QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State of incorporation) | (I.R.S. Employer Identification No.) | ||||||||||||||||||||||
| |||||||||||||||||||||||
(Address of principal executive offices) | (Zip Code) | ||||||||||||||||||||||
(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act: | ||||||||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
☒ | Accelerated filer | ☐ | Emerging growth company | ||||||||||||||||||||
Non-accelerated filer | ☐ | Small reporting company |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
ITEM 1. | FINANCIAL STATEMENTS |
Three Months | |||||||||||
2021 | 2020 | ||||||||||
Net sales | $ | $ | |||||||||
Cost of sales | |||||||||||
Gross profit | $ | $ | |||||||||
Research, development and engineering expenses | |||||||||||
Selling, general and administrative expenses | |||||||||||
Recall charges | ( | ||||||||||
Amortization of intangible assets | |||||||||||
Total operating expenses | $ | $ | |||||||||
Operating income | $ | $ | |||||||||
Other income (expense), net | ( | ( | |||||||||
Earnings before income taxes | $ | $ | |||||||||
Income taxes | |||||||||||
Net earnings | $ | $ | |||||||||
Net earnings per share of common stock: | |||||||||||
Basic | $ | $ | |||||||||
Diluted | $ | $ | |||||||||
Weighted-average shares outstanding (in millions): | |||||||||||
Basic | |||||||||||
Effect of dilutive employee stock compensation | |||||||||||
Diluted | |||||||||||
Cash dividends declared per share of common stock | $ | $ |
Three Months | |||||||||||
2021 | 2020 | ||||||||||
Net earnings | $ | $ | |||||||||
Other comprehensive income (loss), net of tax: | |||||||||||
Pension plans | ( | ||||||||||
Unrealized gains (losses) on designated hedges | ( | ||||||||||
Financial statement translation | |||||||||||
Total other comprehensive income (loss), net of tax | $ | $ | ( | ||||||||
Comprehensive income | $ | $ |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 1 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
March 31 | December 31 | ||||||||||
2021 | 2020 | ||||||||||
(Unaudited) | |||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Marketable securities | |||||||||||
Accounts receivable, less allowance of $132 ($131 in 2020) | |||||||||||
Inventories: | |||||||||||
Materials and supplies | |||||||||||
Work in process | |||||||||||
Finished goods | |||||||||||
Total inventories | $ | $ | |||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | $ | $ | |||||||||
Property, plant and equipment: | |||||||||||
Land, buildings and improvements | |||||||||||
Machinery and equipment | |||||||||||
Total property, plant and equipment | $ | $ | |||||||||
Less accumulated depreciation | |||||||||||
Property, plant and equipment, net | $ | $ | |||||||||
Goodwill | |||||||||||
Other intangibles, net | |||||||||||
Noncurrent deferred income tax assets | |||||||||||
Other noncurrent assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and shareholders' equity | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued compensation | |||||||||||
Income taxes | |||||||||||
Dividends payable | |||||||||||
Accrued product liabilities | |||||||||||
Accrued expenses and other liabilities | |||||||||||
Current maturities of debt | |||||||||||
Total current liabilities | $ | $ | |||||||||
Long-term debt, excluding current maturities | |||||||||||
Income taxes | |||||||||||
Other noncurrent liabilities | |||||||||||
Total liabilities | $ | $ | |||||||||
Shareholders' equity | |||||||||||
Common stock, $0.10 par value | |||||||||||
Additional paid-in capital | |||||||||||
Retained earnings | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Total shareholders' equity | $ | $ | |||||||||
Total liabilities and shareholders' equity | $ | $ |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 2 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
Three Months | |||||||||||
2021 | 2020 | ||||||||||
Common stock shares outstanding (in millions) | |||||||||||
Beginning | |||||||||||
Issuance of common stock under stock compensation and benefit plans | |||||||||||
Repurchase of common stock | |||||||||||
Ending | |||||||||||
Common stock | |||||||||||
Beginning | $ | $ | |||||||||
Issuance of common stock under stock compensation and benefit plans | |||||||||||
Ending | $ | $ | |||||||||
Additional paid-in capital | |||||||||||
Beginning | $ | $ | |||||||||
Issuance of common stock under stock compensation and benefit plans | ( | ( | |||||||||
Repurchase of common stock | |||||||||||
Share-based compensation | |||||||||||
Ending | $ | $ | |||||||||
Retained earnings | |||||||||||
Beginning | $ | $ | |||||||||
Net earnings | |||||||||||
Repurchase of common stock | |||||||||||
Cash dividends declared | ( | ( | |||||||||
Ending | $ | $ | |||||||||
Accumulated other comprehensive income (loss) | |||||||||||
Beginning | $ | ( | $ | ( | |||||||
Other comprehensive income (loss) | ( | ||||||||||
Ending | $ | ( | $ | ( | |||||||
Total Stryker shareholders' equity | $ | $ | |||||||||
Non-controlling interest | |||||||||||
Total shareholders' equity | $ | $ |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 3 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
Three Months | |||||||||||
2021 | 2020 | ||||||||||
Operating activities | |||||||||||
Net earnings | $ | $ | |||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||
Depreciation | |||||||||||
Amortization of intangible assets | |||||||||||
Share-based compensation | |||||||||||
Recall charges | ( | ||||||||||
Sale of inventory stepped-up to fair value at acquisition | |||||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | |||||||||||
Inventories | ( | ( | |||||||||
