FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-9165
STRYKER CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-1239739
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 4085, Kalamazoo, Michigan 49003-4085
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 616/385-2600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes__X__ No_____.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
48,342,551 shares of Common Stock, $.10 par value, as of July 29, 1994
<PAGE>
<PAGE> PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
STRYKER CORPORATION AND SUBSIDIARIES
(UNAUDITED)
June 30 December 31
1994 1993
ASSETS (in thousands)
CURRENT ASSETS
Cash and cash equivalents $ 60,942 $ 49,712
Marketable securities 84,239 102,925
Accounts receivable, less allowance of $4,200
(1993 -- $3,800) 99,439 87,896
Inventories 80,260 76,582
Deferred income taxes 16,337 15,829
Other current assets 14,536 10,907
_______ _______
TOTAL CURRENT ASSETS 355,753 343,851
======= =======
PROPERTY, PLANT AND EQUIPMENT, less allowance for
depreciation 75,470 67,707
INVESTMENT IN AFFILIATE 40,978 32,569
OTHER ASSETS 17,360 10,077
_______ _______
$489,561 $454,204
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 668 $ 777
Accounts payable 30,935 43,172
Accrued compensation 28,848 28,270
Income taxes 17,101 21,107
Accrued expenses and other liabilities 44,618 35,678
Current maturities of long-term debt 841 882
_______ _______
TOTAL CURRENT LIABILITIES 123,011 129,886
LONG-TERM DEBT, excluding current maturities 35,382 31,282
OTHER LIABILITIES 8,166 4,602
STOCKHOLDERS' EQUITY
Common stock, $.10 par value:
Authorized--150,000 shares
Outstanding--48,335 shares (1993--48,395) 4,833 4,840
Additional paid-in capital 15,138 17,111
Retained earnings 302,717 268,367
Unrealized losses on securities (724)
Foreign translation adjustments 1,038 (1,884)
_______ _______
TOTAL STOCKHOLDERS' EQUITY 323,002 288,434
_______ _______
$489,561 $454,204
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
STRYKER CORPORATION AND SUBSIDIARIES
(UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
(in thousands, except per share amounts)
Net Sales $154,226 $140,012 $302,985 $275,214
Costs and expenses:
Cost of sales 70,521 64,840 138,065 126,326
Research, development and engineering 9,812 9,682 19,030 18,303
Selling, general and administrative 48,645 43,748 95,222 86,490
_______ _______ _______ _______
128,978 118,270 252,317 231,119
_______ _______ _______ _______
OPERATING INCOME 25,248 21,742 50,668 44,095
Other income 2,187 808 4,737 1,755
_______ _______ _______ _______
EARNINGS BEFORE INCOME TAXES 27,435 22,550 55,405 45,850
Income taxes 10,425 8,550 21,055 17,400
_______ _______ _______ _______
NET EARNINGS $17,010 $14,000 $34,350 $28,450
Net earnings per share of common stock $.35 $.29 $.71 $.59
Average outstanding shares for the
period 48,358 48,356 48,386 48,337
See accompanying notes to consolidated financial statements.
___________________________________
In 1993 the Company declared a cash dividend of seven cents per share to
shareholders of record on December 31, 1993, payable on January 31, 1994. No
cash dividends have been declared during 1994.
<PAGE>
<PAGE> CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
STRYKER CORPORATION AND SUBSIDIARIES
(UNAUDITED)
Six Months Ended
June 30
1994 1993
(in thousands)
OPERATING ACTIVITIES
Net earnings $34,350 $28,450
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 7,514 6,791
Amortization 1,049 901
Changes in operating assets and liabilities:
Accounts receivable (9,594) (14,698)
Inventories (2,283) (8,980)
Accounts payable (12,484) (7,883)
Accrued expenses 9,874 (264)
Income taxes (4,582) 7,474
Other (5,880) (1,400)
______ ______
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,964 10,391
INVESTING AND FINANCING ACTIVITIES
Purchases of property, plant and equipment (12,300) (11,324)
Sales and maturities (purchases) of marketable 18,686 (2,986)
securities
Business acquisitions (6,112)
Proceeds from (payments on) borrowings (109) 891
Proceeds from exercise of stock options 1,129 1,063
Repurchase of common stock (3,109)
Dividends paid (3,388) (2,898)
Other (1,942) (1,339)
______ ______
NET CASH USED IN INVESTING AND FINANCING ACTIVITIES (7,145) (16,593)
Effect of exchange rate changes on cash and
cash equivalents 411 (325)
______ ______
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $11,230 ($6,527)
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE> NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
STRYKER CORPORATION AND SUBSIDIARIES
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
all adjustments, consisting of normal recurring accruals, which the Company
considers necessary for a fair presentation of the results of operations for the
periods shown. The financial statements have been prepared in accordance with
the instructions to Form 10-Q and, therefore, do not include all information
and footnotes necessary for a fair presentation of consolidated financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
The results of operations for any interim period are not necessarily indicative
of the results to be expected for the full year.
2. INVENTORIES
Inventories are as follows:
June 30 December 31
1994 1993
(in thousands)
Finished goods $ 47,439 $ 45,338
Work-in-process 8,670 10,586
Raw material 31,948 28,455
______ ______
FIFO Cost 88,057 84,379
Less LIFO reserve 7,797 7,797
______ ______
$ 80,260 $ 76,582
FIFO cost approximates replacement cost.
3. BUSINESS ACQUISITION
In June 1994, the Company purchased the Steri-Shield product line from
Bio-Medical Devices, Inc. The Steri-Shield product line is a personal
protection system for operating room personnel. The cost of the purchase was
approximately $1.0 million of cash and $5.5 million of royalties to be paid over
the next seven years. Intangible assets acquired, principally patents, are
being amortized over seven to ten years. Pro forma consolidated results
including the purchased business would not differ significantly from reported
results.
4. SUBSEQUENT EVENT
On August 2, 1994, the Company completed the purchase of 528,860 shares (31%) of
the outstanding common stock of Matsumoto Medical Instruments, Inc.
("Matsumoto"), Osaka, Japan, thereby increasing its direct ownership interest in
Matsumoto to 51%. Matsumoto is one of the largest distributors of medical
devices in Japan and is the exclusive distributor of most of the Company's
products in that country. Results of operations for Matsumoto will be
consolidated with Stryker beginning in August 1994. (See Pro Forma Financial
Information in Part II of this Form 10-Q.)
