07.28.10
$6.7 Billion
KEY EXECUTIVES:
Stephen P. MacMillan, Chairman, President and CEO
Jeanne M. Blondia, VP and Treasurer
Lonny J. Carpenter, Group President, Global Quality and Operations
Andrew G. Fox-Smith, Group President, International
Curtis E. Hall, VP and General Counsel
Curt R. Hartman, VP and Chief Financial Officer
James E. Kemler, Group President, Biotech and Development
Michael P. Mogul, Group President, Orthopaedics
Timothy J. Scannell, Group President, MedSurg and Spine
Elizabeth A. Staub, VP, Regulatory Affairs and Quality Assurance
Bronwen R. Taylor, VP, Internal Audit and Compliance
NO. OF EMPLOYEES: 18,582
GLOBAL HEADQUARTERS: Kalamazoo, Mich.
There’s a reason marathon running is so appealing to corporate CEOs—the sport has a lot in common with business management. Corporate executives who regularly compete in marathons claim their top two passions share the same ingredients for success: stamina, discipline and a steady, unrelenting pace.
The runners’ approach to business management certainly has become part of the corporate culture at many large companies, but it is not the only way to grow profits and maximize operational efficiencies. Stephen P. MacMillan, chairman, president and CEO of orthopedic manufacturing behemoth Stryker, turned to the boxing world last year for lessons on successfully leading a company through severe economic doldrums.
“…2009 felt more like a boxing match,” MacMillan said in a letter to shareholders in the company’s 2009 annual review.“We went toe-to-toe with a volatile global economy, rolled with some marketplace punches, moved quickly and battled back. By the close of the year, we felt encouraged by where we [were] headed.”
That encouragement was inspired by a 4 percent rise in diluted net earnings per share to $2.95 and an increase (albeit a feeble one) in net sales of 0.1 percent to $6.7 billion. Significant gains in working capital and operating cash flow also helped, as did a 4 percent jump in orthopedic implant sales to $4.1 billion. Working capital totaled $4.4 billion in fiscal 2009 (ended Dec. 31), a 25.3 percent increase compared with the $3.5 billion in working capital the company reported in 2008. Operating cash flow totaled more than $1 billion for the third consecutive year, up 24 percent compared with 2008.
Though MacMillan admitted that Stryker’s growth rate last year was not up to the company’s typical high standards—the firm averaged an annual 24.4 percent growth rate between 2000 and 2008—he reminded shareholders of the firm’s proven survival instinct and its ability to emerge from economic tempests a stronger, more capable enterprise.
“While the [0.1 percent] growth rate is anemic by our usual standards, the sheer fact of generating any growth in 2009 was a notable victory. Clearly, this is not the kind of revenue and earnings growth our shareholders have historically expected from us, and we will never be satisfied with delivering results like these,” MacMillan’s letter noted. “But we are proud of how agile and resilient our company proved to be in 2009.”
Agility and resiliency, of course, are relative terms. Perhaps the best example of Stryker’s resiliency last year was, as MacMillan noted, the 0.1 percent increase in net sales in the midst of the worst economic downturn since the Great Depression. Or maybe it was the way the firm countered the 1 percent decrease in gross profit (going from $4.58 billion in 2008 to $4.53 billion in 2009) and 3.5 percent drop in net earnings with a 5 percent increase in operating income. The argument for resiliency also can be made by comparing Stryker’s product line sales last year: The 5 percent decline in the MedSurg Equipment segment was offset by robust sales in the Orthopedic Implant segment.
On a constant currency basis, orthopedic implant sales jumped 6 percent due to higher shipments of hips, knees, trauma, craniomaxillofacial (CMF) and spinal implant systems. Hip implant sales climbed 2 percent in 2009, driven mainly by the popularity of the company’s Trident, X3 Polyethylene and Accolade cementless hip product lines and the Restoration Modular Hip System. Sales growth in several hip systems, including the X3 Polyethylene and Accolade products in Europe, Canada, Latin America and the Pacific region, as well as the Trident line in Japan, also contributed to Stryker’s constant currency sales growth last year.
Spinal implant sales recorded the highest growth in 2009, swelling 10 percent on the appeal of thoracolumbar implants, interbody devices and cervical products in the United States, Europe, Latin America and the Pacific region. The various products within this franchise have proven to be reliable growth engines for the company over the last several years.