Accounts payable | ( | ||||||||||
Accrued expenses and other liabilities | ( | ( | |||||||||
Recall-related payments | ( | ( | |||||||||
Income taxes | |||||||||||
Other, net | ( | ||||||||||
Net cash provided by operating activities | $ | $ | |||||||||
Investing activities | |||||||||||
Acquisitions, net of cash acquired | ( | ( | |||||||||
Purchases of marketable securities | ( | ( | |||||||||
Proceeds from sales of marketable securities | |||||||||||
Purchases of property, plant and equipment | ( | ( | |||||||||
Other investing, net | |||||||||||
Net cash used in investing activities | $ | ( | $ | ( | |||||||
Financing activities | |||||||||||
Proceeds (payments) on short-term borrowings, net | |||||||||||
Proceeds from issuance of long-term debt | |||||||||||
Payments on long-term debt | ( | ( | |||||||||
Dividends paid | ( | ( | |||||||||
Repurchases of common stock | |||||||||||
Cash paid for taxes from withheld shares | ( | ( | |||||||||
Other financing, net | ( | ( | |||||||||
Net cash provided by (used in) financing activities | $ | ( | $ | ( | |||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ( | |||||||||
Change in cash and cash equivalents | $ | ( | $ | ( | |||||||
Cash and cash equivalents at beginning of period | |||||||||||
Cash and cash equivalents at end of period | $ | $ |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 4 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
Net Sales by Product Line | ||||||||
Three Months | ||||||||
2021 | 2020 | |||||||
Orthopaedics: | ||||||||
Knees | $ | $ | ||||||
Hips | ||||||||
Trauma and Extremities | ||||||||
Other | ||||||||
$ | $ | |||||||
MedSurg: | ||||||||
Instruments | $ | $ | ||||||
Endoscopy | ||||||||
Medical | ||||||||
Sustainability | ||||||||
$ | $ | |||||||
Neurotechnology and Spine: | ||||||||
Neurotechnology | $ | $ | ||||||
Spine | ||||||||
$ | $ | |||||||
Total | $ | $ |
Net Sales by Geography | |||||||||||||||||
Three Months 2021 | Three Months 2020 | ||||||||||||||||
United States | International | United States | International | ||||||||||||||
Orthopaedics: | |||||||||||||||||
Knees | $ | $ | $ | $ | |||||||||||||
Hips | |||||||||||||||||
Trauma and Extremities | |||||||||||||||||
Other | |||||||||||||||||
$ | $ | $ | $ | ||||||||||||||
MedSurg: | |||||||||||||||||
Instruments | $ | $ | $ | $ | |||||||||||||
Endoscopy | |||||||||||||||||
Medical | |||||||||||||||||
Sustainability | |||||||||||||||||
$ | $ | $ | $ | ||||||||||||||
Neurotechnology and Spine: | |||||||||||||||||
Neurotechnology | $ | $ | $ | $ | |||||||||||||
Spine | |||||||||||||||||
$ | $ | $ | $ | ||||||||||||||
Total | $ | $ | $ | $ |
Three Months 2021 | Marketable Securities | Pension Plans | Hedges | Financial Statement Translation | Total | ||||||||||||
Beginning | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||
OCI | |||||||||||||||||
Income taxes | ( | ( | ( | ( | |||||||||||||
Reclassifications to: | |||||||||||||||||
Cost of sales | |||||||||||||||||
Other (income) expense | ( | ||||||||||||||||
Income taxes | ( | ( | ( | ||||||||||||||
Net OCI | $ | $ | $ | $ | $ | ||||||||||||
Ending | $ | ( | $ | ( | $ | $ | ( | $ | ( |
Three Months 2020 | Marketable Securities | Pension Plans | Hedges | Financial Statement Translation | Total | ||||||||||||
Beginning | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||
OCI | ( | ( | |||||||||||||||
Income taxes | ( | ( | |||||||||||||||
Reclassifications to: | |||||||||||||||||
Cost of sales | |||||||||||||||||
Other (income) expense | ( | ( | ( | ( | |||||||||||||
Income taxes | ( | ||||||||||||||||
Net OCI | $ | $ | ( | $ | ( | $ | $ | ( | |||||||||
Ending | $ | ( | $ | ( | $ | $ | ( | $ | ( |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 5 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
March 2021 | Cash Flow | Net Investment | Non-Designated | Total | ||||||||||
Gross notional amount | $ | $ | $ | $ | ||||||||||
Maximum term in days | ||||||||||||||
Fair value: | ||||||||||||||
Other current assets | $ | $ | $ | $ | ||||||||||
Other noncurrent assets | ||||||||||||||
Other current liabilities | ( | ( | ( | |||||||||||
Other noncurrent liabilities | ( | ( | ( | |||||||||||
Total fair value | $ | ( | $ | $ | $ |
December 2020 | Cash Flow | Net Investment | Non-Designated | Total | ||||||||||
Gross notional amount | $ | $ | $ | $ | ||||||||||
Maximum term in days | ||||||||||||||
Fair value: | ||||||||||||||
Other current assets | $ | $ | $ | $ | ||||||||||
Other noncurrent assets | ||||||||||||||
Other current liabilities | ( | ( | ( | |||||||||||
Other noncurrent liabilities | ( | ( | ( | |||||||||||
Total fair value | $ | ( | $ | ( | $ | ( | $ | ( |
Three Months | |||||||||||
Derivative instrument: | Recorded in: | 2021 | 2020 | ||||||||
Cash Flow | Cost of sales | $ | ( | $ | ( | ||||||
Net Investment | Other income (expense), net | ||||||||||
Non-Designated | Other income (expense), net | ( | ( | ||||||||
Total | $ | $ | ( |
Assets Measured at Fair Value | March | December | ||||||
2021 | 2020 | |||||||
Cash and cash equivalents | $ | $ | ||||||
Trading marketable securities | ||||||||
Level 1 - Assets | $ | $ | ||||||
Available-for-sale marketable securities: | ||||||||
Corporate and asset-backed debt securities | $ | $ | ||||||
United States agency debt securities | ||||||||
United States Treasury debt securities | ||||||||
Certificates of deposit | ||||||||
Total available-for-sale marketable securities | $ | $ | ||||||
Foreign currency exchange forward contracts | ||||||||
Level 2 - Assets | $ | $ | ||||||
Total assets measured at fair value | $ | $ |
Liabilities Measured at Fair Value | March | December | ||||||
2021 | 2020 | |||||||
