Fourth Quarter Results
- Reported net sales increased 10.3% from 2020 and 13.8% from 2019 to
$4.7 billion - Organic net sales increased 9.0% from 2020 and 6.2% from 2019
- Reported operating income margin of 17.4%
- Adjusted operating income margin(1) contracted 190 bps to 27.3%
- Reported EPS increased 16.1% to
$1.73 - Adjusted EPS(1) decreased 3.6% to
$2.71
In addition to sales growth analysis versus 2020, we are including sales growth versus 2019 as 2019 provides a more normal baseline for comparison given the variability caused by the COVID-19 pandemic throughout 2020. As previously disclosed, effective
Fourth Quarter Net Sales Growth Overview | |||||||||||||||||||||||||||||
From 2020 | From 2019 | ||||||||||||||||||||||||||||
Reported | Foreign Currency Exchange | Constant Currency | Acquisitions / Divestitures | Organic | Reported | Foreign Currency Exchange | Constant Currency | Acquisitions / Divestitures | Organic | ||||||||||||||||||||
MedSurg and Neurotechnology | 8.7 | % | (0.7) % | 9.4 | % | 0.2 | % | 9.2 | % | 12.3 | % | 0.5 | % | 11.8 | % | 0.2 | % | 11.6 | % | ||||||||||
Orthopaedics and Spine | 12.5 | (0.8) | 13.3 | 4.6 | 8.7 | 15.8 | 0.6 | 15.2 | 16.0 | (0.8) | |||||||||||||||||||
Total | 10.3 | % | (0.8) % | 11.1 | % | 2.1 | % | 9.0 | % | 13.8 | % | 0.5 | % | 13.3 | % | 7.1 | % | 6.2 | % |
Full Year Results
- Reported net sales increased 19.2% from 2020 and 14.9% from 2019 to
$17.1 billion - Organic net sales increased 12.6% from 2020 and 7.2% from 2019
- Reported operating income margin of 15.1%
- Adjusted operating income margin(1) expanded 120 bps to 25.6%
- Reported EPS increased 24.0% to
$5.21 - Adjusted EPS(1) increased 22.3% to
$9.09
Full Year Net Sales Growth Overview | |||||||||||||||||||||||||||||
From 2020 | From 2019 | ||||||||||||||||||||||||||||
Reported | Foreign Currency Exchange | Constant Currency | Acquisitions / Divestitures | Organic | Reported | Foreign Currency Exchange | Constant Currency | Acquisitions / Divestitures | Organic | ||||||||||||||||||||
MedSurg and Neurotechnology | 14.3 | % | 1.0 | % | 13.3 | % | 0.2 | % | 13.1 | % | 12.6 | % | 1.0 | % | 11.6 | % | 0.2 | % | 11.4 | % | |||||||||
Orthopaedics and Spine | 26.0 | 1.2 | 24.8 | 12.8 | 12.0 | 18.1 | 1.3 | 16.8 | 15.1 | 1.7 | |||||||||||||||||||
Total | 19.2 | % | 1.1 | % | 18.1 | % | 5.5 | % | 12.6 | % | 14.9 | % | 1.1 | % | 13.8 | % | 6.6 | % | 7.2 | % |
"We delivered a strong year of financial results, despite the ongoing challenges of the pandemic," said
Sales Analysis Compared to 2020 and 2019
Consolidated net sales of
MedSurg and Neurotechnology net sales of
Orthopaedics and Spine net sales of
Earnings Analysis Compared to 2020
Reported net earnings of
2022 Outlook
We continue to monitor and evaluate the impact the global response to the COVID-19 pandemic has had, and will continue to have, on our operations and financial results. As we assess the impact of the pandemic on our operations and the external environment we believe the short-term outlook remains volatile. We expect 2022 organic net sales growth to be in the range of 6% to 8% and expect adjusted net earnings per diluted share(2) to be in the range of
(1) A reconciliation of the non-GAAP financial measures: adjusted gross profit margin, adjusted operating income and adjusted operating income margin, adjusted net earnings and adjusted net earnings per diluted share, to the most directly comparable GAAP measures: gross profit margin, operating income and operating income margin, net earnings and net earnings per diluted share, and other important information accompanies this press release.
(2) We are unable to present a quantitative reconciliation of our expected net earnings per diluted share to expected adjusted net earnings per diluted share as we are unable to predict with reasonable certainty and without unreasonable effort the impact and timing of restructuring-related and other charges, acquisition-related expenses and fair value adjustments to inventory and the outcome of certain regulatory, legal and tax matters. The financial impact of these items is uncertain and is dependent on various factors, including timing, and could be material to our Consolidated Statements of Earnings.