The shares were acquired pursuant to a pro rata offer to purchase made on
June 6, 1994 to all other existing shareholders of Matsumoto. The aggregate
purchase price of approximately 6 billion yen, or approximately $61 million,
was based on book value at December 31, 1993. Payment of approximately
847 million yen, or approximately $8 million, of the purchase price has been
deferred to April 3, 1995. The acquisition of the shares has been funded with
an unsecured yen denominated four-year floating rate loan from the Chicago
branches of The Bank of Tokyo, Ltd., The Mitsubishi Bank, Limited and The Sanwa
Bank, Limited. The effective annual interest rate has been fixed at 4.17%.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
For the six months ended June 30, 1994, net sales increased 10% compared to the
same period of 1993, generally as a result of increased unit volume. Surgical
product sales (principally orthopaedic products) increased 7%, led by gains in
orthopaedic implants and powered surgical instruments. Medical product sales
(principally stretchers/beds and physical therapy services) increased 25%. The
Medical sales gain resulted from increased shipments of patient care and patient
handling equipment and increased revenues from physical therapy services. For
the second quarter, net sales increased 10% compared to the second quarter of
1993. Surgical product sales increased 9% and medical product sales increased
15%.
Uncertainty over the impact of U.S. health care reform programs has generally
slowed domestic sales of medical devices. The Company's domestic sales
increased 7% in the second quarter and first half of 1994 compared to 1993.
International sales increased 17% in the second quarter and 16% in the first
half of 1994 compared to 1993, led by Osteonics orthopaedic implant and Dimso
spinal implant sales by the Company's Pacific and Europe Divisions and powered
surgical instrument sales by the Pacific Division. International sales
represented 36% of total sales in the first half of 1994 compared to 34% in the
same period of 1993.
Cost of sales for the first six months of 1994 represented 45.6% of sales
compared to 45.9% in the same period of 1993. In the second quarter, the cost
of sales percentage decreased to 45.7% from 46.3% in the second quarter of 1993.
The lower cost of sales percentage in 1994 resulted from ongoing cost reduction
programs and an increased mix of international sales.
Research, development and engineering (R,D&E) expense increased 4% for the first
six months of 1994 and represented 6.3% of sales in 1994 compared to 6.7% in the
same period last year. In the second quarter, these expenses increased 1% and
were 6.4% of sales in 1994 compared to 6.9% in the second quarter of 1993. The
Company's continued commitment to product development resulted in several new
product introductions in 1994, including the Omnifit-Plus forged cobalt chrome
hip stem, the new Sapphire ViewTM arthroscope system, a new low cost,
high-resolution 1-Chip Camera, a second generation ConstaVacTM CBCII Blood
Conservation System, and a new line of powered micro instruments for
oral/maxillofacial procedures.
Selling, general and administrative (S,G&A) expense increased 10% in the first
six months and 11% in the second quarter of 1994 compared to the same periods of
1993. These costs represented 31.4% of sales in the first six months of 1994
and 1993, and 31.5% in the second quarter of 1994 compared to 31.2% in the same
period of 1993.
The increase in other income in the second quarter and first half of 1994 is due
to the equity in net earnings of an affiliate, resulting from the investment in
Matsumoto Medical Instruments, Inc. in the third quarter of 1993. In addition,
interest income increased due to the higher level of invested cash. The
effective tax rate remained constant at 38%.
For the first six months of 1994, earnings before income taxes and net earnings
increased 21%, while net earnings per share increased 20% compared to the first
six months of 1993. Earnings before income taxes and net earnings in the second
quarter of 1994 increased 22%, while net earnings per share increased 21%
compared to the second quarter of 1993.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--continued
LIQUIDITY AND CAPITAL RESOURCES
Stryker's financial position at June 30, 1994 remained strong with cash and
marketable securities of $145.2 million and working capital of $232.7 million.
Accounts receivable at June 30, 1994 increased 13% from December 31, 1993 and
days sales outstanding increased to 53 days from 47 days at December 31, 1993.
This increase reflects the increased level of international sales, which
generally have longer collection terms. Inventories at June 30, 1994 increased
only 5% from December 31, 1993 and days in inventory decreased to 113 days from
114 days at December 31, 1993.
On August 2, 1994, the Company completed the purchase of 31% of the outstanding
common stock of Matsumoto Medical Instruments, Inc. ("Matsumoto"), Osaka, Japan,
thereby increasing its direct ownership interest in Matsumoto to 51%. The
aggregate purchase price of approximately 6 billion yen, or approximately
$61 million, was based on book value at December 31, 1993. Payment of
approximately 847 million yen, or approximately $8 million, of the purchase
price has been deferred to April 3, 1995. The acquisition of the shares has
been funded with an unsecured yen denominated four-year floating rate loan.
The effective annual interest rate has been fixed at 4.17%.
The Company generated $18.0 million of cash from operations in the first half of
1994 compared to $10.4 million in the same period of 1993. Furthermore, early
in the second quarter of 1994, the Company acquired 122,500 shares of its common
stock as part of a 600,000 share Stock Repurchase Plan announced in December
1993. Cash and marketable securities on hand of $145.2 million and anticipated
future cash flows from operations are expected to be sufficient to fund future
operating and capital requirements. Should additional funds be required, the
Company has unsecured lines of credit with banks totaling $39.0 million, of
which only $.7 million was utilized at June 30, 1994.
<PAGE>
<PAGE> PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(c) At the Annual Meeting of Stockholders held on April 29, 1994, the
stockholders elected seven directors to serve until the next Annual
Meeting of Stockholders. The voting results for each nominee are as
follows:
Shares
_____________________
Name For Withheld
John W. Brown 44,118,654 99,508
Howard E. Cox, Jr. 44,119,732 98,430
Donald M. Engelman, Ph.D. 44,119,157 99,005
Jerome H. Grossman, M.D. 44,119,916 98,246
John S. Lillard 44,128,283 89,879
William U. Parfet 44,082,474 135,688
Ronda E. Stryker 44,125,132 93,030
ITEM 5. OTHER INFORMATION
ACQUISITION OR DISPOSITION OF ASSETS
On August 2, 1994, the Company completed the purchase of 528,860 shares (31%) of
the outstanding common stock of Matsumoto Medical Instruments, Inc.
("Matsumoto"), Osaka, Japan, thereby increasing its direct ownership interest in
Matsumoto to 51%. Matsumoto is one of the largest distributors of medical
devices in Japan and is the exclusive distributor of most of the Company's
products in that country. Matsumoto sells products primarily to dealers of
medical instruments which distribute them to Japanese national hospitals,
hospitals affiliated with national or private universities and other hospitals.