Deferred compensation arrangements | $ | $ | ||||||
Level 1 - Liabilities | $ | $ | ||||||
Foreign currency exchange forward contracts | $ | $ | ||||||
Interest rate swap liability | ||||||||
Level 2 - Liabilities | $ | $ | ||||||
Contingent consideration: | ||||||||
Beginning | $ | $ | ||||||
Additions | ||||||||
Change in estimate | ( | |||||||
Settlements | ( | ( | ||||||
Ending | $ | $ | ||||||
Level 3 - Liabilities | $ | $ | ||||||
Total liabilities measured at fair value | $ | $ |
Fair Value of Available for Sale Securities by Maturity | ||||||||
March 2021 | December 2020 | |||||||
Due in one year or less | $ | $ | ||||||
Due after one year through three years | $ | $ |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 6 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
Leases | March | December | |||||||||
2021 | 2020 | ||||||||||
Right-of-use assets | $ | $ | |||||||||
Lease liabilities, current | $ | $ | |||||||||
Lease liabilities, non-current | $ | $ | |||||||||
Other information: | |||||||||||
Weighted-average remaining lease term | |||||||||||
Weighted-average discount rate | % | % |
Three Months | |||||||||||
2021 | 2020 | ||||||||||
Operating lease cost | $ |
Purchase Price Allocation of Acquired Net Assets | |||||
2020 | Wright | ||||
Tangible assets and liabilities: | |||||
Accounts receivable | $ | ||||
Inventory | |||||
Deferred income tax assets | |||||
Other assets | |||||
Debt | ( | ||||
Deferred income tax liabilities | ( | ||||
Product liabilities | ( | ||||
Other liabilities | ( | ||||
Intangible assets: | |||||
Customer and distributor relationships | |||||
Developed technology and patents | |||||
Trade name | |||||
Goodwill | |||||
Purchase price, net of cash acquired | $ | ||||
Weighted-average life of intangible assets |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 7 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
Estimated Amortization Expense | ||||||||||||||
Remainder of 2021 | 2022 | 2023 | 2024 | 2025 | ||||||||||
$ | $ | $ | $ | $ |
Summary of Total Debt | March 2021 | December 2020 | ||||||||||||||||||
Rate | Due | |||||||||||||||||||
Senior unsecured notes: | ||||||||||||||||||||
$ | $ | |||||||||||||||||||
Variable term loan | ||||||||||||||||||||
Other | ||||||||||||||||||||
Total debt | $ | $ | ||||||||||||||||||
Less current maturities of debt | ||||||||||||||||||||
Total long-term debt | $ | $ | ||||||||||||||||||
March 2021 | December 2020 | |||||||||||||||||||
Unamortized debt issuance costs | $ | $ | ||||||||||||||||||
Borrowing capacity on existing facilities | $ | $ | ||||||||||||||||||
Fair value of senior unsecured notes | $ | $ |
Three Months | ||||||||
2021 | 2020 | |||||||
Orthopaedics | $ | $ | ||||||
MedSurg | ||||||||
Neurotechnology and Spine | ||||||||
Net sales | $ | $ | ||||||
Orthopaedics | $ | $ | ||||||
MedSurg | ||||||||
Neurotechnology and Spine | ||||||||
Segment operating income | $ | $ | ||||||
Items not allocated to segments: | ||||||||
Corporate and other | ( | ( | ||||||
Acquisition and integration-related charges | ( | ( | ||||||
Amortization of intangible assets | ( | ( | ||||||
Restructuring-related and other charges | ( | ( | ||||||
Medical device regulations | ( | ( | ||||||
Recall-related matters | ( | |||||||
Consolidated operating income | $ | $ |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 8 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 9 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
CONSOLIDATED RESULTS OF OPERATIONS | Three Months | ||||||||||||||||
Percent Net Sales | Percentage | ||||||||||||||||
2021 | 2020 | 2021 | 2020 | Change | |||||||||||||
Net sales | $ | 3,953 | $ | 3,588 | 100.0 | % | 100.0 | % | 10.2 | % | |||||||
Gross profit | 2,509 | 2,331 | 63.5 | 65.0 | 7.6 | ||||||||||||
Research, development and engineering expenses | 288 | 254 | 7.3 | 7.1 | 13.4 | ||||||||||||
Selling, general and administrative expenses | 1,575 | 1,330 | 39.8 | 37.1 | 18.4 | ||||||||||||
Recall charges | 6 | (6) | 0.2 | (0.2) | nm | ||||||||||||
Amortization of intangible assets | 181 | 118 | 4.6 | 3.3 | 53.4 | ||||||||||||
Other income (expense), net | (92) | (45) | (2.3) | (1.3) | 104.4 | ||||||||||||
Income taxes | 65 | 97 | nm | nm | (33.0) | ||||||||||||
Net earnings | $ | 302 | $ | 493 | 7.6 | % | 13.7 | % | (38.7) | % | |||||||
Net earnings per diluted share | $ | 0.79 | $ | 1.30 | (39.2) | % | |||||||||||
Adjusted net earnings per diluted share(1) | $ | 1.93 | $ | 1.84 | 4.9 | % |
Geographic and Segment Net Sales | Three Months | ||||||||||||||||
Percentage Change | |||||||||||||||||
2021 | 2020 | As Reported | Constant Currency | ||||||||||||||
Geographic: | |||||||||||||||||
United States | $ | 2,784 | $ | 2,643 | 5.3 | % | 5.3 | % | |||||||||
International | 1,169 | 945 | 23.7 | 15.2 | |||||||||||||
Total | $ | 3,953 | $ | 3,588 | 10.2 | % | 8.0 | % | |||||||||
Segment: | |||||||||||||||||
Orthopaedics | $ | 1,484 | $ | 1,222 | 21.4 | % | 18.7 | % | |||||||||
MedSurg | 1,621 | 1,622 | — | (1.6) | |||||||||||||
Neurotechnology and Spine | 848 | 744 | 14.0 | 11.3 | |||||||||||||
Total | $ | 3,953 | $ | 3,588 | 10.2 | % | 8.0 | % |
Supplemental Net Sales Growth Information | Three Months | |||||||||||||||||||||||||||||||
Percentage Change | ||||||||||||||||||||||||||||||||
United States | International | |||||||||||||||||||||||||||||||
2021 | 2020 | As Reported | Constant Currency | As Reported | As Reported | Constant Currency | ||||||||||||||||||||||||||
Orthopaedics: | ||||||||||||||||||||||||||||||||
Knees | $ | 412 | $ | 432 | (4.5) | % | (6.5) | % | (8.8) | % | 8.0 | % | 0.1 | % | ||||||||||||||||||
Hips | 309 | 316 | (2.2) | (4.7) | (7.3) | 6.8 | (0.1) | |||||||||||||||||||||||||