Conference Call on
As previously announced, Stryker will host a conference call on
To register for this conference call, please use the following link: Stryker's Q4 2021 earnings call. After registering, a confirmation will be sent via email, including dial-in details and unique conference call access codes required for call entry. Registration is open throughout the live call. To ensure you are connected prior to the beginning of the call, the Company suggests registering a minimum of 15 minutes before the start of the call.
A simultaneous webcast of the call will be accessible via the Investor Relations page of the Company's website at www.stryker.com. For those not planning to ask a question of management, the Company recommends listening via the webcast. Please allow 15 minutes to register, download and install any necessary software.
Following the conference call, a replay will be available at (866) 813-9403 (Toll Free) or (929) 458-6194 (International). The replay passcode is 064681. An archive of the webcast will also be available on the Company's website two hours after the live call ends.
Caution Concerning 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 our actual results to differ materially from those expressed or implied in such statements. Such factors include, but are not limited to: the impact on our operations and financial results of the COVID-19 pandemic and any related policies and actions by governments or other third parties; the failure to satisfy any of the closing conditions to the acquisition of Vocera Communications, Inc. ("Vocera"), including the receipt of any required regulatory clearances (and the risk that such clearances may result in the imposition of conditions that could adversely affect the expected benefits of the transaction); delays in consummating the acquisition of Vocera; unexpected liabilities, costs, charges or expenses in connection with the acquisition of Vocera; the effects of the proposed Vocera transaction (or the announcement thereof) on the parties' relationships with employees, customers, other business partners or governmental entities; weakening of economic conditions that could adversely affect the level of demand for our products; pricing pressures generally, including cost-containment measures that could adversely affect the price of or demand for our products; changes in foreign exchange markets; legislative and regulatory actions; unanticipated issues arising in connection with clinical studies and otherwise that affect
Stryker is one of the world's leading medical technology companies and, together with its customers, is driven to make healthcare better. The company offers innovative products and services in Medical and Surgical, Neurotechnology, Orthopaedics and Spine that help improve patient and hospital outcomes. More information is available at www.stryker.com.
For investor inquiries please contact:
For media inquiries please contact:
For the Three Months and Full Year | |||||||||||||||||||||
(Unaudited - Millions of Dollars, Except Per Share Amounts) | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF EARNINGS | |||||||||||||||||||||
Three Months | Full Year | ||||||||||||||||||||
2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||
Net sales | $ | 4,701 | $ | 4,262 | 10.3 | % | $ | 17,108 | $ | 14,351 | 19.2 | % | |||||||||
Cost of sales | 1,656 | 1,545 | 7.2 | 6,140 | 5,294 | 16.0 | |||||||||||||||