Almost as alluring as spinal devices were CMF implants, which grew 8 percent due to strong sales of the company’s HydroSet injectable bone substitute in the United States, Europe, Canada and the Pacific region. Neurological devices also contributed to the growth in this franchise.
The company’s bone substitute product also contributed significantly to sales of trauma implants. The material—a self-setting calcium phosphate used to fill gaps in bones—as well as the Gamma 3 Hip Fracture System and the SPS Calcaneal Foot Plating System, helped boost sales in this franchise by 5 percent last year.
Capping a perfect growth record within Stryker’s Orthopedic Implant segment, knee implant sales rose 4 percent (6 percent on a constant currency basis) due to strong demand for the Triathlon system in the United States, Europe, Japan, Canada and the Pacific region. Solid sales of the Scorpio system in Latin America also added to the growth.
On the surface, it seems that orthopedic implant sales were not impacted much by the economic slump that forced many patients to postpone their hip and knee implant procedures. But a closer look at the data Stryker provided in its 2009 annual review reveals that growth shrank considerably in most of the franchises. Trauma implant sales growth, for example, plummeted 13 percent last year (compared with 2008), while increases in knee implants fell 10 percent; spinal implant growth slipped 9 percent; and CMF growth was cut in half (8 percent).
The global recession had a more harsh (and noticeable) impact on Stryker’s MedSurg Equipment segment. Sales in this segment last year totaled $2.6 billion, a 5 percent decrease compared with the $2.75 billion the company reported in 2008. Executives attributed the decline to a sharp drop in demand from hospitals for medical equipment. “The severe weakening of the economy caused the company’s hospital customers to reduce capital purchases, which generate about 60 percent of sales within the MedSurg Equipment segment, to a degree not previously experienced in prior recessionary periods,” the company’s 2009 annual review stated.
Patient handling and emergency medical equipment was the most critically wounded MedSurg victim, posting a 22 percent drop in sales (compared with an 18 percent increase in 2008). Executives blamed the decrease on lower sales of hospital beds and stretchers in the United States, Europe, Canada, Latin America and the Pacific region, though the decline was partially offset by higher sales of stretchers in Japan and emergency medical equipment in the United States.
Sales of endoscopic and communications systems also took a hit, falling 9 percent last year. This franchise was affected by lower demand for medical video imaging equipment and image portal products in the United States, though the weak demand was offset somewhat by higher sales in Latin America, Japan and the Pacific region for communications devices and arthroscopy and general surgery products. Growth in medical video imaging equipment sales in Europe, Japan, Latin America and the Pacific region also kept the losses to a virtual minimum.
Surgical equipment and surgical navigation systems sales actually posted an increase, though it was only 1 percent (2 percent on a constant currency basis). The sales growth in this franchise was attributed to higher sales of operating room equipment, powered surgical devices, and interventional pain products.
Despite the considerable declines in sales revenue (or perhaps because of those decreases), Stryker made two noteworthy investments in its future last year. In a span of just three weeks, the firm spent nearly $600 million to purchase Ascent Healthcare Solutions, a Phoenix, Ariz.-based company that reprocesses and remanufactures medical devices, and OtisMed Corp., a privately held software technology firm in Alameda, Calif. Executives said the Ascent acquisition will enable Stryker to take advantage of two emerging market trends: cost containment and environmental responsibility. The OtisMed deal, on the other hand, will enable the firm to customize instruments that complement its Triathlon Knee System.
In addition to the Ascent and OtisMed acquisitions, Stryker also signed deals with Japan's Mutoh Co. Ltd. and Synergetics USA Inc. to acquire the assets used to produce the Sonopet Ultrasonic Aspirator control consoles, hand pieces and accessories.
Stryker’s ongoing effort to transform its quality systems took a major step forward last fall with the creation of a new position—group president, global quality and operations. Managers named 20-year Stryker veteran Lonny Carpenter to the position and charged him with making the company’s quality systems the best in the industry, and reducing overall operating costs and inventory levels. Carpenter reports directly to MacMillan.
Executives’ focus on improving the company’s quality systems also helped to settle several outstanding warning letters it received from the U.S. Food and Drug Administration (FDA), and led the company to team with federal law enforcement officials to resolve an investigation into its Biotech division. In October, a federal grand jury in Massachusetts indicted the company’s Biotech arm, its former president and three sales managers on charges of wire fraud, conspiracy to defraud the FDA, distribution of a misbranded device and false statements to the FDA. The indictment stems from an investigation of alleged improper promotion of bone growth products.
