Stryker Corp SYK
Q2 2013 Earnings Call Transcript

Transcript Call Date 07/18/2013

Operator: Welcome to Stryker's Second Quarter 2013 Earnings Conference Call. My name is John, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Following the conference, we will conduct a question-and-answer session. During that time participants will have the opportunity to ask one question and one follow-up question. This conference call is being recorded for replay purposes.

Before we begin, I would like to remind you that the discussions during this conference call will include forward-looking statements. Factors that could cause actual results to differ materially are discussed in the Company's most recent filings with the SEC. Also, the discussions will include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release that is in the Exhibit to Stryker's current report on Form 8-K filed today with the SEC.

I will now turn the call over to Mr. Kevin Lobo, President and Chief Executive Officer. You may proceed, sir.

Kevin A. Lobo - President and CEO: Good afternoon, everyone, and welcome to Stryker's second quarter 2013 earnings call. Joining me is Bill Jellison, who as many of you know, joined Stryker as our CFO in April and Katherine Owen, Vice President of Strategy and Investor Relations.

With respect to today's call, I'll provide opening comments and then turn over to Katherine for additional details and then Bill will cover the financials. We will then open the call to your questions.

Our second quarter results were driven by solid and balanced growth, both geographically and across our three segments, Reconstructive, MedSurg, and Neurotechnology and Spine. With Q2 sales up $2.2 billion, we delivered 5% reported growth and a 5.9% gain excluding foreign currency and acquisitions. We benefited from one extra selling day in the quarter, which after adjusting for this, resulted in sales growth of 4.4% excluding foreign exchange and acquisitions. Based on our first half results we remain confident in our ability to achieve our full year sales targets and are shifting our range of sales growth excluding acquisition and foreign exchange from 3% to 5.5% to 4% to 5.5%.

The strong top line along with operational efficiencies is helping drive solid performance, highlighted by continues gross margin improvement after adjusting for the medical device excise tax. While we are pleased with our operational performance, as discussed previously, our results have been adversely impacted by a substantial foreign exchange headwind. For Q2, foreign currency negatively impacted our per share earnings by roughly $0.04. However, with the sales momentum and effective cost control, we were able to partially absorb the foreign exchange impact and still deliver EPS of $1 a share.

With respect to our geographic growth, the U.S. had another strong showing with sales up approximately 5%. Encouragingly, we saw improvement momentum in our international business, which posted nearly 9% growth, excluding foreign exchange, and included 1.6% growth from the Trauson acquisition.

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