Gross profit | $ | 3,045 | $ | 2,717 | 12.1 | % | $ | 10,968 | $ | 9,057 | 21.1 | % | |||||||||
% of sales | 64.8 | % | 63.7 | % | 64.1 | % | 63.1 | % | |||||||||||||
Research, development and engineering expenses | 331 | 255 | 29.8 | 1,235 | 984 | 25.5 | |||||||||||||||
Selling, general and administrative expenses | 1,745 | 1,562 | 11.7 | 6,427 | 5,361 | 19.9 | |||||||||||||||
Recall charges | 5 | 21 | nm | 103 | 17 | nm | |||||||||||||||
Amortization of intangible assets | 145 | 130 | 11.5 | 619 | 472 | 31.1 | |||||||||||||||
Total operating expenses | $ | 2,226 | $ | 1,968 | 13.1 | % | $ | 8,384 | $ | 6,834 | 22.7 | % | |||||||||
Operating income | $ | 819 | $ | 749 | 9.3 | % | $ | 2,584 | $ | 2,223 | 16.2 | % | |||||||||
% of sales | 17.4 | % | 17.6 | % | 15.1 | % | 15.5 | % | |||||||||||||
Other income (expense), net | (62) | (78) | (20.5) | (303) | (269) | 12.6 | |||||||||||||||
Earnings before income taxes | $ | 757 | $ | 671 | 12.8 | % | $ | 2,281 | $ | 1,954 | 16.7 | % | |||||||||
Income taxes | 95 | 103 | (7.8) | 287 | 355 | (19.2) | |||||||||||||||
Net earnings | $ | 662 | $ | 568 | 16.5 | % | $ | 1,994 | $ | 1,599 | 24.7 | % | |||||||||
Net earnings per share of common stock: | |||||||||||||||||||||
Basic | $ | 1.75 | $ | 1.51 | 15.9 | % | $ | 5.29 | $ | 4.26 | 24.2 | % | |||||||||
Diluted | $ | 1.73 | $ | 1.49 | 16.1 | % | $ | 5.21 | $ | 4.20 | 24.0 | % | |||||||||
Weighted-average shares outstanding (in millions): | |||||||||||||||||||||
Basic | 377.3 | 375.9 | 377.0 | 375.5 | |||||||||||||||||
Diluted | 382.7 | 381.3 | 382.3 | 380.3 |
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
2021 | 2020 | ||||
Assets | |||||
Cash and cash equivalents | $ | 2,944 | $ | 2,943 | |
Marketable securities | 75 | 81 | |||
Accounts receivable, net | 3,022 | 2,701 | |||
Inventories | 3,314 | 3,494 | |||
Prepaid expenses and other current assets | 662 | 488 | |||
Total current assets | $ | 10,017 | $ | 9,707 | |
Property, plant and equipment, net | 2,833 | 2,752 | |||
17,758 | 18,332 | ||||
Noncurrent deferred income tax assets | 1,760 | 1,530 | |||
Other noncurrent assets | 2,263 | 2,009 | |||
Total assets | $ | 34,631 | $ | 34,330 | |
Liabilities and shareholders' equity | |||||
Current liabilities | $ | 4,549 | $ | 5,041 | |
Long-term debt, excluding current maturities | 12,472 | 13,230 | |||
Income taxes | 913 | 990 | |||
Other noncurrent liabilities | 1,820 | 1,985 | |||
Shareholders' equity | 14,877 | 13,084 | |||
Total liabilities and shareholders' equity | $ | 34,631 | $ | 34,330 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
2021 | 2020 | ||||||
Operating activities | |||||||
Net earnings | $ | 1,994 | $ | 1,599 | |||
Depreciation | 371 | 340 | |||||
Amortization of intangible assets | 619 | 472 | |||||
Changes in operating assets, liabilities, income taxes payable and other, net | 279 | 866 | |||||
Net cash provided by operating activities | $ | 3,263 | $ | 3,277 | |||
Investing activities | |||||||
Acquisitions, net of cash acquired | $ | (339) | $ | (4,222) | |||
Purchases of property, plant and equipment | (525) | (487) | |||||
Other investing, net | 5 | 8 | |||||
Net cash used in investing activities | $ | (859) | $ | (4,701) | |||
Financing activities | |||||||
Borrowings (payments) of debt, net | $ | (1,153) | $ | 989 | |||
Payments of dividends | (950) | (863) | |||||
Other financing, net | (262) | (137) | |||||
Net cash provided by (used in) financing activities | $ | (2,365) | $ | (11) | |||