The shares were acquired pursuant to a pro rata offer to purchase made on
June 6, 1994 to all other existing shareholders of Matsumoto. The aggregate
purchase price of approximately 6 billion yen, or approximately $61 million,
was based on book value at December 31, 1993. Payment of approximately
847 million yen, or approximately $8 million of the purchase price has been
deferred to April 3, 1995. The acquisition of the shares has been funded with
an unsecured yen denominated four-year floating rate loan from the Chicago
branches of The Bank of Tokyo, Ltd., The Mitsubishi Bank, Limited and The Sanwa
Bank, Limited. The effective annual interest rate has been fixed at 4.17%.
The 1993 audited financial statements and the first half of 1994 interim
financial statements of Matsumoto and pro forma financial information reflecting
the acquisition of the Matsumoto shares are presented below. The effective
rates of exchange for the U.S. dollar against the Japanese yen were
approximately 112 yen/$1 at December 31, 1993 and approximately 99 yen/$1 at
June 30, 1994.
<PAGE>
<PAGE>
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
BALANCE SHEET
MATSUMOTO MEDICAL INSTRUMENTS, INC.
December 31
1993
(in thousands of yen,
except per share amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents 3,341,072
Marketable securities 469,048
Trade receivables, less allowance of 79,885 6,442,543
Inventories 7,587,411
Deferred income taxes 1,024,394
Prepaid expenses and other current assets 96,648
__________
TOTAL CURRENT ASSETS 18,961,116
PROPERTY AND EQUIPMENT:
Land 4,594,961
Buildings and improvements 3,251,066
Machinery and equipment 1,902,409
__________
9,748,436
Less allowance for depreciation (1,965,051)
__________
7,783,385
OTHER ASSETS 2,343,703
__________
29,088,204
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable 190,000
Trade payables and accrued expenses 1,481,324
Income taxes 1,709,067
Other current liabilities 199,877
Current maturities of long-term debt 1,722,951
_________
TOTAL CURRENT LIABILITIES 5,303,219
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES 2,580,563
ACCRUED SEVERANCE AND PENSION BENEFITS 1,462,453
OTHER LIABILITIES 243,670
STOCKHOLDERS' EQUITY:
Common stock, 50 yen par value:
Authorized - 6,000,000 shares
Outstanding - 1,706,000 shares 85,300
Additional paid-in capital 6,823
Legal reserve 21,325
Retained earnings 19,384,851
__________
TOTAL STOCKHOLDERS' EQUITY 19,498,299
__________
29,088,204
==========
See accompanying notes to financial statements.
<PAGE>
<PAGE> STATEMENT OF EARNINGS AND RETAINED EARNINGS
MATSUMOTO MEDICAL INSTRUMENTS, INC.
Year Ended
December 31, 1993
(in thousands of yen,
except per share amounts)
Net Sales 22,382,927
Costs and expenses:
Cost of sales 10,968,318
Selling, general and administrative 6,385,106
__________
17,353,424
__________
OPERATING INCOME 5,029,503
Other income - net 32,711
__________
EARNINGS BEFORE INCOME TAXES 5,062,214
Income taxes 2,672,995
__________
NET EARNINGS 2,389,219
Retained earnings at beginning of year 17,038,282
Cash dividends of 25 yen per share (42,650)
__________
RETAINED EARNINGS AT END OF YEAR 19,384,851
==========
Net Earnings Per Share of Common Stock 1,400.48
Average Number of Shares Outstanding 1,706,000
See accompanying notes to financial statements.
<PAGE>
<PAGE> STATEMENT OF CASH FLOWS
MATSUMOTO MEDICAL INSTRUMENTS, INC.
Year Ended
December 31, 1993
(in thousands of yen)
OPERATING ACTIVITIES:
Net Earnings 2,389,219
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 512,765
Allowance for doubtful accounts (37,407)
Deferred income taxes (credit) (257,376)
Provision for retirement and severance benefits 123,330
Other 7,708
Changes in operating assets and liabilities:
Trade receivables (721,073)
Inventories (832,433)
Prepaid expenses and other current assets 73,239
Trade payables and accrued expenses 127,837
Income taxes 261,224
Other current liabilities 50,083
_________
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,697,116
INVESTING ACTIVITIES:
Purchases of property and equipment (1,058,786)
Other 84,239
_________
NET CASH USED IN INVESTING ACTIVITIES (974,547)
FINANCING ACTIVITIES:
Proceeds from borrowings 2,500,000
Payments on borrowings (2,046,000)
Dividends paid (42,650)
_________
NET CASH PROVIDED BY FINANCING ACTIVITIES 411,350
_________
INCREASE IN CASH AND CASH EQUIVALENTS 1,133,919
Cash and cash equivalents at beginning of year 2,207,153
_________
CASH AND CASH EQUIVALENTS AT END OF YEAR 3,341,072
=========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expenses 205,568
Income taxes 2,659,115
See accompanying notes to financial statements.
<PAGE>
<PAGE> NOTES TO FINANCIAL STATEMENTS
MATSUMOTO MEDICAL INSTRUMENTS, INC.
December 31, 1993
1. BASIS OF PRESENTATION
Matsumoto Medical Instruments, Inc. (the "Company") maintains its accounting
records and prepares its financial statements in accordance with accounting
principles and practices generally accepted in Japan.
The financial statements presented herein reflect certain adjustments, which are
not recorded on the books of the Company, to present the financial position,
results of operations and cash flows of the Company in conformity with
accounting principles generally accepted in the United States. A reconciliation
of amounts adjusted is as follows:
Retained Retained
Earnings at Earnings at
Dec. 31, Net Earnings Appropri- Dec. 31,
1992 for 1993 ation 1993
_________________________________________________
(in thousands of yen)
Per the official accounting
records of the Company 18,008,220 2,257,459 (123,550) 20,142,129
Total adjustments reflected (969,938) 131,760 80,900 (757,278)
_________________________________________________
As reported in the accompanying
financial statements 17,038,282 2,389,219 (42,650) 19,384,851
=================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company distributes various medical instruments and products acquired mainly
from foreign manufacturers and sells them primarily to dealers of medical
instruments which distribute them to Japanese national hospitals, hospitals
attached to national or private universities and other hospitals.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
MARKETABLE SECURITIES
Marketable securities are stated at the lower of aggregate cost or market. The
cost of individual securities is determined on a moving average basis.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost being
determined on a basis which approximates cost determined by the first-in,
first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed by the
declining-balance method over the estimated useful lives of the respective
assets.