Trauma and Extremities | 640 | 392 | 63.1 | 59.2 | 69.2 | 50.9 | 40.1 | |||||||||||||||||||||||||
Other | 123 | 82 | 48.6 | 46.7 | 36.2 | 111.4 | 98.1 | |||||||||||||||||||||||||
$ | 1,484 | $ | 1,222 | 21.4 | % | 18.7 | % | 19.0 | % | 26.7 | % | 18.0 | % | |||||||||||||||||||
MedSurg: | ||||||||||||||||||||||||||||||||
Instruments | $ | 469 | $ | 513 | (8.5) | % | (10.0) | % | (13.4) | % | 11.1 | % | 2.8 | % | ||||||||||||||||||
Endoscopy | 469 | 455 | 3.1 | 1.6 | (2.9) | 27.4 | 19.0 | |||||||||||||||||||||||||
Medical | 622 | 587 | 5.9 | 4.0 | 4.1 | 11.8 | 3.6 | |||||||||||||||||||||||||
Sustainability | 61 | 67 | (8.6) | (8.7) | (9.1) | 54.1 | 47.1 | |||||||||||||||||||||||||
$ | 1,621 | $ | 1,622 | — | (1.6) | % | (4.1) | % | 16.0 | % | 7.6 | % | ||||||||||||||||||||
Neurotechnology and Spine: | ||||||||||||||||||||||||||||||||
Neurotechnology | $ | 570 | $ | 483 | 18.1 | % | 15.0 | % | 11.7 | % | 28.6 | % | 20.3 | % | ||||||||||||||||||
Spine | 278 | 261 | 6.5 | 4.4 | (1.9) | 31.7 | 22.6 | |||||||||||||||||||||||||
$ | 848 | $ | 744 | 14.0 | % | 11.3 | % | 6.3 | % | 29.4 | % | 20.9 | % | |||||||||||||||||||
Total | $ | 3,953 | $ | 3,588 | 10.2 | % | 8.0 | % | 5.3 | % | 23.7 | % | 15.2 | % |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 10 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
Percent Net Sales | ||||||||||||||
Three Months | 2021 | 2020 | 2021 | 2020 | ||||||||||
Reported | $ | 2,509 | $ | 2,331 | 63.5 | % | 65.0 | % | ||||||
Inventory stepped-up to fair value | 79 | 6 | 2.0 | 0.2 | ||||||||||
Restructuring-related and other charges | (2) | 4 | (0.1) | 0.1 | ||||||||||
Medical device regulations | 1 | 1 | — | — | ||||||||||
Adjusted | $ | 2,587 | $ | 2,342 | 65.4 | % | 65.3 | % |
Percent Net Sales | ||||||||||||||
Three Months | 2021 | 2020 | 2021 | 2020 | ||||||||||
Reported | $ | 288 | $ | 254 | 7.3 | % | 7.1 | % | ||||||
Medical device regulations | (18) | (23) | (0.5) | (0.7) | ||||||||||
Adjusted | $ | 270 | $ | 231 | 6.8 | % | 6.4 | % |
Percent Net Sales | ||||||||||||||
Three Months | 2021 | 2020 | 2021 | 2020 | ||||||||||
Reported | $ | 1,575 | $ | 1,330 | 39.8 | % | 37.1 | % | ||||||
Other acquisition and integration-related | (170) | (31) | (4.2) | (0.9) | ||||||||||
Restructuring-related and other charges | (15) | (49) | (0.4) | (1.4) | ||||||||||
Adjusted | $ | 1,390 | $ | 1,250 | 35.2 | % | 34.8 | % |
Percent Net Sales | ||||||||||||||
Three Months | 2021 | 2020 | 2021 | 2020 | ||||||||||
Reported | $ | 459 | $ | 635 | 11.6 | % | 17.7 | % | ||||||
Inventory stepped-up to fair value | 79 | 6 | 2.0 | 0.2 | ||||||||||
Other acquisition and integration-related | 170 | 31 | 4.2 | 0.9 | ||||||||||
Amortization of purchased intangible assets | 181 | 118 | 4.6 | 3.2 | ||||||||||
Restructuring-related and other charges | 14 | 54 | 0.4 | 1.5 | ||||||||||
Medical device regulations | 19 | 24 | 0.5 | 0.7 | ||||||||||
Recall-related matters | 6 | (6) | 0.2 | (0.2) | ||||||||||
Adjusted | $ | 928 | $ | 862 | 23.5 | % | 24.0 | % |
Percent Net Sales | ||||||||||||||
Three Months | 2021 | 2020 | 2021 | 2020 | ||||||||||
Reported | $ | 302 | $ | 493 | 7.6 | % | 13.7 | % | ||||||
Inventory stepped-up to fair value | 60 | 5 | 1.5 | 0.1 | ||||||||||
Other acquisition and integration-related | 129 | 24 | 3.3 | 0.7 | ||||||||||
Amortization of purchased intangible assets | 151 | 96 | 3.8 | 2.7 | ||||||||||
Restructuring-related and other charges | 18 | 42 | 0.5 | 1.2 | ||||||||||
Medical device regulations | 16 | 18 | 0.4 | 0.5 | ||||||||||
Recall-related matters | 5 | (4) | 0.1 | (0.1) | ||||||||||
Tax matters | 56 | 25 | 1.4 | 0.7 | ||||||||||
Adjusted | $ | 737 | $ | 699 | 18.6 | % | 19.5 | % |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 11 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
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 | $ | 2,509 | $ | 1,575 | $ | 288 | $ | 459 | $ | (92) | $ | 302 | 17.7 | % | $ | 0.79 | ||||||||||
Reported percent net sales | 63.5 | % | 39.8 | % | 7.3 | % | 11.6 | % | (2.3) | % | 7.6 | % | ||||||||||||||
Acquisition and integration-related charges: | ||||||||||||||||||||||||||
Inventory stepped-up to fair value | 79 | — | — | 79 | — | 60 | 2.3 | 0.16 | ||||||||||||||||||
Other acquisition and integration-related | — | (170) | — | 170 | — | 129 | 5.1 | 0.34 | ||||||||||||||||||
Amortization of purchased intangible assets | — | — | — | 181 | — | 151 | 2.2 | 0.40 | ||||||||||||||||||
Restructuring-related and other charges | (2) | (15) | — | 14 | 11 | 18 | 1.0 | 0.05 | ||||||||||||||||||
Medical device regulations | 1 | — | (18) | 19 | — | 16 | 0.3 | 0.04 | ||||||||||||||||||
Recall-related matters | — | — | — | 6 | — | 5 | (0.5) | 0.01 | ||||||||||||||||||
Regulatory and legal matters | — | — | — | — | — | — | — | — | ||||||||||||||||||
Tax matters | — | — | — | — | — | 56 | (15.1) | 0.14 | ||||||||||||||||||
Adjusted | $ | 2,587 | $ | 1,390 | $ | 270 | $ | 928 | $ | (81) | $ | 737 | 13.0 | % | $ | 1.93 | ||||||||||
Adjusted percent net sales | 65.4 | % | 35.2 | % | 6.8 | % | 23.5 | % | (2.0) | % | 18.6 | % |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 12 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
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 | $ | 2,331 | $ | 1,330 | $ | 254 | $ | 635 | $ | (45) | $ | 493 | 16.4 | % | $ | 1.30 | ||||||||||
Reported percent net sales | 65.0 | % | 37.1 | % | 7.1 | % | 17.7 | % | (1.3) | % | 13.7 | % | ||||||||||||||
Acquisition and integration-related charges: | ||||||||||||||||||||||||||
Inventory stepped-up to fair value | 6 | — | — | 6 | — | 5 | 0.1 | 0.01 | ||||||||||||||||||