Effect of exchange rate changes on cash and cash equivalents | (38) | 41 | |||||
Change in cash and cash equivalents | $ | 1 | $ | (1,394) |
nm - not meaningful
For the Three Months and Full Year |
(Unaudited - Millions of Dollars) |
SALES GROWTH ANALYSIS | |||||||||||||||||||
Three Months | Full Year | ||||||||||||||||||
Percentage Change | Percentage Change | ||||||||||||||||||
2021 | 2020 | As Reported | Constant Currency | 2021 | 2020 | As Reported | Constant Currency | ||||||||||||
Geographic: | |||||||||||||||||||
$ | 3,418 | $ | 3,098 | 10.3 | % | 10.3 | % | $ | 12,321 | $ | 10,455 | 17.9 | % | 17.9 | % | ||||
International | 1,283 | 1,164 | 10.2 | 13.1 | 4,787 | 3,896 | 22.8 | 18.8 | |||||||||||
Total | $ | 4,701 | $ | 4,262 | 10.3 | % | 11.1 | % | $ | 17,108 | $ | 14,351 | 19.2 | % | 18.1 | % | |||
Segment: | |||||||||||||||||||
MedSurg and Neurotechnology | $ | 2,639 | $ | 2,429 | 8.7 | % | 9.4 | % | $ | 9,538 | $ | 8,345 | 14.3 | % | 13.3 | % | |||
Orthopaedics and Spine | 2,062 | 1,833 | 12.5 | 13.3 | 7,570 | 6,006 | 26.0 | 24.8 | |||||||||||
Total | $ | 4,701 | $ | 4,262 | 10.3 | % | 11.1 | % | $ | 17,108 | $ | 14,351 | 19.2 | % | 18.1 | % |
SUPPLEMENTAL SALES GROWTH ANALYSIS | |||||||||||||||||
Three Months | |||||||||||||||||
International | |||||||||||||||||
Percentage Change | |||||||||||||||||
2021 | 2020 | As Reported | Constant Currency | As Reported | As Reported | Constant Currency | |||||||||||
MedSurg and Neurotechnology: | |||||||||||||||||
Instruments | $ | 600 | $ | 555 | 8.4 | % | 9.0 | % | 5.3 | % | 20.9 | % | 23.9 | % | |||
Endoscopy | 629 | 525 | 19.9 | 21.0 | 19.7 | 20.7 | 25.9 | ||||||||||
Medical | 709 | 705 | 0.5 | 1.0 | 0.6 | 0.4 | 2.5 | ||||||||||
Neurovascular | 303 | 281 | 7.0 | 8.3 | 1.1 | 10.8 | 13.1 | ||||||||||
Neuro Cranial | 324 | 294 | 10.7 | 11.1 | 11.5 | 7.2 | 9.6 | ||||||||||
Other | 74 | 69 | 6.0 | 6.0 | 5.6 | 32.1 | 27.9 | ||||||||||
$ | 2,639 | $ | 2,429 | 8.7 | % | 9.4 | % | 7.7 | % | 11.5 | % | 14.4 | % | ||||
Orthopaedics and Spine: | |||||||||||||||||
Knees | $ | 523 | $ | 459 | 14.2 | % | 14.9 | % | 14.6 | % | 13.1 | % | 15.8 | % | |||
Hips | 352 | 340 | 3.2 | 4.0 | 1.6 | 5.9 | 8.1 | ||||||||||
Trauma and Extremities | 711 | 570 | 24.5 | 25.5 | 30.7 | 11.4 | 14.4 | ||||||||||
Spine | 300 | 307 | (1.8) | (1.1) | (0.5) | (5.2) | (2.6) | ||||||||||
Other | 176 | 157 | 11.7 | 13.0 | 8.2 | 25.2 | 32.1 | ||||||||||
$ | 2,062 | $ | 1,833 | 12.5 | % | 13.3 | % | 14.1 | % | 8.7 | % | 11.7 | % | ||||
Total | $ | 4,701 | $ | 4,262 | 10.3 | % | 11.1 | % | 10.3 | % | 10.2 | % | 13.1 | % |
Full Year | |||||||||||||||||
International | |||||||||||||||||
Percentage Change | |||||||||||||||||
2021 | 2020 | As Reported | Constant Currency | As Reported | As Reported | Constant Currency | |||||||||||
MedSurg and Neurotechnology: | |||||||||||||||||
Instruments | $ | 2,111 | $ | 1,863 | 13.4 | % | 12.5 | % | 11.3 | % | 20.9 | % | 16.6 | % | |||
Endoscopy | 2,141 | 1,763 | 21.5 | 20.8 | 18.6 | 32.7 | 29.4 | ||||||||||
Medical | 2,607 | 2,524 | 3.3 | 2.2 | 5.1 | (2.4) | (6.6) | ||||||||||
Neurovascular | 1,188 | 973 | 22.0 | 19.5 | 18.3 | 24.4 | 20.3 | ||||||||||
Neuro Cranial | 1,214 | 972 | 24.9 | 24.3 | 23.4 | 32.4 | 28.6 | ||||||||||
Other | 277 | 250 | 10.4 | 10.3 | 10.0 | 48.9 | 40.8 | ||||||||||
$ | 9,538 | $ | 8,345 | 14.3 | % | 13.3 | % | 13.0 | % | 18.1 | % | 14.0 | % | ||||
Orthopaedics and Spine: | |||||||||||||||||
Knees | $ | 1,848 | $ | 1,567 | 18.0 | % | 16.9 | % | 15.4 | % | 25.5 | % | 21.3 | % | |||