<PAGE>
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
Deferred income taxes are provided for temporary differences between the
carrying amounts of the assets and liabilities for financial reporting purposes
and the corresponding amounts used for income tax purposes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
EARNINGS PER SHARE
Net earnings per share is based on the average number of shares of common stock
outstanding during the year.
3. MARKETABLE SECURITIES
The cost and market value of marketable equity securities included in marketable
securities at December 31, 1993 were as follows (in thousands of yen):
Cost (carrying value) 416,273
=======
Market value 697,466
=======
At December 31, 1993, gross unrealized gains and losses pertaining to marketable
equity securities in the current portfolio were 313,463 thousand yen and
32,270 thousand yen, respectively.
4. INVENTORIES
Inventories consisted of the following at December 31, 1993 (in thousands of
yen):
Merchandise 7,565,307
Supplies 22,104
---------
7,587,411
=========
5. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable at December 31, 1993 consisted mainly of unsecured loans from
banks at an interest rate of 3.0%.
Long-term debt consisted of the following at December 31, 1993 (in thousands of
yen):
5.5% secured bonds, payable in yen, due 1994 200,000
6.1% secured bonds, payable in yen, due 1999 500,000
Secured bank loans, payable in yen, due through 1996 2,323,640
Secured bank loans, payable in Swiss francs, due
through 2001 287,874
Unsecured bank loans, payable in yen, due through
1996 992,000
---------
4,303,514
Less current maturities (1,722,951)
---------
2,580,563
=========
The interest rates applicable to the secured and unsecured bank loans, payable
in yen, vary with the changes in the prime rates, and the weighted average
interest rates applicable to such loans were approximately 3.3% and 3.5%,
respectively, at December 31, 1993.
<PAGE>
<PAGE>
5. NOTES PAYABLE AND LONG-TERM DEBT (continued)
Land and buildings totaling 1,301,095 thousand yen at net book value were
pledged as collateral for the secured bonds and loans at December 31, 1993.
Maturities of long-term debt for the four years subsequent to December 31, 1994
are (in thousands of yen): 1995 - 829,118 thousand yen; 1996 - 1,100,519
thousand yen; 1997 - 47,518 thousand yen and 1998 - 41,167 thousand yen.
6. INCOME TAXES
Income taxes applicable to the Company comprise corporation, inhabitants' and
enterprise taxes, which, in the aggregate, resulted in a statutory tax rate of
approximately 52.2% for the year ended December 31, 1993.
A reconciliation of the statutory tax rate to the Company's effective rate for
the year ended December 31, 1993 follows:
Statutory tax rate 52.2%
Permanently non-deductible expenses .6
----
Effective tax rate 52.8%
====
Deferred income taxes reflect the net tax effects of the temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and the corresponding amounts used for income tax purposes.
The significant components of the Company's deferred tax assets and liabilities
at December 31, 1993 are summarized as follows (in thousands of yen):
Deferred tax assets:
Inventories 701,709
Accrued pension costs 639,336
Other accrued expenses 138,758
Enterprise tax payable and other 287,615
---------
Total deferred tax assets 1,767,418
Deferred tax liabilities:
Marketable equity securities 31,397
---------
TOTAL NET DEFERRED TAX ASSETS 1,736,021
=========
7. SEVERANCE AND PENSION BENEFITS
The Company has a noncontributory defined benefit plan covering all employees
who are entitled, under most employment termination circumstances, to lump-sum
or annuity payments of amounts which are determined by reference to the current
level of salary, length of service, and the conditions under which the
termination occurs.
The Company's funding policy for the plan is to contribute actuarially
determined amounts on a monthly basis.
In addition, directors and statutory auditors are customarily entitled to
lump-sum payments under an unfunded retirement plan. Allowances have been
provided for these officers of the Company at estimated amounts, although such
payments were subject to the approval of the stockholders.
<PAGE>
<PAGE>
7. SEVERANCE AND PENSION BENEFITS (continued)
The following table sets forth the funded and accrued status of the plans and
amounts recognized in the balance sheet at December 31, 1993 for the Company's
defined benefit plan for employees and the retirement plan for directors and
statutory auditors (in thousands of yen).
Actuarial present value of accumulated benefit
obligation, including vested benefits of
255,354 (498,549)
========
Actuarial present value of projected benefit
obligation for services rendered to date (1,012,531)
Plan assets at fair value, primarily stocks and bonds 470,084
------------
Projected benefit obligation in excess of plan
assets at fair value (542,447)
Unrecognized net obligation (6,370)
------------
Accrued pension cost for employees (548,817)
Accrued retirement benefits for directors and
statutory auditors (913,636)
------------
Accrued severance and pension benefits (1,462,453)
============
Net periodic severance and pension cost for the year ended December 31, 1993
included the following components (in thousands of yen):
Service cost - benefits earned during the year 92,224
Interest cost on projected benefit obligation 49,331
Actual return on plan assets (18,426)
Net amortization and deferral (3,038)
-------
Net periodic severance and pension cost 120,091
=======
Amounts included in the Company's balance sheet at December 31, 1993 were
determined using a 5.5% discount rate and a 6.0% rate of increase in future
compensation levels. The expected long-term rate of return on assets used to
determine net periodic severance and pension cost for 1993 was 5.0%.
8. LEASES
The Company leases certain computer equipment and vehicles under long-term
non-cancellable lease agreements accounted for as capital leases.
Machinery and equipment at cost and allowance for depreciation at
December 31, 1993 include 518,849 thousand yen and 385,800 thousand yen,
respectively, for assets recorded under capital leases. Depreciation expense
for the year ended December 31, 1993 includes amortization of assets recorded
under capital leases of 138,594 thousand yen.
<PAGE>
<PAGE>
8. LEASES (continued)
Future minimum payments subsequent to December 31, 1993 under capital leases,
which primarily relate to real estate and equipment, are summarized as follows
(in thousands of yen):
1994 156,151
1995 100,825
1996 42,694
1997 4,568
1998 217
-------
Total minimum lease payments 304,455
Amount representing executory costs (41,054)
Amount representing interest (27,392)
Present value of net minimum lease -------
payments, including 121,884
thousand yen classified as current
(included in other current
liabilities and other
liabilities) 236,009
=======
Rent expense totaled 354,794 thousand yen for the year ended December 31, 1993.
9. RELATED PARTY TRANSACTIONS
In the normal course of business, the Company purchases a significant portion of
its distributed products from Stryker Corporation, a 20% shareholder, and its
subsidiaries. The Company purchased inventories in the aggregate amount of
7,605,586 thousand yen during the year ended December 31, 1993 and the related
payables at December 31, 1993 amounted to 83,703 thousand yen.