Other acquisition and integration-related | — | (31) | — | 31 | — | 24 | 0.3 | 0.06 | ||||||||||||||||||
Amortization of purchased intangible assets | — | — | — | 118 | — | 96 | 0.9 | 0.25 | ||||||||||||||||||
Restructuring-related and other charges | 4 | (49) | — | 54 | — | 42 | 0.6 | 0.11 | ||||||||||||||||||
Medical device regulations | 1 | — | (23) | 24 | — | 18 | 0.3 | 0.05 | ||||||||||||||||||
Recall-related matters | — | — | — | (6) | — | (4) | (0.1) | (0.01) | ||||||||||||||||||
Regulatory and legal matters | — | — | — | — | — | — | — | — | ||||||||||||||||||
Tax matters | — | — | — | — | — | 25 | (4.2) | 0.07 | ||||||||||||||||||
Adjusted | $ | 2,342 | $ | 1,250 | $ | 231 | $ | 862 | $ | (45) | $ | 699 | 14.3 | % | $ | 1.84 | ||||||||||
Adjusted percent net sales | 65.3 | % | 34.8 | % | 6.4 | % | 24.0 | % | (1.3) | % | 19.5 | % |
Three Months | 2021 | 2020 | ||||||
Net cash provided by operating activities | $ | 452 | $ | 591 | ||||
Net cash used in investing activities | (96) | (163) | ||||||
Net cash provided by (used in) financing activities | (1,053) | (768) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (8) | (33) | ||||||
Change in cash and cash equivalents | $ | (705) | $ | (373) |
Three Months | 2021 | 2020 | ||||||
Total dividends paid to common shareholders | $ | 238 | $ | 215 | ||||
Total amount paid to repurchase common stock | $ | — | $ | — | ||||
Shares of repurchased common stock (in millions) | — | — |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 13 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 6. | EXHIBITS |
31(i)* | |||||
31(ii)* | |||||
32(i)* | |||||
32(ii)* | |||||
101.INS | iXBRL Instance Document | ||||
101.SCH | iXBRL Schema Document | ||||
101.CAL | iXBRL Calculation Linkbase Document | ||||
101.DEF | iXBRL Definition Linkbase Document | ||||
101.LAB | iXBRL Label Linkbase Document | ||||
101.PRE | iXBRL Presentation Linkbase Document | ||||
104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document) | ||||
† Filed with this Form 10-Q | |||||
* Furnished with this Form 10-Q |
Dollar amounts are in millions except per share amounts or as otherwise specified. | 14 |
STRYKER CORPORATION | 2021 First Quarter Form 10-Q |
STRYKER CORPORATION | |||||||||||
(Registrant) | |||||||||||
Date: | April 28, 2021 | /s/ KEVIN A. LOBO | |||||||||
Kevin A. Lobo | |||||||||||
Chairman and Chief Executive Officer | |||||||||||
Date: | April 28, 2021 | /s/ GLENN S. BOEHNLEIN | |||||||||
Glenn S. Boehnlein | |||||||||||
Vice President, Chief Financial Officer |
15 |
Date: | April 28, 2021 | /s/ KEVIN A. LOBO | ||||||
Kevin A. Lobo | ||||||||
Chairman and Chief Executive Officer |
Date: | April 28, 2021 | /s/ GLENN S. BOEHNLEIN | ||||||
Glenn S. Boehnlein | ||||||||
Vice President, Chief Financial Officer |
Date: | April 28, 2021 | /s/ KEVIN A. LOBO | ||||||
Kevin A. Lobo | ||||||||
Chairman and Chief Executive Officer |
Date: | April 28, 2021 | /s/ GLENN S. BOEHNLEIN | ||||||
Glenn S. Boehnlein | ||||||||
Vice President, Chief Financial Officer |
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Consolidated Statements Of Earnings (Unaudited) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Income Statement [Abstract] | ||
Net sales | $ 3,953 | $ 3,588 |
Cost of sales | 1,444 | 1,257 |
Gross profit | 2,509 | 2,331 |
Research, development and engineering expenses | 288 | 254 |
Selling, general and administrative expenses | 1,575 | 1,330 |
Recall charges | 6 | (6) |
Amortization of intangible assets | 181 | 118 |
Total operating expenses | 2,050 | 1,696 |
Operating income | 459 | 635 |
Other income (expense), net | (92) | (45) |
Earnings before income taxes | 367 | 590 |
Income taxes | 65 | 97 |
Net earnings | $ 302 | $ 493 |
Net earnings per share of common stock: | ||
Basic | $ 0.80 | $ 1.32 |
Diluted | $ 0.79 | $ 1.30 |
Weighted-average shares outstanding (in millions): | ||
Basic | 376.3 | 374.8 |
Effect of dilutive employee stock compensation | 5.4 | 4.9 |
Diluted | 381.7 | 379.7 |
Cash dividends declared per share of common stock (in dollars per share) | $ 0.63 | $ 0.575 |
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Statement of Comprehensive Income [Abstract] | ||
Net earnings | $ 302 | $ 493 |
Other comprehensive income (loss), net of tax: | ||
Pension plans | 7 | (4) |
Unrealized gains (losses) on designated hedges | 28 | (26) |
Financial statement translation | 255 | 13 |
Total other comprehensive income (loss), net of tax | 290 | (17) |
Comprehensive income | $ 592 | $ 476 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 132 | $ 131 |
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Basis Of Presentation |
3 Months Ended |
---|---|
Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | BASIS OF PRESENTATION General Information Management believes the accompanying unaudited Consolidated Financial Statements contain all adjustments, including normal recurring items, considered necessary to fairly present the financial position of Stryker Corporation and its consolidated subsidiaries ("Stryker," the "Company," "we," us" or "our") on March 31, 2021 and the results of operations for the three months 2021. The results of operations included in these Consolidated Financial Statements may not necessarily be indicative of our annual results. These statements should be read in conjunction with our Annual Report on Form 10-K for 2020. New Accounting Pronouncements Not Yet Adopted We evaluate all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) for consideration of their applicability. ASUs not included in our disclosures were assessed and determined to be either not applicable or are not expected to have a material impact on our Consolidated Financial Statements.