Hips | 1,342 | 1,206 | 11.2 | 9.9 | 5.8 | 21.1 | 17.2 | ||||||||||
Trauma and Extremities | 2,664 | 1,722 | 54.6 | 53.0 | 63.8 | 36.8 | 32.3 | ||||||||||
Spine | 1,167 | 1,047 | 11.5 | 10.5 | 8.7 | 19.1 | 15.2 | ||||||||||
Other | 549 | 464 | 18.2 | 18.0 | 10.1 | 58.8 | 57.4 | ||||||||||
$ | 7,570 | $ | 6,006 | 26.0 | % | 24.8 | % | 25.0 | % | 28.6 | % | 24.5 | % | ||||
Total | $ | 17,108 | $ | 14,351 | 19.2 | % | 18.1 | % | 17.9 | % | 22.8 | % | 18.8 | % |
For the Three Months and Full Year |
(Unaudited - Millions of Dollars) |
SALES GROWTH ANALYSIS | |||||||||||||||||||
Three Months | Full Year | ||||||||||||||||||
Percentage Change | Percentage Change | ||||||||||||||||||
2021 | 2019 | As Reported | Constant Currency | 2021 | 2019 | As Reported | Constant Currency | ||||||||||||
Geographic: | |||||||||||||||||||
$ | 3,418 | $ | 3,039 | 12.5 | % | 12.5 | % | $ | 12,321 | $ | 10,957 | 12.4 | % | 12.4 | % | ||||
International | 1,283 | 1,092 | 17.5 | 15.5 | 4,787 | 3,927 | 21.9 | 17.6 | |||||||||||
Total | $ | 4,701 | $ | 4,131 | 13.8 | % | 13.3 | % | $ | 17,108 | $ | 14,884 | 14.9 | % | 13.8 | % | |||
Segment: | |||||||||||||||||||
MedSurg and Neurotechnology | $ | 2,639 | $ | 2,352 | 12.3 | % | 11.8 | % | $ | 9,538 | $ | 8,475 | 12.6 | % | 11.6 | % | |||
Orthopaedics and Spine | 2,062 | 1,779 | 15.8 | 15.2 | 7,570 | 6,409 | 18.1 | 16.8 | |||||||||||
Total | $ | 4,701 | $ | 4,131 | 13.8 | % | 13.3 | % | $ | 17,108 | $ | 14,884 | 14.9 | % | 13.8 | % |
SUPPLEMENTAL SALES GROWTH ANALYSIS | |||||||||||||||||
Three Months | |||||||||||||||||
International | |||||||||||||||||
Percentage Change | |||||||||||||||||
2021 | 2019 | As Reported | Constant Currency | As Reported | As Reported | Constant Currency | |||||||||||
MedSurg and Neurotechnology: | |||||||||||||||||
Instruments | $ | 600 | $ | 542 | 10.8 | % | 10.3 | % | 10.8 | % | 10.6 | % | 8.6 | % | |||
Endoscopy | 629 | 559 | 12.5 | 12.7 | 11.3 | 17.0 | 17.7 | ||||||||||
Medical | 709 | 637 | 11.4 | 10.9 | 10.3 | 15.1 | 13.1 | ||||||||||
Neurovascular | 303 | 245 | 23.3 | 20.9 | 7.4 | 35.0 | 30.6 | ||||||||||
Neuro Cranial | 324 | 295 | 10.2 | 10.0 | 6.7 | 28.5 | 26.9 | ||||||||||
Other | 74 | 74 | 0.4 | 0.3 | (0.6) | 87.0 | 78.6 | ||||||||||
$ | 2,639 | $ | 2,352 | 12.3 | % | 11.8 | % | 9.6 | % | 20.7 | % | 18.7 | % | ||||
Orthopaedics and Spine: | |||||||||||||||||
Knees | $ | 523 | $ | 510 | 2.6 | % | 2.2 | % | 0.3 | % | 9.7 | % | 7.9 | % | |||
Hips | 352 | 372 | (5.3) | (5.8) | (9.7) | 2.7 | 1.3 | ||||||||||
Trauma and Extremities | 711 | 442 | 60.5 | 59.0 | 78.2 | 29.1 | 25.9 | ||||||||||
Spine | 300 | 312 | (3.7) | (4.2) | (6.6) | 5.3 | 2.9 | ||||||||||
Other | 176 | 143 | 22.1 | 22.3 | 21.5 | 24.0 | 24.7 | ||||||||||
$ | 2,062 | $ | 1,779 | 15.8 | % | 15.2 | % | 16.6 | % | 14.0 | % | 12.1 | % | ||||
Total | $ | 4,701 | $ | 4,131 | 13.8 | % | 13.3 | % | 12.5 | % | 17.5 | % | 15.5 | % |
Full Year | |||||||||||||||||
International | |||||||||||||||||
Percentage Change | |||||||||||||||||
2021 | 2019 | As Reported | Constant Currency | As Reported | As Reported | Constant Currency | |||||||||||
MedSurg and Neurotechnology: | |||||||||||||||||
Instruments | $ | 2,111 | $ | 1,959 | 7.7 | % | 6.8 | % | 6.1 | % | 13.6 | % | 9.4 | % | |||
Endoscopy | 2,141 | 1,983 | 8.0 | 7.6 | 5.9 | 16.0 | 14.2 | ||||||||||
Medical | 2,607 | 2,264 | 15.2 | 14.2 | 12.4 | 25.8 | 21.0 | ||||||||||