In addition, the Company conducts sales promotion activities for Stryker
products jointly with Stryker Japan KK, a wholly-owned subsidiary of Stryker
Corporation, in the normal course of business.
10. FINANCIAL INSTRUMENTS
The Company performs periodic evaluations of the creditworthiness of its
customers and generally does not require collateral. Trade accounts receivables
are generally due within 30 days and trade notes receivable are generally due
within 75 days. The concentration of credit risk with respect to trade notes
and accounts receivable is limited due to the large number of entities, which
are primarily dealers of medical instruments and hospitals in Japan, comprising
the Company's customer base. Credit losses relating to these customers have
been consistently within management's expectations.
The carrying amounts of the Company's financial instruments at December 31, 1993
approximate the fair values. The only exception is for marketable equity
securities included in marketable securities (see Note 3).
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Matsumoto Medical Instruments, Inc.
We have audited the accompanying balance sheet of Matsumoto Medical Instruments,
Inc. as of December 31, 1993, and the related statements of earnings and
retained earnings and cash flows for the year ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Matsumoto Medical Instruments,
Inc. at December 31, 1993, and the results of its operations and cash flows for
the year ended December 31, 1993, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG
Tokyo, Japan
January 28, 1994
<PAGE>
<PAGE>
INTERIM FINANCIAL STATEMENTS
CONDENSED BALANCE SHEET
MATSUMOTO MEDICAL INSTRUMENTS, INC.
(UNAUDITED)
June 30 December 31
1994 1993
(in thousands of yen,
except per share amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents 1,873,862 3,341,072
Marketable securities 469,048 469,048
Accounts receivable, less allowance
of 79,885 thousand yen 7,197,051 6,442,543
Inventories 8,704,580 7,587,411
Other current assets 1,429,908 1,121,042
---------- ----------
TOTAL CURRENT ASSETS 19,674,449 18,961,116
PROPERTY AND EQUIPMENT
Land 4,601,461 4,594,961
Buildings and improvements 3,559,755 3,251,066
Machinery and equipment 2,410,711 1,902,409
---------- ----------
10,571,927 9,748,436
Less allowance for depreciation (2,151,051) (1,965,051)
---------- ---------
8,420,876 7,783,385
OTHER ASSETS 2,347,231 2,343,703
---------- ----------
30,442,556 29,088,204
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable 40,000 190,000
Accounts payable and accrued expenses 3,135,476 1,681,201
Income taxes 1,219,743 1,709,067
Current maturities of long-term debt 1,146,187 1,722,951
---------- ----------
TOTAL CURRENT LIABILITIES 5,541,406 5,303,219
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES 2,380,564 2,580,563
OTHER LIABILITIES 1,729,311 1,706,123
STOCKHOLDERS' EQUITY
Common stock, 50 yen par value:
Authorized - 6,000,000 shares
Outstanding - 1,706,000 shares 85,300 85,300
Additional paid-in capital 6,823 6,823
Legal reserve 21,325 21,325
Retained earnings 20,677,827 19,384,851
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 20,791,275 19,498,299
---------- ----------
30,442,556 29,088,204
<PAGE>
<PAGE>
CONDENSED STATEMENT OF EARNINGS
MATSUMOTO MEDICAL INSTRUMENTS, INC.
(UNAUDITED)
Six Months Ended
June 30
1994 1993
(in thousands of yen,
except per share amounts)
Net Sales 12,568,074 11,651,825
Costs and expenses:
Cost of sales 6,332,480 6,720,929
Selling, general and administrative 3,349,683 3,267,200
---------- ----------
OPERATING INCOME 2,885,911 1,663,696
Other income 68,749 86,102
---------- ----------
EARNINGS BEFORE INCOME TAXES 2,954,660 1,749,798
Income taxes 1,554,664 954,748
---------- ----------
NET EARNINGS 1,399,996 795,050
========== ==========
Net earnings per share of common stock 820.63 466.03
Average outstanding shares for the period 1,706,000 1,706,000
<PAGE>
<PAGE>
CONDENSED STATEMENT OF CASH FLOWS
MATSUMOTO MEDICAL INSTRUMENTS, INC.
(UNAUDITED)
Six Months Ended
June 30
1994 1993
(in thousands of yen)
OPERATING ACTIVITIES
Net Earnings 1,399,996 795,050
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 186,000 111,000
Changes in operating assets
and liabilities:
Accounts receivables (754,508) (1,220,012)
Inventories (1,117,169) 320,646
Accounts payable and accrued expenses 1,454,276 1,209,632
Income taxes (489,324) (756,011)
Other (362,107) (397,052)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 317,164 63,253
INVESTING AND FINANCING ACTIVITIES
Purchases of property and equipment (823,491) (351,377)
Payments on borrowings (926,763) (17,580)
Dividends paid (34,120) (42,650)
NET CASH USED IN INVESTING AND --------- ---------
FINANCING ACTIVITIES (1,784,374) (411,607)
DECREASE IN CASH AND CASH EQUIVALENTS (1,467,210) (348,354)
<PAGE>
<PAGE>
NOTES TO INTERIM FINANCIAL STATEMENTS
MATSUMOTO MEDICAL INSTRUMENTS, INC.
UNAUDITED
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements include all adjustments which
the Company considers necessary for a fair presentation of the results of
operations for the periods shown. The financial statements have been prepared
in accordance with the instructions to Form 10-Q and, therefore, do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
The results of operations for any interim period are not necessarily indicative
of the results to be expected for the full year.
2. RELATED PARTY TRANSACTIONS
In the normal course of business the Company purchases a significant portion of
its distributed products from Stryker Corporation, a 20% shareholder, and its
subsidiaries. Purchases from Stryker totaled 5,079,636 thousand yen and
4,175,523 thousand yen in the first six months of 1994 and 1993, respectively.
<PAGE>
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following pro forma balance sheet (unaudited) at June 30, 1994 reflects the
Company's purchase of 31% of the outstanding common shares of Matsumoto Medical
Instruments, Inc. ("Matsumoto"), as if the purchase had occurred on that date.
The pro forma statements of earnings (unaudited) for the year ended December 31,
1993 and the six months ended June 30, 1994 reflect the Company's purchases of
Matsumoto common shares as if they had occurred on January 1, 1993.
