bone cement; and the bone growth factor OP-1. On a constant currency basis, sales of Orthopaedic Implants increased 10.3% in the first quarter of 2007.
Worldwide sales of MedSurg Equipment were $565.5 million for the first quarter of 2007, representing an increase of 15.3% based on higher shipments of surgical equipment; surgical navigation systems; endoscopic, communications and digital imaging systems; as well as patient handling and emergency medical equipment. On a constant currency basis, sales of MedSurg Equipment increased 14.1% in the first quarter of 2007.
Physical Therapy Services revenues were $63.8 million for the first quarter representing a decrease of 4.8%.
Income Taxes
The Company's effective income tax rate for the first quarter of 2007 was 28.2%, as compared to effective income tax rates for the first quarter and year ended December 31, 2006 of 35.1% and 29.5%, respectively. The effective income tax rates for the first quarter and year ended December 31, 2006 reflect the impact of the non-deductibility for income tax purposes of the purchased in-process research and development charge associated with the acquisition of Sightline.
The Company adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. Upon adoption, the Company recognized an increase in the interest accrual associated with unresolved income tax positions, which was accounted for by reducing the January 1, 2007 balance of retained earnings by $7.6 million (net of income taxes). In addition, the Company reclassified $179.2 million from the current income taxes liability to noncurrent liabilities to match the anticipated timing of future income tax payments.
Outlook for 2007
The Company's outlook for 2007 continues to be optimistic regarding underlying growth rates in orthopaedic procedures and the Company's broadly based range of products in orthopaedics and other medical specialties, despite the potential for continued pricing pressure in certain markets. The Company projects that diluted net earnings per share for 2007 will approximate $2.42, an increase of 20% over adjusted diluted net earnings per share of $2.02 in 2006. The financial forecast for 2007 includes a constant currency net sales increase in the range of 11% to 13% as a result of growth in shipments of Orthopaedic Implants and MedSurg Equipment. If foreign currency exchange rates hold near current levels, the Company anticipates a favorable impact on net sales of approximately 1% to 1.5% in the second quarter of 2007 and a favorable impact on net sales of approximately 0.5% to 1.5% for the full year of 2007.
Conference Call
As previously announced, the Company will conduct a conference call for financial analysts at 4:30 p.m., Eastern Time, today. To participate in the conference call dial 866-270-6057 (domestic) or 617-213-8891 (international) and enter the participant passcode 23300474. A simultaneous webcast of the call will be accessible via the Company's website at http://www.stryker.com. The call will be archived on this site for 90 days.
A recording of the call will also be available from 6:30 p.m., Eastern Time, today until 6:30 p.m. on Friday, April 20, 2007. To hear this recording dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter the passcode 44086244.
Forward-Looking Statements
This press release contains information that includes or is based on forward-looking statements within the meaning of the federal securities law that are subject to various risks and uncertainties that could cause the Company's actual results to differ materially from those expressed or implied in such statements. Such factors include, but are not limited to: pricing pressures generally, including cost-containment measures that could adversely affect the price of or demand for the Company's products; regulatory actions; unanticipated issues arising in connection with clinical studies and eventual United States Food and Drug Administration approval of new products; changes in reimbursement levels from third-party payors; a significant increase in product liability claims; changes in economic conditions that adversely affect the level of demand for the Company's products; changes in foreign exchange markets; changes in financial markets; and changes in the competitive environment. Additional information concerning these and other factors are contained in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
Stryker Corporation is one of the world's leading medical technology companies with the most broadly based range of products in orthopaedics and a significant presence in other medical specialties. Stryker works with respected medical professionals to help people lead more active and more satisfying lives. The Company's products include implants used in joint replacement, trauma, craniomaxillofacial and spinal surgeries; biologics; surgical, neurologic, ear, nose & throat and interventional pain equipment; endoscopic, surgical navigation, communications and digital imaging systems; as well as patient handling and emergency medical equipment. Stryker also provides outpatient physical therapy services in the United States.