|
Revenue Recognition |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Revenue Recognition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | REVENUE RECOGNITION Our policies for recognizing sales have not changed from those described in our Annual Report on Form 10-K for 2020. We disaggregate our net sales by product line and geographic location for each of our segments as we believe it best depicts how the nature, amount, timing and certainty of our net sales and cash flows are affected by economic factors.
Contract Assets and Liabilities On March 31, 2021 and December 31, 2020 contract assets recorded in our Consolidated Balance Sheets were not significant. Our contract liabilities arise as a result of consideration received from customers at inception of contracts for certain businesses or where the timing of billing for services precedes satisfaction of our performance obligations. We generally satisfy performance obligations within one year from the contract inception date. Our contract liabilities were $444 and $416 on March 31, 2021 and December 31, 2020.
|
Accumulated Other Comprehensive (Loss) Income (AOCI) |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive (Loss) Income (AOCI) | ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (AOCI)
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Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | DERIVATIVE INSTRUMENTS We use operational and economic hedges, foreign currency exchange forward contracts, net investment hedges (both derivative and non-derivative financial instruments) and interest rate derivative instruments to manage the impact of currency exchange and interest rate fluctuations on earnings, cash flow and equity. We do not enter into derivative instruments for speculative purposes. We are exposed to potential credit loss in the event of nonperformance by our counterparties on our outstanding derivative instruments but do not anticipate nonperformance by any of our counterparties. Should a counterparty default, our maximum loss exposure is the asset balance of the instrument. We have not changed our hedging strategies, accounting practices or objectives from those disclosed in our Annual Report on Form 10-K for 2020. Foreign Currency Hedges
We have €1,500 in certain forward currency contracts designated as net investment hedges to hedge a portion of our investments in certain of our entities with functional currencies denominated in Euros. In addition to these derivative financial instruments designated as net investment hedges, we have designated €4,350 of senior unsecured notes as net investment hedges to selectively hedge portions of our investment in certain international subsidiaries. The currency effects of our Euro-denominated senior unsecured notes are reflected in AOCI within shareholders' equity where they offset gains and losses recorded on our net investment in international subsidiaries. On March 31, 2021 the total after tax gain (loss) in AOCI related to designated net investment hedges was ($222). Net Currency Exchange Rate Gains (Losses)
Pretax gains (losses) on derivatives designated as cash flow of ($16) and net investment hedges of $33 recorded in AOCI are expected to be reclassified to cost of sales and other income (expense) in earnings within 12 months as of March 31, 2021. This cash flow hedge reclassification is primarily due to the sale of inventory that includes previously hedged purchases. A component of the AOCI amounts related to net investment hedges is reclassified over the life of the hedge instruments as we elected to exclude the initial value of the component related to the spot-forward difference from the effectiveness assessment. Interest Rate Hedges In the three months 2021 a loss of $11 was reclassified from AOCI to earnings relating to the termination of forward starting interest rate swaps with notional amounts of $750 designated as cash flow hedges as we now consider it probable that the original forecasted debt issuances will not occur. Pretax gains of $5 recorded in AOCI related to other interest rate hedges closed in conjunction with debt issuances are expected to be reclassified to other income (expense) in earnings within 12 months of March 31, 2021. The cash flow effect of interest rate hedges is recorded in cash flow from operations.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS Our policies for managing risk related to foreign currency, interest rates, credit and markets and our process for determining fair value have not changed from those described in our Annual Report on Form 10-K for 2020. There were no significant transfers into or out of any level in 2021.
On March 31, 2021 and December 31, 2020 the aggregate difference between the cost and fair value of available-for-sale marketable securities was nominal. Interest and marketable securities income was $17 and $40 in the three months 2021 and 2020, which was recorded in other income (expense), net. Our investments in available-for-sale marketable securities had a minimum credit quality rating of A2 (Moody's), A (Standard & Poor's) and A (Fitch). We do not plan to sell the investments, and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity.