KEY EXECUTIVES:
Stephen P. MacMillan, Chairman, President and CEO
Jeanne M. Blondia, VP and Treasurer
Lonny J. Carpenter, Group President, Global Quality and Operations
Andrew G. Fox-Smith, Group President, International
Curtis E. Hall, VP and General Counsel
Curt R. Hartman, VP and Chief Financial Officer
James E. Kemler, Group President, Biotech and Development
Michael P. Mogul, Group President, Orthopaedics
Timothy J. Scannell, Group President, MedSurg and Spine
Elizabeth A. Staub, VP, Regulatory Affairs and Quality Assurance
Bronwen R. Taylor, VP, Internal Audit and Compliance
NO. OF EMPLOYEES: 18,582
GLOBAL HEADQUARTERS: Kalamazoo, Mich.
There’s a reason marathon running is so appealing to corporate CEOs—the sport has a lot in common with business management. Corporate executives who regularly compete in marathons claim their top two passions share the same ingredients for success: stamina, discipline and a steady, unrelenting pace.
The runners’ approach to business management certainly has become part of the corporate culture at many large companies, but it is not the only way to grow profits and maximize operational efficiencies. Stephen P. MacMillan, chairman, president and CEO of orthopedic manufacturing behemoth Stryker, turned to the boxing world last year for lessons on successfully leading a company through severe economic doldrums.
“…2009 felt more like a boxing match,” MacMillan said in a letter to shareholders in the company’s 2009 annual review.“We went toe-to-toe with a volatile global economy, rolled with some marketplace punches, moved quickly and battled back. By the close of the year, we felt encouraged by where we [were] headed.”
That encouragement was inspired by a 4 percent rise in diluted net earnings per share to $2.95 and an increase (albeit a feeble one) in net sales of 0.1 percent to $6.7 billion. Significant gains in working capital and operating cash flow also helped, as did a 4 percent jump in orthopedic implant sales to $4.1 billion. Working capital totaled $4.4 billion in fiscal 2009 (ended Dec. 31), a 25.3 percent increase compared with the $3.5 billion in working capital the company reported in 2008. Operating cash flow totaled more than $1 billion for the third consecutive year, up 24 percent compared with 2008.
Though MacMillan admitted that Stryker’s growth rate last year was not up to the company’s typical high standards—the firm averaged an annual 24.4 percent growth rate between 2000 and 2008—he reminded shareholders of the firm’s proven survival instinct and its ability to emerge from economic tempests a stronger, more capable enterprise.
“While the [0.1 percent] growth rate is anemic by our usual standards, the sheer fact of generating any growth in 2009 was a notable victory. Clearly, this is not the kind of revenue and earnings growth our shareholders have historically expected from us, and we will never be satisfied with delivering results like these,” MacMillan’s letter noted. “But we are proud of how agile and resilient our company proved to be in 2009.”
Agility and resiliency, of course, are relative terms. Perhaps the best example of Stryker’s resiliency last year was, as MacMillan noted, the 0.1 percent increase in net sales in the midst of the worst economic downturn since the Great Depression. Or maybe it was the way the firm countered the 1 percent decrease in gross profit (going from $4.58 billion in 2008 to $4.53 billion in 2009) and 3.5 percent drop in net earnings with a 5 percent increase in operating income. The argument for resiliency also can be made by comparing Stryker’s product line sales last year: The 5 percent decline in the MedSurg Equipment segment was offset by robust sales in the Orthopedic Implant segment.
On a constant currency basis, orthopedic implant sales jumped 6 percent due to higher shipments of hips, knees, trauma, craniomaxillofacial (CMF) and spinal implant systems. Hip implant sales climbed 2 percent in 2009, driven mainly by the popularity of the company’s Trident, X3 Polyethylene and Accolade cementless hip product lines and the Restoration Modular Hip System. Sales growth in several hip systems, including the X3 Polyethylene and Accolade products in Europe, Canada, Latin America and the Pacific region, as well as the Trident line in Japan, also contributed to Stryker’s constant currency sales growth last year.
Spinal implant sales recorded the highest growth in 2009, swelling 10 percent on the appeal of thoracolumbar implants, interbody devices and cervical products in the United States, Europe, Latin America and the Pacific region. The various products within this franchise have proven to be reliable growth engines for the company over the last several years.
