ABOUT STRYKER
Stryker is one of the world's leading medical technology companies and, together
with our customers, we are driven to make healthcare better. We offer innovative
products and services in Orthopaedics, Medical and Surgical, and Neurotechnology
and Spine that help improve patient and hospital outcomes.
We segregate our operations into three reportable business segments:
Orthopaedics, MedSurg, and Neurotechnology and Spine. Orthopaedics products
consist primarily of implants used in hip and knee joint replacements and trauma
and extremities surgeries. MedSurg products include surgical equipment and
surgical navigation systems (Instruments), endoscopic and communications systems
(Endoscopy), patient handling, emergency medical equipment and intensive care
disposable products (Medical), reprocessed and remanufactured medical devices
(Sustainability) and other medical device products used in a variety of medical
specialties. Neurotechnology and Spine products include neurosurgical,
neurovascular and spinal implant devices.
COVID-19 Pandemic
The COVID-19 global pandemic has led to severe disruptions in the market and the
global and United States economies that may continue for a prolonged duration
and trigger a recession or a period of economic slowdown. In response, various
governmental authorities and private enterprises have implemented numerous
measures to contain the pandemic, such as travel bans and restrictions,
quarantines, shelter-in-place orders and shutdowns. A significant number of our
global suppliers, vendors, distributors and manufacturing facilities are located
in regions that have been affected by the pandemic. Those operations have been
materially adversely affected by restrictive government and private enterprise
measures implemented in response to the pandemic.
Some of our products are particularly sensitive to reductions in elective
medical procedures. Elective medical procedures were suspended in the first
quarter of 2020 in many of the markets where our products are marketed and sold,
which negatively affected our business, cash flows, financial condition and
results of operations through the first quarter of 2021. In the three months
2021 we saw recovery of elective procedures as the impact of the COVID-19
pandemic eased in most geographies. However, the recovery of elective procedures
continues to be variable by region and geography. Demand increases for certain
capital products continued from the first quarter 2021.
Overview of the Three and Six Months
In the three months 2021 we achieved sales growth of 55.4% and 17.6% from 2020
and 2019. Excluding the impact of acquisitions sales grew 42.9% and 9.3% in
constant currency. We reported operating income margin of 17.0%, net earnings of
$592 and net earnings per diluted share of $1.55. Excluding the impact of
certain items, adjusted operating income margin(1) increased by 1,340 bps to
25.9%, with adjusted net earnings(1) of $861 and adjusted net earnings per
diluted share(1) of $2.25 representing growth of 251.6%.
In the six months 2021 we achieved sales growth of 29.8% and 15.1% from 2020 and
2019. Excluding the impact of acquisitions sales grew 19.7% and 7.1% in constant
currency. We reported operating income margin of 14.4%, net earnings of $894 and
net earnings per diluted share of $2.34. Excluding the impact of certain items,
adjusted operating income margin(1) increased by 570 bps to 24.7%, with adjusted
net earnings(1) of $1,598 and adjusted net earnings per diluted share(1) of
$4.18 representing growth of 68.5%.
Recent Developments
In March 2021 we repaid $750 of our senior unsecured notes with a coupon of
2.625% that were due on March 15, 2021. In June 2021 we repaid the $400 term
loan that was due on November 10, 2023. Refer to Note 8 to our Consolidated
Financial Statements for further information.
We have not repurchased any shares of our common stock under our authorized
repurchase program in 2021. The total dollar value of shares of our common stock
that could be acquired under our authorized share repurchase program was $1,033
as of June 30, 2021. We previously announced our intention to suspend our
repurchase program through 2021.
The government in China has launched regional and national programs for
volume-based procurement ("VBP") of high-value medical consumables to reduce
healthcare costs. Each VBP tender has specific requirements to award contracts
to the lowest bidders who are able to satisfy the quality and quantity
requirements. The successful bidders may experience increases in unit sales
volume for certain products, while unsuccessful bidders will lose unit sales
volume. While the unit volume increases for successful bidders may enable
manufacturers to lower their distribution and commercial costs, we expect that
the new prices required for a successful bid will, nevertheless, negatively
impact our existing commercial operations of joint replacement and trauma
products in China. Based on preliminary indications received subsequent to the
end of the second quarter, we believe we will be a successful bidder in certain
regional tenders for several of our trauma products and unsuccessful in the bid
for other trauma products. When the final decisions are made, it is reasonably
possible that we will record an impairment charge of approximately $100 relating
to certain long-lived and intangible assets. The national VBP program for hips
and knees is currently in preparation. If we are unsuccessful in that national
program, we expect that our commercial operations of joint replacement products
will also be negatively impacted; however, we do not expect additional
intangible asset impairments. Spine products are part of volume-based
procurement in one province and it is not clear to what extent spine products
will be included in further VBP initiatives provincial or nationwide. Our
business in China represented approximately 2% of our revenues for the year
ended December 31, 2020.
(1) Refer to "Non-GAAP Financial Measures" for a discussion of non-GAAP
financial measures used in this report and a reconciliation to the most directly
comparable GAAP financial measure.

Dollar amounts are in millions except per share amounts or as otherwise specified.

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