STRYKER CORPORATION For the Three Month Period Ended March 31, 2007 (Unaudited - In Millions Except Per Share Amounts) First Quarter CONDENSED STATEMENTS OF EARNINGS 2007 2006 % Change Net sales $1,489.3 $1,320.9 12.7 Cost of sales 496.7 452.9 9.7 GROSS PROFIT 992.6 868.0 14.4 % of Sales 66.6 65.7 Research, development and engineering expenses 84.6 77.1 9.7 Selling, general and administrative expenses 571.4 505.7 13.0 Intangibles amortization 11.3 10.4 8.7 Purchased in-process research and development - 52.7 (100.0) 667.3 645.9 3.3 OPERATING INCOME 325.3 222.1 46.5 % of Sales 21.8 16.8 Other income (expense) 13.8 5.2 165.4 EARNINGS BEFORE INCOME TAXES 339.1 227.3 49.2 Income taxes 95.6 79.8 19.8 NET EARNINGS $243.5 $147.5 65.1 Net Earnings Per Share Basic $0.60 $0.36 66.7 Diluted $0.59 $0.36 63.9 Average Shares Outstanding Basic 408.6 405.7 Diluted 416.0 411.3 RECONCILIATION OF REPORTED NET EARNINGS TO ADJUSTED NET EARNINGS First Quarter 2007 2006 % Change NET EARNINGS Reported net earnings $243.5 $147.5 65.1 Purchased in-process research and development - 52.7 (100.0) Adjusted net earnings $243.5 $200.2 21.6 DILUTED NET EARNINGS PER SHARE Reported diluted net earnings per share $0.59 $0.36 63.9 Purchased in-process research and development $- $0.13 (100.0) Adjusted diluted net earnings per share $0.59 $0.49 20.4 STRYKER CORPORATION For the Three Month Period Ended March 31, 2007 (Unaudited - In Millions) First Quarter % Change Constant CONDENSED SALES ANALYSIS 2007 2006 Reported Currency Domestic $977.0 $867.9 12.6 12.6 International 512.3 453.0 13.1 7.7 NET SALES $1,489.3 $1,320.9 12.7 10.9 Orthopaedic Implants $860.0 $763.6 12.6 10.3 MedSurg Equipment 565.5 490.3 15.3 14.1 Physical Therapy Services 63.8 67.0 (4.8) (4.8) NET SALES $1,489.3 $1,320.9 12.7 10.9 First Quarter 2007 % Change Domestic International Total Constant Constant SUPPLEMENTAL SALES Reported Reported Currency Reported Currency GROWTH ANALYSIS Orthopaedic Implants sales: Hips 4% 9% 3% 7% 4% Knees 17 14 8 16 14 Trauma 31 5 0 14 11 Spine 22 23 18 22 21 Craniomaxillofacial 23 10 5 18 16 Total Orthopaedic Implants 14 10 5 13 10 MedSurg Equipment sales: Surgical equipment and surgical navigation systems 12 24 18 16 14 Endoscopic, communications and digital imaging systems 13 27 20 16 15 Patient handling and emergency medical equipment 16 4 4 13 13 Total MedSurg Equipment 14 21 16 15 14 STRYKER CORPORATION (Unaudited - In Millions) March 31 December 31 CONDENSED BALANCE SHEETS(1) 2007 2006 ASSETS Cash and cash equivalents $294.3 $416.6 Marketable securities 1,171.9 998.2 Accounts receivable (net) 936.6 907.0 Inventories 710.2 677.6 Other current assets 585.1 534.9 TOTAL CURRENT ASSETS 3,698.1 3,534.3 Property, Plant and Equipment (net) 962.3 951.7 Goodwill and Other Intangibles (net) 933.0 937.0 Other Assets 483.3 450.8 TOTAL ASSETS $6,076.7 $5,873.8 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities $1,061.4 $1,351.5 Long-Term Debt 0.1 - Other Liabilities 527.2 331.3 Shareholders' Equity 4,488.0 4,191.0 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,076.7 $5,873.8 (1) On January 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48. As required under the provisions of the Interpretation, prior period amounts have not been restated. STRYKER CORPORATION For the Three Month Period Ended March 31, 2007 (Unaudited - In Millions) First Quarter CONDENSED STATEMENTS OF CASH FLOWS 2007 2006 OPERATING ACTIVITIES Net earnings $243.5 $147.5 Depreciation 33.7 28.7 Amortization 55.3 49.1 Purchased in-process research and development - 52.7 Changes in working capital and other (179.8) (257.3) NET CASH PROVIDED BY OPERATING ACTIVITIES 152.7 20.7 INVESTING ACTIVITIES Acquisitions, net of cash acquired (5.8) (47.4) Purchases of marketable securities, net (171.4) (110.4) Purchases of property, plant and equipment (41.9) (51.9) Proceeds from sales of property, plant and equipment 0.2 0.1 NET CASH USED IN INVESTING ACTIVITIES (218.9) (209.6) FINANCING ACTIVITIES Borrowings (repayments) on debt, net 0.4 (98.1) Dividends paid (89.7) (44.6) Other 30.5 38.2 NET CASH USED IN FINANCING ACTIVITIES (58.8) (104.5) Effect of exchange rate changes on cash and cash equivalents 2.7 0.6 CHANGE IN CASH AND CASH EQUIVALENTS $(122.3) $(292.8)
Stryker CorporationCONTACT: Katherine A. Owen, Vice President, Strategy and InvestorRelations of Stryker Corporation, +1-269-385-2600
Web site: http://www.stryker.com//