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Contingencies and Commitments |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contingencies and Commitments | CONTINGENCIES AND COMMITMENTS We are involved in various ongoing proceedings, legal actions and claims arising in the normal course of business, including proceedings related to product, labor, intellectual property and other matters, the most significant of which are more fully described below. The outcomes of these matters will generally not be known for prolonged periods of time. In certain of the legal proceedings, the claimants seek damages as well as other compensatory and equitable relief that could result in the payment of significant claims and settlements and/or the imposition of injunctions or other equitable relief. For legal matters for which management had sufficient information to reasonably estimate our future obligations, a liability representing management's best estimate of the probable loss, or the minimum of the range of probable losses when a best estimate within the range is not known, is recorded. The estimates are based on consultation with legal counsel, previous settlement experience and settlement strategies. If actual outcomes are less favorable than those estimated by management, additional expense may be incurred, which could unfavorably affect future operating results. We are self-insured for certain claims and expenses. The ultimate cost to us with respect to product liability claims could be materially different than the amount of the current estimates and accruals and could have a material adverse effect on our financial position, results of operations and cash flows. Recall Matters In June 2012 we voluntarily recalled our Rejuvenate and ABG II Modular-Neck hip stems and terminated global distribution of these hip products. Product liability lawsuits relating to this voluntary recall have been filed against us. In November 2014 we entered into a settlement agreement to compensate eligible United States patients who had revision surgery prior to November 3, 2014 and in December 2016 the settlement program was extended to patients who had revision surgery prior to December 19, 2016. In September 2020 we entered into a second settlement agreement to compensate eligible United States patients who had revision surgery prior to September 9, 2020. We continue to offer support for recall-related care and reimburse patients who are not eligible to enroll in the settlement program for testing and treatment services, including any necessary revision surgeries. In addition, there are remaining lawsuits that we will continue to defend against. In August 2016 and May 2018 we voluntarily recalled certain lot-specific sizes and offsets of LFIT Anatomic CoCr V40 Femoral Heads. Product liability lawsuits and claims relating to this voluntary recall have been filed against us. In November 2018 we entered into a settlement agreement to resolve a significant number of claims and lawsuits related to the recalls. The specific terms of the settlement agreement, including the financial terms, are confidential. With the acquisition of Wright as more fully described in Note 7, we are responsible for certain product liability claims, primarily related to certain hip products sold by Wright prior to its 2014 divestiture of the OrthoRecon business. We will continue to evaluate each claim and the possible loss we may incur. We have incurred, and expect to incur in the future, costs associated with the defense and settlement of these matters. Based on the information that has been received, we have estimated the remaining range of probable loss related to these matters globally to be approximately $480 to $610. We have recorded reserves representing the remaining minimum of the range of probable loss. The final outcomes of these matters are dependent on many factors that are difficult to predict. Accordingly, the ultimate cost related to these matters may be materially different than the amount of our current estimate and accruals and could have a material adverse effect on our results of operations and cash flows.
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Acquisitions |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | ACQUISITIONS We acquire stock in companies and various assets that continue to support our capital deployment and product development strategies. The aggregate purchase price of our acquisitions, net of cash acquired was $31 and $23 in the three months 2021 and 2020. In November 2020 we completed the acquisition of Wright Medical Group N.V. (Wright) for $30.75 per share, or an aggregate purchase price of $4.1 billion ($5.6 billion including convertible notes). Wright is a global medical device company focused on extremities and biologics. Wright is part of our Trauma and Extremities business within Orthopaedics. Goodwill attributable to the acquisition is not deductible for tax purposes. In December 2020 we completed the acquisition of OrthoSensor, Inc. (OrthoSensor). OrthoSensor is a leader in the digital evolution of musculoskeletal care and sensor technology for total joint replacement. OrthoSensor is part of our Joint Replacement business within Orthopaedics. Goodwill attributable to the acquisition is not deductible for tax purposes. Purchase price allocations for our significant acquisitions are:
Purchase price allocations for Wright and other 2020 acquisitions were based on preliminary valuations, primarily related to intangible assets, product liabilities and deferred income taxes. Our estimates and assumptions are subject to change within the measurement period.
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Debt and Credit Facilities |
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Long-term Debt, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt And Credit Facilities | DEBT AND CREDIT FACILITIES We have lines of credit issued by various financial institutions that are available to fund our day-to-day operating needs. Certain of our credit facilities require us to comply with financial and other covenants. We were in compliance with all covenants on March 31, 2021. Our commercial paper program backed by our primary revolving credit facility which expires in August 2023 allows us to have a maximum of $1,500 in commercial paper outstanding with maturities up to 397 days from the date of issuance. We have a credit agreement that provides for up to $1,500 of borrowings in United States Dollars pursuant to a 364-day revolving credit facility, which matures on April 29, 2021 and is available for working capital and general corporate purposes. On March 31, 2021 there were no borrowings outstanding under our credit facility or commercial paper programs.
The fair value of the senior unsecured notes was estimated using quoted interest rates, maturities and amounts of borrowings based on quoted active market prices and yields that took into account the underlying terms of the debt instruments. Substantially all of our debt is classified within Level 2 of the fair value hierarchy. In March 2021 we repaid $750 of senior unsecured notes with a coupon of 2.625% that were due on March 15, 2021.
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Income Taxes |
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Mar. 31, 2021 | |
Income Tax [Abstract] | |
Income Taxes | INCOME TAXES Our effective tax rates were 17.7% and 16.4% in the three months 2021 and 2020. The effective income tax rates for 2021 and 2020 reflect the continued lower effective income tax rates as a result of our European operations. In March 2021 the American Rescue Plan Act (the Act) was signed into law in the United States. We do not expect the provisions of the Act to have a material impact on our annual effective tax rate or Consolidated Financial Statements in 2021.
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Segment Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | SEGMENT INFORMATION
There were no significant changes to total assets by segment from information provided in our Annual Report on Form 10-K for 2020.
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Risks and Uncertainties |
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Mar. 31, 2021 | |
Risks and Uncertainties [Abstract] | |
Concentration Risk Disclosure | RISK AND UNCERTAINTIESIn China the government launched a national program for volume-based procurement of high value medical consumables to reduce healthcare costs. The government will award a contract to the lowest bidders who are able to satisfy the quality and quantity requirements. The successful bidders will be guaranteed a sales volume for certain periods, while losing a volume-based procurement tender process will result in a loss of market share. This process may also enable manufacturers to lower their distribution and commercial costs. The implementation of the tender process may negatively impact our existing commercial operations of joint replacement, spine and trauma products in China. Currently the government is collecting data related to these products. We are responding to the request for information and are closely monitoring this process for any indicators of potential impairment of goodwill or intangible assets related to our business in China. Our business in China represented approximately 2% of our revenues for the year ended December 31, 2020. |
Basis Of Presentation (Policies) |
3 Months Ended |
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Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
New Accounting Pronouncements Not Yet Adopted | New Accounting Pronouncements Not Yet Adopted We evaluate all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) for consideration of their applicability. ASUs not included in our disclosures were assessed and determined to be either not applicable or are not expected to have a material impact on our Consolidated Financial Statements.