The pro forma financial information presented is not necessarily indicative of
the results which would have occurred had the purchase been effective on the
dates indicated nor is it necessarily indicative of the results to be expected
for any subsequent period. The pro forma adjustments are based upon available
information and certain assumptions that the Company believes to be
reasonable. The pro forma financial information should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's 1993 Annual Report on Form 10-K and the interim financial statements
and notes thereto in Part I of this Form 10-Q.
<PAGE>
<PAGE>
<TABLE>
<CAPTION> PRO FORMA CONDENSED BALANCE SHEET - UNAUDITED
STRYKER CORPORATION AND SUBSIDIARIES
JUNE 30, 1994
Pro Forma
Stryker Matsumoto Adjustments Pro Forma
------- --------- ----------- ---------
(in thousands)
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 60,942 $ 19,020 $ 79,962
Marketable securities 84,239 4,761 89,000
Accounts receivable 99,439 73,052 $ (7,620) (1) 164,871
Inventories 80,260 88,353 (25,651) (2) 142,962
Deferred income taxes 16,337 10,398 26,735
Other current assets 14,536 4,116 18,652
------- ------- ------- -------
TOTAL CURRENT ASSETS 355,753 199,700 (33,271) 522,182
PROPERTY, PLANT AND EQUIPMENT, less
allowance for depreciation 75,470 85,474 11,877 (2) 172,821
INVESTMENT IN AFFILIATE 40,978 (40,978) (3)
OTHER ASSETS 17,360 23,825 41,185
------- ------- ------- -------
$489,561 $308,999 $(62,372) $736,188
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 668 $ 406 $ 1,074
Accounts payable 30,935 13,315 $(7,620) (1) 36,630
Accrued compensation 28,848 1,283 30,131
Income taxes 17,101 12,381 29,482
Accrued expenses and other liabilities 44,618 17,228 61,846
Current maturities of long-term debt 841 11,634 12,475
------- ------- ------ -------
TOTAL CURRENT LIABILITIES 123,011 56,247 (7,620) 171,638
LONG-TERM DEBT, excluding current
maturities 35,382 24,163 61,348 (4) 120,893
OTHER LIABILITIES 8,166 17,553 25,719
MINORITY INTEREST 96,657 (3) 96,657
STOCKHOLDERS' EQUITY
Common stock, $.10 par value:
Authorized - 150,000 shares
Outstanding - 48,335 shares 4,833 866 (866) (3) 4,833
Additional paid-in capital 15,138 286 (286) (3) 15,138
Retained earnings 302,717 209,181 (209,181) (3) 302,717
Unrealized losses on securities (724) (724)
Foreign translation adjustments 1,038 703 (2,424) (3) (683)
------- ------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 323,002 211,036 (212,757) 321,281
------- ------- ------- -------
$489,561 $308,999 $(62,372) $736,188
======= ======= ======= =======
See accompanying notes to pro forma condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION> PRO FORMA CONDENSED STATEMENT OF EARNINGS - UNAUDITED
STRYKER CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1993
Pro Forma
Stryker Matsumoto Adjustments Pro Forma
------- --------- ----------- ---------
(in thousands, except per
share amounts)
<S> <C> <C> <C> <C>
Net Sales $557,335 $201,926 $(64,338) (5) $694,923
Costs and expenses:
Cost of sales 256,748 98,403 (58,356) (5) 296,795
Research, development and engineering 36,199 36,199
Selling, general and administrative 172,446 57,562 230,008
------- ------- ------- -------
465,393 155,965 (58,356) 563,002
------- ------- ------- -------
OPERATING INCOME 91,942 45,961 (5,982) 131,921
Other income (expense) 4,123 296 (5,081) (6) (662)
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES 96,065 46,257 (11,063) 131,259
Income taxes 35,860 24,419 (4,204) (7) 56,075
------- ------- ------- -------
NET EARNINGS BEFORE MINORITY INTEREST 60,205 21,838 (6,859) 75,184
Minority interest 10,701 (8) 10,701
------- ------- ------- -------
NET EARNINGS $ 60,205 $ 21,838 $(17,560) $ 64,483
======= ======= ======= =======
Net earnings per share of common stock $1.25 $1.33
Average outstanding shares for the period 48,356 48,356
</TABLE>
See accompanying notes to pro forma condensed financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION> PRO FORMA CONDENSED STATEMENT OF EARNINGS - UNAUDITED
STRYKER CORPORATION AND SUBSIDIARIES
SIX MONTHS ENDED JUNE 30, 1994
Pro Forma
Stryker Matsumoto Adjustments Pro Forma
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net Sales $302,985 $120,722 $(51,567) (5) $372,140
Costs and expenses:
Cost of sales 138,065 60,793 (46,408) (5) 152,450
Research, development and engineering 19,030 19,030
Selling, general and administrative 95,222 32,102 127,324
------- ------- ------- -------
252,317 92,895 (46,408) 298,804
------- ------- ------- -------
OPERATING INCOME 50,668 27,827 (5,159) 73,336
Other income (expense) 4,737 671 (4,381) (6) 1,027
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES 55,405 28,498 (9,540) 74,363
Income taxes 21,055 14,991 (3,625) (7) 32,421
------- ------- ------- -------
NET EARNINGS BEFORE MINORITY INTEREST 34,350 13,507 (5,915) 41,942
Minority interest 6,618 (8) 6,618
------- ------- ------- -------
NET EARNINGS $ 34,350 $ 13,507 $(12,533) $ 35,324
======= ======= ======= =======
Net earnings per share of common stock $.71 $.73
Average outstanding shares for the period 48,386 48,386
</TABLE>
See accompanying notes to pro forma condensed financial statements.
<PAGE>
<PAGE>
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
The pro forma condensed balance sheet (unaudited) assumes that the purchase of
31% of Matsumoto's outstanding common stock occurred on June 30, 1994 and
Matsumoto's assets and liabilities were recorded at estimated fair values in
accordance with generally accepted accounting principles as per Opinion No. 16
of the Accounting Principles Board.
The pro forma condensed financial statements give effect to the following
adjustments:
(1) To eliminate intercompany accounts between Stryker and Matsumoto.
(2) To eliminate Stryker's net profit in Matsumoto's ending inventory and to
reflect the approximate market value of Matsumoto's property, plant and
equipment.
(3) To eliminate Stryker's investment in Matsumoto and Matsumoto's
stockholders' equity and to record the related minority interest.
(4) To record the long-term debt incurred by Stryker to finance the purchase.
(5) To eliminate sales by Stryker to Matsumoto and
Stryker's pre-tax profit in the increase in Matsumoto's inventory for the
periods shown.
