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CEO Says it's a Good Time to be at Stryker in Kalamazoo

Thursday, May 4, 2017   (0 Comments)
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KALAMAZOO, MI -- Stryker Corp. is strong financially and is growing, its chairman and chief executive officer says.

"It is a good time to be at Stryker and a good time to be at Stryker in Kalamazoo," Kevin A. Lobo said, following the medical technologies company's 38th annual shareholders meeting Wednesday afternoon in Kalamazoo.

He told the stockholders that the Kalamazoo-based company is proud to have surpassed the $11 billion mark for sales last year. It reported $11.3 billion in net sales during 2016. And he said the company's stock price grew by 28.9 percent during 2016 versus the 9.5 percent performance of others tracked by Standard and Poor's.

"Stryker is a growing company," he said. "We've continue to outpace the med-tech (medical technologies) market, growing at the high end of med-tech."

Lobo's comments to more than 250 company shareholders, executives and others Wednesday came eight days after its first-quarter release of sales and earnings The company's numbers surpassed Wall Street expectations.

On April 25, the maker of powered surgical implements, hospital beds and replacement joints reported net earnings of $444 million for the period ended March 31. That was up 10.4 percent from $401 million during the same period a year ago. Net sales for the period were $2.96 billion, up 18.4 percent over first-quarter 2016.

Stryker reported net earnings of $1.19 per fully diluted share, up 9.3 percent from $1.07 a year ago. On an adjusted basis, that was per share earnings of $1.48, which exceeded a $1.43 consensus estimate by analysts.

Sales for its three business segments grew at rates of: 36.2 percent for Medical-Surgical; 7.4 percent for Orthopaedics; and 7.3 percent for Neurotechnology and Spine.

Asked what people here should know about the company going forward, Lobo said, "Within Kalamazoo we have our corporate offices. We also have Instruments and Medical, two of the big divisions within our MedSurg segment. They are both growing extremely well, both divisions."

He said the Medical Division made two big acquisitions last year, referring to the mid-2016 acquisitions of Sage Products LLC and Physio-Control International Inc., "and have integrated those very successfully."  The two acquisitions are credited with adding $245 million to net sales in the quarter.

He also said the Instruments Division recently launched its latest generation of powered tools and will be opening a new facility. That is the $154-million corporate campus Stryker is building on about 288 acres in Portage. It is expected to add 105 new jobs over three years.

The campus will include a customer experience center, a product showroom, a state-of-the-art research and development lab, and a bio-skills lab for research and new product development.

Asked by a shareholder about international sales, which account for about 27 percent of Stryker's sales, and how much of the company's assets are held overseas, Lobo said that about 80 percent of Stryker's cash is "trapped" overseas.

"Trapped" cash refers to overseas earnings that, for any number of reasons, including foreign regulations, cannot be brought back to the U.S. or that won't be brought back as U.S. corporations avoid taxes here.

Lobo said that having cash trapped abroad has caused Stryker to borrow when it has major needs in the United States. He said he hopes the Trump administration makes favorable business tax reforms as were promised when the president was campaigning.

"We certainly are looking forward to tax reform," Lobo said. "... My greatest hope is that they deal with this issue of trapped cash and we're able to access our cash and not have double-taxation, which is one of the big challenges. We do not have a territorial tax system in the United States, which all over major companies do."

The top executive did not mention a reorganization that is taking place in its Instruments Division. That unit has been undergoing an organizational restructuring that will mean a loss of jobs. It has not said how many.

Asked about Stryker's biggest challenge overall this year, he said, "Our biggest challenge for the company is really growing in emerging markets."

"We've done a spectacular job in the United States," he said. "We've now gotten Europe to be a high-growth country (market). Canada's doing well. Australia's doing well. But we have work to do in China, Brazil, Russia, Turkey. India is doing very well but it's quite small."

What's the most favorable development for the company?

"The best thing happening for the company is growth and innovation," Lobo said. "We have so many new products that we're launching. The biggest launch in Stryker's history is the Mako total knee. We've got System 8 Power Tool out of Instruments (Division) here in Kalamazoo launching. So we have a steady flow of new products and that's fueling our growth."

Styker completed a $1.65 billion buyout of Florida-based Mako Surgical Corp. in late 2013. It is considered a pioneer in the advancement of robotic-assisted surgery in orthopedics, and the company has high hopes for the robotic-arm assisted technology that will allow surgeons to more efficiently do total knee implants.

Lobo said the company's core strategies continue to be:

-Business Unit Specialization -Maintaining decentralized business units that have dedicated sales, marketing, research and development, and business development. "That is at the core of this company -- staying very close to your customer, being able to innovate very quickly and launch new products and also to identify new acquisitions," he said.

-Acquisitions - "We are going to continue to be a very active acquirer as we have been over the last five years," he said.

-International Growth - "International growth remains a very significant opportunity," he said, mentioning that the company looks forward to doing better in emerging markets such as China.

-Cost Transformation - Lobo said the company is focused on controlling costs and driving out unnecessary costs.

During Wednesday's gathering, which lasted less than 40 minutes at the Radisson Plaza Hotel & Suites in downtown Kalamazoo, the company re-elected members of its board of directors.

Along with Lobo, the board includes: Allan C. Golston, president of the United States Program for the Bill & Melinda Gates Foundation; Srikant M. Datar, the Arthur Lowes Dickinson Professor at the Graduate School of Business Administration of Harvard University; Ronda E. Stryker, granddaughter of company founder Homer Stryker and a director of Greenleaf Trust bank, Spelman College and Kalamazoo College; Howard E. Cox Jr., a partner with Greylock and its affiliated venture capital partnerships; Andrew K. Silvernail, chairman and CEO of IDEX Corp.; Louise L. Francesconi, former vice president of Raytheon Co. and former president of Raytheon Missile Systems; and Roch Doliveux, CEO of global biopharmaceutical company UCB S.A.


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