STRYKER

Stryker 2015 FORM 10-K

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2014 Gross Profit Selling, General & Administrative Expenses Intangible Amortization Operating Income Net Earnings Effective Tax Rate Diluted EPS AS REPORTED $ 6,356 $ 3,547 $ 188 $ 1,246 $ 515 55.6 % $ 1.34 Acquisition and integration-related charges Inventory stepped up to fair value 27 — — 27 15 0.5 0.04 Other acquisition and integration-related — (75) — 75 50 0.7 0.13 Amortization of intangible assets — — (188) 188 133 1.1 0.35 Restructuring-related charges 1 (116) — 117 78 1.1 0.20 Rejuvenate and other recall matters — — — 761 628 (3.1) 1.65 Tax matters — — — — 391 (33.6) 1.02 ADJUSTED $ 6,384 $ 3,356 $ — $ 2,414 $ 1,810 22.3 % $ 4.73 2013 Gross Profit Selling General and Administrative Expenses Intangible Amortization Operating Income Net Earnings Effective Tax Rate Diluted EPS AS REPORTED $ 6,019 $ 3,467 $ 138 $ 1,256 $ 1,006 17.0% $ 2.63 Acquisition and integration related charges Inventory stepped up to fair value 28 — — 28 21 0.1 0.06 Other acquisition and integration related — (70) — 70 51 0.3 0.13 Amortization of intangible assets — — (138) 138 98 0.4 0.26 Restructuring-related charges 11 (52) — 63 46 0.3 0.12 Rejuvenate and other recall matters — — — 622 460 2.0 1.20 Regulatory and legal matters 7 (62) — 69 63 (0.6) 0.17 Donations — (25) — 25 15 0.3 0.04 Tax matters — — — — (46) 2.9 (0.12) ADJUSTED $ 6,065 $ 3,258 $ — $ 2,271 $ 1,714 22.7% $ 4.49 The weighted-average basic and diluted shares outstanding used in the calculation of non-GAAP Diluted EPS are the same as the weighted- average basic and diluted shares outstanding used in the calculation of the reported Diluted EPS. FINANCIAL CONDITION AND LIQUIDITY 2015 2014 2013 Net cash provided by operations activities $ 899 $ 1,782 $ 1,886 Net cash provided by (used in) investing activities 1,956 (1,878 ) (2,217 ) Net cash (used in) provided financing activities (1,141 ) 629 300 Effect of exchange rate changes (130 ) (77 ) (25 ) Change in cash and cash equivalents $ 1,584 $ 456 $ (56 ) We believe our financial condition continues to be of high quality, as evidenced by our ability to generate substantial cash from operations and ready access to capital markets at competitive rates. Operating cash flow provides the primary source of cash to fund operating needs and capital expenditures. Excess operating cash is used first to fund acquisitions to complement our portfolio of businesses. Other discretionary uses include dividends and share repurchases. As necessary, we may supplement operating cash flow with debt to fund these activities. Our overall cash position shows our strong business results and a global cash management strategy that takes into account liquidity management, economic factors and tax considerations. Operating Activities Cash provided by operations was $899, $1,782, $1,886 in 2015, 2014 and 2013. The decrease in 2015 was primarily due to recall- related payments associated with the Rejuvenate and ABGII recall settlement agreement and the timing of income tax payments. The net of accounts receivable, inventory and accounts payable resulted in the consumption of $231, $249, and $165 of cash in 2015, 2014 and 2013. Inventory days on hand for 2015 increased by 5 days from 2014 after increasing eight days in 2014. Accounts receivable days sales outstanding for 2015 increased by one day after decreasing one day in 2014. Investing Activities Cash provided by investing activities was $1,956 in 2015 compared to cash used in investing of $1,878 in 2014 and $2,217 in 2013. This change is primarily due to the sale of a portion of our marketable securities in 2015 to make recall-related payments discussed above under Operating Activities. Acquisitions: Acquisitions resulted in cash consumption of $153, $916 and $2,320 in 2015, 2014 and 2013. In 2015 the primary acquisition was CHG, and in 2014 the primary acquisitions were Patient Safety Technologies, Inc., Pivot Medical Inc., Berchtold Holding, AG and Small Bone Innovations, Inc. In 2013 we acquired Trauson Holdings Company Limited and Mako Surgical Corp. Capital Expenditures: Capital expenditures were $270, $233 and $195 in 2015, 2014 and 2013. Capital expenditures in 2015 were primarily related to acquisition integration support, information technology infrastructure upgrades, capacity expansion, new product introductions, innovation and cost savings. Financing Activities Dividends Paid: Dividends paid per common share increased 9.8% to $1.34 per share in 2015 compared to $1.22 per share in 2014, an increase of 15.1% from 2013. Dividends paid per common share and total dividends paid to common shareholders are included in the following table for 2015, 2014 and 2013. 2015 2014 2013 Dividends paid per common share $ 1.34 $ 1.22 $ 1.06 Total dividends paid to common shareholders $ 521 $ 462 $ 401 Short-Term and Long-Term Debt: We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including acquisitions and share repurchase activities) and overall cost of capital. STRYKER CORPORATION 2015 Form 10-K 13 Dollar amounts in millions except per share amounts or as otherwise specified.

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