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Revenue Recognition (Tables) |
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Revenue Recognition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregated Revenue | We disaggregate our net sales by product line and geographic location for each of our segments as we believe it best depicts how the nature, amount, timing and certainty of our net sales and cash flows are affected by economic factors.
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Accumulated Other Comprehensive (Loss) Income (AOCI) (Tables) |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) |
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Reclassification out of Accumulated Other Comprehensive Income |
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Derivative Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value |
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Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location |
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis |
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Investments Classified by Contractual Maturity Date |
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Contingencies and Commitments (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, Cost |
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Acquisitions (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition | Purchase price allocations for our significant acquisitions are:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense |
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Debt and Credit Facilities (Tables) |
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Long-term Debt, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments |
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Segment Information (Tables) |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales and Other Financial Information by Business Segment |
|
Revenue Recognition - Narrative (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Revenue Recognition [Abstract] | ||
Contract liabilities | $ 444 | $ 416 |
Derivative Instruments (Narrative) (Details) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021
USD ($)
|
Mar. 31, 2021
EUR (€)
|
Dec. 31, 2020
USD ($)
|
|
Foreign Exchange Contract | |||
Notional amount | $ 8,588,000,000 | $ 8,159,000,000 | |
Interest Rate Swap | |||
Reclassification of gain (loss) from AOCI to earnings | 11,000,000 | ||
Designated as Hedging Instrument | Foreign Exchange Contract | |||
Derivative, Notional Amount | € | € 1,500,000,000 | ||
Notional amount | € | € 4,350,000,000 | ||
Derivative, fair value | (222,000,000) | ||
Cash flow hedge gain (loss) to be reclassified within twelve months | (16,000,000) | ||
Other Income | 33,000,000 | ||
Designated as Hedging Instrument | Interest Rate Swap | |||
Cash flow hedge gain (loss) to be reclassified within twelve months | 5,000,000 | ||
Cash Flow | Designated as Hedging Instrument | |||
Derivative, Notional Amount | 750,000,000 | ||
Cash Flow | Designated as Hedging Instrument | Foreign Exchange Contract | |||
Notional amount | $ 927,000,000 | $ 949,000,000 |
Derivative Instruments (Income Statement Location) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Foreign Exchange Contract | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Net currency exchange rate gains (losses) | $ 5 | $ (3) |
Foreign Exchange Contract | Cost of sales | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Net currency exchange rate gains (losses) | (1) | (3) |
Foreign Exchange Contract | Other income (expense), net | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Net currency exchange rate gains (losses) | (2) | (7) |
Net Investment | Other income (expense), net | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Net currency exchange rate gains (losses) | $ 8 | $ 7 |
Fair Value Measurements (Assets and Liabilities Measured At Fair Value On A Recurring Basis Using Unobservable Inputs (Level 3)) (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Due in one year or less | $ 39 | $ 42 |
Due after one year through three years | $ 35 | $ 39 |
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Fair Value Disclosures [Abstract] | ||
Gain on sale of marketable securities | $ 17 | $ 40 |
Contingencies and Commitments (Narrative) (Details) $ in Millions |
Mar. 31, 2021
USD ($)
|
---|---|
Minimum | |
Loss Contingencies [Line Items] | |
Estimate of possible loss | $ 480 |
Maximum | |
Loss Contingencies [Line Items] | |
Estimate of possible loss | $ 610 |
Contingencies and Commitments - Leases (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
|
Commitments and Contingencies Disclosure [Abstract] | |||
Right-of-use assets | $ 424 | $ 423 | |
Lease liabilities, current | 109 | 109 | |
Lease liabilities, non-current | $ 322 | $ 325 | |
Other information: | |||
Weighted-average remaining lease term | 5 years 9 months 18 days | 5 years 7 months 6 days | |
Weighted-average discount rate | 2.94% | 2.57% | |
Operating lease cost | $ 36 | $ 36 |
Acquisitions (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
Nov. 30, 2020 |
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Business Acquisition [Line Items] | |||
Aggregate purchase price of acquisitions | $ 31 | $ 23 | |
Business combination, consideration transferred, including convertible notes | $ 5,600 | ||
Wright | |||
Business Acquisition [Line Items] | |||
Aggregate purchase price of acquisitions | $ 4,100 | ||
Consideration transferred (in dollars per share) | $ 30.75 |
Acquisitions (Allocation Of The Preliminary Purchase Price To The Acquired Net Assets (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Mar. 31, 2021 |
|
Goodwill | $ 12,778 | $ 12,803 |
Wright | ||
Accounts receivable | 127 | |
Inventory | 478 | |
Deferred income tax assets | 373 | |
Other assets | 345 | |
Debt | (1,447) | |
Deferred income tax liabilities | (504) | |
Product liabilities | (199) | |
Other liabilities | (290) | |
Goodwill | 3,459 | |
Purchase price, net of cash acquired | $ 4,081 | |
Weighted-average life of intangible assets | 12 years | |
Wright | Customer and distributor relationships | ||
Intangible assets acquired | $ 181 | |
Wright | Developed technology and patents | ||
Intangible assets acquired | 1,499 | |
Wright | Trade name | ||
Intangible assets acquired | $ 59 |
Acquisitions (Future Amortization Expense) (Details) $ in Millions |
Mar. 31, 2021
USD ($)
|
---|---|
Business Combinations [Abstract] | |
Remainder of 2021 | $ 450 |
2022 | 588 |
2023 | 567 |
2024 | 541 |
2025 | $ 520 |
Income Taxes (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2021
Rate
|
Mar. 31, 2020
Rate
|
|
Income Tax [Abstract] | ||
Effective income tax rate reconciliation, percent | 17.70% | 16.40% |
Risks and Uncertainties (Details) |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Risks and Uncertainties [Abstract] | |
Concentration Risk, Geographic | 2 |
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