(6) To record the interest expense related to the debt in Note (4) above and
to eliminate the 20% equity in Matsumoto's net earnings recorded by
Stryker since its initial investment in August 1993.
(7) To record the income tax expense related to the pro forma adjustments.
(8) To record the 49% minority interest in Matsumoto's net earnings.
<PAGE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -- The exhibit listed below is submitted as a separate
section of this report following the signature page:
Exhibit (2) Offer to Purchase Shares of Matsumoto Medical
Instruments, Inc. by Stryker Corporation dated June 6, 1994
Exhibit (4) Credit Agreement dated August 1, 1994
Exhibit (11) Statement Re: Computation of Earnings per Share of
Common Stock
(b) Reports on Form 8-K -- No reports on Form 8-K were filed during
the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STRYKER CORPORATION
(Registrant)
August 10, 1994 JOHN W. BROWN
Date John W. Brown, Chairman, President
and Chief Executive Officer
(Principal Executive Officer)
August 10, 1994 DAVID J. SIMPSON
Date David J. Simpson, Vice President, Chief
Financial Officer and Secretary
(Principal Financial Officer)
<PAGE>
<PAGE>
EXHIBIT (2)
OFFER TO PURCHASE SHARES
of
Matsumoto Medical Instruments, Inc.
by
Stryker Corporation
dated June 6, 1994
I. Summary of the Terms of the Offer
1. Stryker Corporation (hereinafter referred to as the "Purchaser")
offers to purchase from each other holder of issued and
outstanding shares of common stock, with par value of fifty yen
(50 yen) per share (in non-bearer form) (hereinafter referred to
as "Common Stock"), of Matsumoto Medical Instruments, Inc.
(hereinafter referred to as "Matsumoto") the number of shares
(subject to adjustment to eliminate fractional shares) that equals
thirty-eight and three-quarters percent (38 3/4%) of the shares of
Matsumoto Common Stock owned by him or her (hereinafter referred
to as the "Offer"). Certain holders of Matsumoto Common Stock
have agreed to sell additional shares of Matsumoto Common Stock to
the Purchaser in order to assure that the Purchaser's direct
ownership interest in Matsumoto would equal fifty-one percent
(51%) in the event that the other shareholders do not agree to
sell to the Purchaser the entire number of shares that it is
offering to purchase pursuant to the Offer.
2. Purpose of the Offer
The Purchaser is a corporation organized under the laws of the
State of Michigan in the United States, which engages in the
business of manufacturing and marketing specialty surgical and
medical products. The Purchaser is an important supplier of the
medical and surgical instruments currently distributed by
Matsumoto in Japan and these two corporations have established an
effective and cooperative long-term relationship with each other.
The Purchaser acquired a twenty percent (20%) equity interest in
Matsumoto in August 1993 pursuant to a tender offer made to all
holders of Common Stock and desires at this time to increase its
direct ownership to fifty-one percent (51%) of the outstanding
shares of Matsumoto Common Stock. The Board of Directors of
Matsumoto and the Purchaser have agreed that, after completion of
the Offer, Stryker will sell to Matsumoto all the shares in
Stryker Japan KK, a wholly owned subsidiary of the Purchaser that
is engaged in the marketing in Japan of surgical and medical
products manufactured by Stryker, and Nippon Stryker Service KK,
another wholly owned subsidiary of the Purchaser that is inactive.
It is the current intention to merge Stryker Japan KK and Nippon
Stryker Service KK into Matsumoto at a subsequent date. The
Purchaser and the Board of Directors of Matsumoto believe that the
consummation of the Offer and the share purchases represent an
important step in the long-term business relationship between the
two companies that will strengthen Matsumoto's position as a
leading distributor of surgical instruments and medical devices in
Japan.
3. Recommendation by Matsumoto
Upon considering whether or not the Offer meets the best interest
of Matsumoto, its shareholders and its customers, the Board of
Directors of Matsumoto has recommended the sales of Common Stock
pursuant to the Offer and has approved the purchase by the
Purchaser of shares so sold to it.
<PAGE>
<PAGE>
4. Purchase Period, Purchase Price, and Number of Shares to be
Purchased
Purchase Period ("Purchase From June 16, 1994 to
Period") July 15, 1994 (for 30 days)
-------------------------- ---------------------------
Purchase Period ("Purchase 11,429 yen per share (book
Price") value determined by audit
as of December 31, 1993)
-------------------------- ---------------------------
Number of Shares to be 528,860 shares
Purchased
-------------------------- ---------------------------
Number of Shares Owned 341,200 shares*
Directly on the First Day
of the Purchase Period
-------------------------- ---------------------------
Number of Shares to be 870,060 shares*
Directly Owned after
Purchase
-------------------------- ---------------------------
* The Purchaser holds options to purchase 1,837 shares of Matsumoto
Common Stock owned by John D. Pierson that it may exercise at any
time after the Offer.
5. Regulatory Approvals Concerning the Purchase of Shares
There is no obligation on the part of Matsumoto to obtain approval
or consent concerning the Offer. Under Article 26 of the Foreign
Exchange and Foreign Trade Control Law [Gaikoku Kawase oyobi
Gaikoku Boueki Kanri Ho], Stryker is obliged to file a report on
the purchase of Common Stock with the Minister of Finance and
other relevant governmental agencies by way of the Bank of Japan.
6. Procedure for Tendering Shares
(1) Shareholders wishing to tender share(s) of Common Stock shall
deliver certificate(s) representing share(s) tendered,
accompanied by completed "Description of Tendered Shares
[Uritsuke Moushikomisho]" and "Letter of Transmittal [Joto
Sho]" (signed and sealed) to Matsumoto for delivery to the
Purchaser.
(2) Upon delivery of documents hereinabove provided, Matsumoto
shall in exchange furnish such shareholders with "Receipt of
Tendered Shares [Kaitsuke Moushikomi Uketsukehyo]."
7. Terms and Conditions of the Offer
(1) After the issuance of the Offer, the Purchase Price shall not
be reduced.
(2) The Purchaser offers to purchase thirty-eight and three-
quarters percent (38 3/4%) of the shares of Matsumoto Common
Stock owned by each other shareholder.