Neurovascular | 1,188 | 924 | 28.6 | 25.3 | 15.5 | 38.2 | 32.4 | ||||||||||
Neuro Cranial | 1,214 | 1,059 | 14.7 | 14.0 | 10.9 | 34.3 | 29.8 | ||||||||||
Other | 277 | 286 | (3.2) | (3.3) | (3.7) | 46.2 | 37.7 | ||||||||||
$ | 9,538 | $ | 8,475 | 12.6 | % | 11.6 | % | 8.6 | % | 25.3 | % | 21.0 | % | ||||
Orthopaedics and Spine: | |||||||||||||||||
Knees | $ | 1,848 | $ | 1,815 | 1.8 | % | 0.9 | % | 0.3 | % | 6.3 | % | 2.6 | % | |||
Hips | 1,342 | 1,383 | (3.0) | (4.2) | (6.9) | 4.0 | 0.6 | ||||||||||
Trauma and Extremities | 2,664 | 1,639 | 62.5 | 60.3 | 77.6 | 35.6 | 30.2 | ||||||||||
Spine | 1,167 | 1,157 | 0.9 | (0.2) | (4.8) | 18.4 | 13.6 | ||||||||||
Other | 549 | 415 | 32.1 | 31.5 | 27.5 | 51.0 | 47.9 | ||||||||||
$ | 7,570 | $ | 6,409 | 18.1 | % | 16.8 | % | 18.0 | % | 18.3 | % | 14.1 | % | ||||
Total | $ | 17,108 | $ | 14,884 | 14.9 | % | 13.8 | % | 12.4 | % | 21.9 | % | 17.6 | % |
Note: Fourth quarter 2021 had the same number of selling days as 2020 and 2019. The full year 2021 had one less selling day than 2020 and the same number of selling days as 2019.
SUPPLEMENTAL INFORMATION - RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
We supplement the reporting of our financial information determined under accounting principles generally accepted in
To measure percentage sales growth in constant currency, we remove the impact of changes in foreign currency exchange rates that affect the comparability and trend of sales. Percentage sales growth in constant currency is calculated by translating current and prior year results at the same foreign currency exchange rate. To measure percentage organic sales growth, we remove the impact of changes in foreign currency exchange rates, acquisitions and divestitures, which affect the comparability and trend of sales. Percentage organic sales growth is calculated by translating current year and prior year results at the same foreign currency exchange rate excluding the impact of acquisitions and divestitures. To measure earnings performance on a consistent and comparable basis, we exclude certain items that affect the comparability of operating results and the trend of earnings. To measure free cash flow, we adjust cash provided by operating activities by the amount of purchases of property, plant and equipment and proceeds from long-lived asset disposals and remove the impact of certain legal settlements and recall payments. To measure free cash flow conversion we divide free cash flow by adjusted net earnings.
Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported sales growth, gross profit, selling, general and administrative expenses, research, development and engineering expenses, operating income, other income (expense), net, effective income tax rate, net earnings and net earnings per diluted share, the most directly comparable GAAP financial measures. These non-GAAP financial measures are an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the reconciliations to corresponding GAAP financial measures below, provide a more complete understanding of our business. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
The following reconciles the non-GAAP financial measures discussed above with the most directly comparable GAAP financial measures. The weighted-average diluted shares outstanding used in the calculation of non-GAAP net earnings per diluted share are the same as those used in the calculation of reported net earnings per diluted share for the respective period.