Almost as alluring as spinal devices were CMF implants, which grew 8 percent due to strong sales of the company’s HydroSet injectable bone substitute in the United States, Europe, Canada and the Pacific region. Neurological devices also contributed to the growth in this franchise.
The company’s bone substitute product also contributed significantly to sales of trauma implants. The material—a self-setting calcium phosphate used to fill gaps in bones—as well as the Gamma 3 Hip Fracture System and the SPS Calcaneal Foot Plating System, helped boost sales in this franchise by 5 percent last year.
Capping a perfect growth record within Stryker’s Orthopedic Implant segment, knee implant sales rose 4 percent (6 percent on a constant currency basis) due to strong demand for the Triathlon system in the United States, Europe, Japan, Canada and the Pacific region. Solid sales of the Scorpio system in Latin America also added to the growth.
On the surface, it seems that orthopedic implant sales were not impacted much by the economic slump that forced many patients to postpone their hip and knee implant procedures. But a closer look at the data Stryker provided in its 2009 annual review reveals that growth shrank considerably in most of the franchises. Trauma implant sales growth, for example, plummeted 13 percent last year (compared with 2008), while increases in knee implants fell 10 percent; spinal implant growth slipped 9 percent; and CMF growth was cut in half (8 percent).
The global recession had a more harsh (and noticeable) impact on Stryker’s MedSurg Equipment segment. Sales in this segment last year totaled $2.6 billion, a 5 percent decrease compared with the $2.75 billion the company reported in 2008. Executives attributed the decline to a sharp drop in demand from hospitals for medical equipment. “The severe weakening of the economy caused the company’s hospital customers to reduce capital purchases, which generate about 60 percent of sales within the MedSurg Equipment segment, to a degree not previously experienced in prior recessionary periods,” the company’s 2009 annual review stated.
Patient handling and emergency medical equipment was the most critically wounded MedSurg victim, posting a 22 percent drop in sales (compared with an 18 percent increase in 2008). Executives blamed the decrease on lower sales of hospital beds and stretchers in the United States, Europe, Canada, Latin America and the Pacific region, though the decline was partially offset by higher sales of stretchers in Japan and emergency medical equipment in the United States.
Sales of endoscopic and communications systems also took a hit, falling 9 percent last year. This franchise was affected by lower demand for medical video imaging equipment and image portal products in the United States, though the weak demand was offset somewhat by higher sales in Latin America, Japan and the Pacific region for communications devices and arthroscopy and general surgery products. Growth in medical video imaging equipment sales in Europe, Japan, Latin America and the Pacific region also kept the losses to a virtual minimum.
Surgical equipment and surgical navigation systems sales actually posted an increase, though it was only 1 percent (2 percent on a constant currency basis). The sales growth in this franchise was attributed to higher sales of operating room equipment, powered surgical devices, and interventional pain products.
Despite the considerable declines in sales revenue (or perhaps because of those decreases), Stryker made two noteworthy investments in its future last year. In a span of just three weeks, the firm spent nearly $600 million to purchase Ascent Healthcare Solutions, a Phoenix, Ariz.-based company that reprocesses and remanufactures medical devices, and OtisMed Corp., a privately held software technology firm in Alameda, Calif. Executives said the Ascent acquisition will enable Stryker to take advantage of two emerging market trends: cost containment and environmental responsibility. The OtisMed deal, on the other hand, will enable the firm to customize instruments that complement its Triathlon Knee System.
In addition to the Ascent and OtisMed acquisitions, Stryker also signed deals with Japan's Mutoh Co. Ltd. and Synergetics USA Inc. to acquire the assets used to produce the Sonopet Ultrasonic Aspirator control consoles, hand pieces and accessories.
Stryker’s ongoing effort to transform its quality systems took a major step forward last fall with the creation of a new position—group president, global quality and operations. Managers named 20-year Stryker veteran Lonny Carpenter to the position and charged him with making the company’s quality systems the best in the industry, and reducing overall operating costs and inventory levels. Carpenter reports directly to MacMillan.
Executives’ focus on improving the company’s quality systems also helped to settle several outstanding warning letters it received from the U.S. Food and Drug Administration (FDA), and led the company to team with federal law enforcement officials to resolve an investigation into its Biotech division. In October, a federal grand jury in Massachusetts indicted the company’s Biotech arm, its former president and three sales managers on charges of wire fraud, conspiracy to defraud the FDA, distribution of a misbranded device and false statements to the FDA. The indictment stems from an investigation of alleged improper promotion of bone growth products.