For the Three Months and Full Year | ||||||||||||||||||||||
(Unaudited - Millions of Dollars, Except Per Share Amounts) | ||||||||||||||||||||||
Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures | ||||||||||||||||||||||
Three Months 2021 | Gross Profit | Selling, General & Administrative Expenses | Research, Development & Engineering Expenses | Operating Income | Other Income (Expense), Net | Net Earnings | Effective Tax Rate | Diluted EPS | ||||||||||||||
Reported | $ | 3,045 | $ | 1,745 | $ | 331 | $ | 819 | $ | (62) | $ | 662 | 12.5 | % | $ | 1.73 | ||||||
Reported percent net sales | 64.8 | % | 37.1 | % | 7.0 | % | 17.4 | % | (1.3) % | 14.1 | % | |||||||||||
Acquisition and integration-related charges (a) | ||||||||||||||||||||||
Inventory stepped-up to fair value | 35 | — | — | 35 | — | 27 | 0.4 | 0.07 | ||||||||||||||
Other acquisition and integration-related | — | (55) | — | 55 | — | 40 | 0.8 | 0.11 | ||||||||||||||
Amortization of purchased intangible assets | — | — | — | 145 | — | 111 | 1.4 | 0.29 | ||||||||||||||
Restructuring-related and other charges (b) | 8 | (169) | — | 177 | — | 147 | 0.5 | 0.38 | ||||||||||||||
Medical device regulations (c) | 3 | — | (32) | 35 | — | 30 | — | 0.08 | ||||||||||||||
Recall-related matters (d) | — | — | — | 5 | — | 4 | 0.1 | 0.01 | ||||||||||||||
Regulatory and legal matters (e) | — | (14) | — | 14 | (4) | 7 | 0.2 | 0.03 | ||||||||||||||
Tax matters (f) | — | — | — | — | — | 6 | (0.7) | 0.01 | ||||||||||||||
Adjusted | $ | 3,091 | $ | 1,507 | $ | 299 | $ | 1,285 | $ | (66) | $ | 1,034 | 15.2 | % | $ | 2.71 | ||||||
Adjusted percent net sales | 65.8 | % | 32.1 | % | 6.4 | % | 27.3 | % | (1.4) % | 22.0 | % |
Three Months 2020 | Gross Profit | Selling, General & Administrative Expenses | Research, Development & Engineering Expenses | Operating Income | Other Income (Expense), Net | Net Earnings | Effective Tax Rate | Diluted EPS | ||||||||||||||
Reported | $ | 2,717 | $ | 1,562 | $ | 255 | $ | 749 | $ | (78) | $ | 568 | 15.4 | % | $ | 1.49 | ||||||
Reported percent net sales | 63.7 | % | 36.6 | % | 6.0 | % | 17.6 | % | (1.8) % | 13.3 | % | |||||||||||
Acquisition and integration-related charges (a) | ||||||||||||||||||||||
Inventory stepped-up to fair value | 39 | — | — | 39 | — | 30 | 0.9 | 0.08 | ||||||||||||||
Other acquisition and integration-related | — | (118) | — | 118 | — | 97 | 1.8 | 0.25 | ||||||||||||||
Amortization of purchased intangible assets | — | — | — | 130 | — | 104 | 2.3 | 0.27 | ||||||||||||||
Restructuring-related and other charges (b) | 17 | (150) | — | 166 | — | 159 | (1.0) | 0.42 | ||||||||||||||
Medical device regulations (c) | 1 | — | (20) | 21 | — | 16 | 0.4 | 0.05 | ||||||||||||||
Recall-related matters (d) | — | — | — | 21 | — | 15 | 0.8 | 0.03 | ||||||||||||||
Regulatory and legal matters (e) | — | (1) | — | 1 | — | 2 | — | — | ||||||||||||||
Tax matters (f) | — | — | — | — | (3) | 80 | (12.6) | 0.22 | ||||||||||||||
Adjusted | $ | 2,774 | $ | 1,293 | $ | 235 | $ | 1,245 | $ | (81) | $ | 1,071 | 8.0 | % | $ | 2.81 | ||||||
Adjusted percent net sales | 65.1 | % | 30.3 | % | 5.5 | % | 29.2 | % | (1.9) % | 25.1 | % |
Full Year 2021 | Gross Profit | Selling, General & Administrative Expenses | Research, Development & Engineering Expenses | Operating Income | Other Income (Expense), Net | Net Earnings | Effective Tax Rate | Diluted EPS | |||||||||||||||
Reported | $ | 10,968 | $ | 6,427 | $ | 1,235 | $ | 2,584 | $ | (303) | $ | 1,994 | 12.6 | % | $ | 5.21 | |||||||
Reported percent net sales | 64.1 | % | 37.6 | % | 7.2 | % | 15.1 | % | (1.8) % | 11.7 | % | ||||||||||||
Acquisition and integration-related charges (a) | |||||||||||||||||||||||
Inventory stepped-up to fair value | 266 | — | — | 266 | — | 203 | 1.0 | 0.53 | |||||||||||||||
Other acquisition and integration-related | — | (319) | — | 319 | — | 244 | 1.2 | 0.64 | |||||||||||||||
Amortization of purchased intangible assets | — | — | — | 619 | — | 489 | 1.6 | 1.28 | |||||||||||||||
Restructuring-related and other charges (b) | 28 | (358) | — | 386 | 11 | 345 | (0.3) | 0.90 | |||||||||||||||
Medical device regulations (c) | 5 | — | (102) | 107 | — | 90 | — | 0.24 | |||||||||||||||
Recall-related matters (d) | — | — | — | 103 | — | 89 | — | 0.23 | |||||||||||||||
Regulatory and legal matters (e) | — | 2 | — | (2) | (7) | (12) | 0.2 | (0.02) | |||||||||||||||
Tax matters (f) | — | — | — | — | — | 32 | (1.4) | 0.08 | |||||||||||||||
Adjusted | $ | 11,267 | $ | 5,752 | $ | 1,133 | $ | 4,382 | $ | (299) | $ | 3,474 | 14.9 | % | $ | 9.09 | |||||||
Adjusted percent net sales | 65.9 | % | 33.6 | % | 6.6 | % | 25.6 | % | (1.7) % | 20.3 | % |
Full Year 2020 | Gross Profit | Selling, General & Administrative Expenses | Research, Development & Engineering Expenses | Operating Income | Other Income (Expense), Net | Net Earnings | Effective Tax Rate | Diluted EPS | ||||||||||||||
Reported | $ | 9,057 | $ | 5,361 | $ | 984 | $ | 2,223 | $ | (269) | $ | 1,599 | 18.2 | % | $ | 4.20 | ||||||
Reported percent net sales | 63.1 | % | 37.4 | % | 6.9 | % | 15.5 | % | (1.9) % | 11.1 | % | |||||||||||
Acquisition and integration-related charges (a) | ||||||||||||||||||||||
Inventory stepped-up to fair value | 48 | — | — | 48 | — | 36 | 0.3 | 0.10 | ||||||||||||||
Other acquisition and integration-related | — | (194) | — | 194 | — | 157 | 0.7 | 0.41 | ||||||||||||||
Amortization of purchased intangible assets | — | — | — | 472 | — | 381 | 1.6 | 1.00 | ||||||||||||||
Restructuring-related and other charges (b) | 53 | (406) | — | 458 | — | 397 | 0.2 | 1.04 | ||||||||||||||
Medical device regulations (c) | 2 | — | (79) | 81 | — | 63 | 0.4 | 0.17 | ||||||||||||||
Recall-related matters (d) | — | — | — | 17 | — | 13 | 0.1 | 0.03 | ||||||||||||||
Regulatory and legal matters (e) | — | (6) | — | 6 | — | 8 | (0.1) | 0.02 | ||||||||||||||
Tax matters (f) | — | — | — | — | 4 | 173 | (8.8) | 0.46 | ||||||||||||||
Adjusted | $ | 9,160 | $ | 4,755 | $ | 905 | $ | 3,499 | $ | (265) | $ | 2,827 | 12.6 | % | $ | 7.43 | ||||||
Adjusted percent net sales | 63.8 | % | 33.1 | % | 6.3 | % | 24.4 | % | (1.8) % | 19.7 | % |
(a) | Charges represent certain acquisition and integration-related costs associated with acquisitions. |
(b) | Charges represent the costs associated with the termination of sales relationships in certain countries, workforce reductions, elimination of product lines, certain long-lived and intangible asset impairments and associated costs and other restructuring-related activities. |
(c) | Charges represent the costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with the medical device reporting regulations and other requirements of the new medical device regulations in the |
(d) | Charges represent changes in our best estimate of the minimum end of the range of probable loss to resolve certain recall-related matters. |
(e) | Our best estimate of the minimum of the range of probable loss to resolve certain regulatory or other legal matters and the amount of favorable awards from settlements. |
(f) | Benefits and charges represent the accounting impact of certain significant and discrete tax items, including adjustments related to the Tax Cuts and Jobs Act of 2017, and the transfer of certain intellectual properties between tax jurisdictions. |
Year Ended | 2021 | 2020 | |||||
Cash provided by operating activities | $ | 3,263 | $ | 3,277 | |||
Net earnings | 1,994 | 1,599 | |||||
Conversion | 163.6 | % | 204.9 | % | |||
Cash provided by operating activities | $ | 3,263 | $ | 3,277 | |||
Purchases of property, plant and equipment | (525) | (487) | |||||
Proceeds from long-lived asset disposals | 11 | 14 | |||||
Recall payments | 221 | 17 | |||||
Free cash flow | $ | 2,970 | $ | 2,821 | |||
Adjusted net earnings | 3,474 | 2,827 | |||||
Free cash flow conversion | 85.5 | % | 99.8 | % |
Source:
2022 GlobeNewswire, Inc., source