(3) The Purchaser may withdraw the Offer or revoke its acceptance
of purchasing the shares tendered pursuant to the Offer in the
case that any of the following conditions are not satisfied as
of the Closing Date:
<PAGE>
<PAGE>
(i) The representations and warranties of Matsumoto provided in
or referred to in its agreement with the Purchaser in
connection with the Offer (hereinafter referred to as the
"Agreement") are true and complete in all material respects
and Matsumoto shall have duly performed and complied with
all agreements and conditions required by the Agreement;
(ii) No action, proceeding, application, claim or counterclaim
shall have been threatened or instituted by any government
or governmental authority or agency, which challenges the
Offer or restricts the Purchaser's rights of ownership
regarding the shares of Common Stock tendered pursuant to
the Offer;
(iii) No action shall have been taken, or any statute, rule,
regulation, order or injunction shall have been enacted,
promulgated, entered, enforced or deemed applicable to the
Offer, which challenges the Offer or restricts the
Purchaser's rights regarding the shares of Common Stock
tendered pursuant to the Offer;
(iv) The recommendation of the Board of Directors of Matsumoto
that shareholders tender their shares of Common Stock
pursuant to the Offer and the approval of the sale and
transfer of shares to the Purchaser pursuant to the Offer
shall not have been withdrawn or modified;
(v) Counsel to Matsumoto shall have delivered to the Purchaser
a favorable opinion or opinions dated the Closing Date;
(vi) All legal matters, and the form and substance of all
documents required by the Letter of Transmittal or the
Description of Tendered Shares to be delivered by the
shareholders tendering shares of Common Stock pursuant to
the Offer or required by the Agreement to be delivered by
Matsumoto to the Purchaser shall have been approved by and
be satisfactory to the Purchaser.
(vii) The aggregate number of shares tendered by shareholders
pursuant to the Offer, plus any shares sold to the
Purchaser by certain holders of Matsumoto Common Stock who
have agreed to make up any shortfall as herein provided,
shall equal thirty-one percent (31%) of the then issued and
outstanding shares of Common Stock.
Shareholders who wish to obtain more information regarding the
above conditions should contact the Accounting Department (Keiri
Bu) at the head office of Matsumoto.
(4) After the issuance of the Offer, the Purchaser shall not change
the method of payment for the Purchase Price or the expected
number of shares to be purchased.
8. Acknowledgement of Purchase
Upon the expiration of the Purchase Period, the Purchaser will
promptly send an "Acceptance of Tendered Shares [Kaitsuke
Tsuchisho]" to each shareholder who tendered his or her shares.
The Acceptance of Tendered Shares shall describe the number of
shares to be purchased form each shareholder.
<PAGE>
<PAGE>
9. Closing
Closing Date August 2, 1994
--------------------- --------------------------
Procedure for Closing On the Closing Date, payment
for the Purchase Price shall
be made by wire transfer to a
bank account designated by
each shareholder.
II. Information Concerning the Purchaser
1. Summary of the Purchaser
(1) The Purchaser's Business and Operation
The Purchaser is a publicly-held corporation that develops,
manufacturers and markets specialty surgical and medical products,
including endoscopic systems, orthopaedic implants, powered
surgical instruments and patient handling equipment for the world
market.
(2) Capital Amount and Number of Shares
(as of December 31, 1993)
----------------------------- ----------------------------
Capital Amount $21,951,000
----------------------------- ----------------------------
Total Number of Shares Issued 48,395,453 shares of Common
and Outstanding Stock
(3) Board of Directors of the Purchaser
John W. Brown
Howard E. Cox, Jr.
Donald M. Engelman, Ph.D.
Jerome H. Grossman, M.D.
John S. Lillard
William U. Parfet
Ronda E. Stryker
(4) Officers of the Purchaser
Name Title
------------------------- -----------------------------
John W. Brown Chairman, President and Chief
Executive Officer
------------------------- -----------------------------
Ronald A. Elenbaas Vice President, President,
Stryker Surgical Group
------------------------- -----------------------------
William T. Laube, III Vice President, President,
Stryker Pacific
------------------------- -----------------------------
Robert D. Monk Treasurer/Controller and
Assistant Secretary
------------------------- -----------------------------
Julia M. Paradine-Rice Assistant Treasurer
------------------------- -----------------------------
David J. Simpson Vice President, Chief Financial
Officer and Secretary
------------------------- -----------------------------
Thomas R. Winkel Vice President, President,
Stryker Americas/Middle East
<PAGE>
<PAGE>
Note: As of November 25, 1992, Dr. John D. Pierson, President of
Stryker Japan (a wholly-owned subsidiary of Stryker) was
elected to serve on the Board of Directors of Matsumoto. As
of December 6, 1993, William T. Laube, III, a Vice President
of its Stryker Pacific Division, was elected a director of
Matsumoto.
2. Selected Consolidated Financial Information
Net Sales. . . . . . . . . . . . . . . . . . . .$557,335,000
Operating Income . . . . . . . . . . . . . . . . .91,942,000
Earnings before taxes, etc.. . . . . . . . . . . .96,065,000
Net earnings . . . . . . . . . . . . . . . . . . .60,205,000
Total assets . . . . . . . . . . . . . . . . . . 454,204,000
III. Information Concerning Matsumoto
Please refer to the Business Reports [Eigyo Hokoku Sho]
concerning Matsumoto's financial information for fiscal years
of 1991, 1992 and 1993, as attached hereto as Exhibit A,
Exhibit B and Exhibit C, respectively.
<PAGE>
<PAGE>
EXHIBIT (4)
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of August 1, 1994, is among STRYKER
CORPORATION, a corporation organized under the laws of the State of Michigan
(the "Borrower"), the Banks listed on the signature pages hereof and The Bank of
Tokyo, Ltd., Chicago Branch, as Agent.
SECTION I. DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, the following
terms are defined as follows:
"Agent" shall mean The Bank of Tokyo, Ltd., Chicago Branch in its
capacity as agent for the Banks hereunder, and its successors and assigns in
such capacity.
"Bank" shall mean each bank listed on the signature pages hereof, and
their respective successors and assigns.
"Banking Day" shall mean a day on which banks are open for business in
London, England; Chicago, Illinois; and Tokyo, Japan, and dealing in Japanese
yen deposits in London, England, other than Saturday, Sunday or a legal holiday
or day on which banks in such cities are required or authorized by law to remain
closed.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which the commercial banks in the City of Chicago, Illinois are
authorized or obligated by law or executive order to close.
"Event of Default" shall have the meaning given to such term in Section
VIII hereof.
"Final Maturity Date" shall mean August 1, 1998.
"Interest Payment Date" shall mean the last day of each Interest Period
and the Final Maturity Date.
"Interest Period" shall mean the period used for the computation of
interest commencing on the date the relevant Loan is made and concluding on the
date six months thereafter, with subsequent Interest Periods commencing on the
last day of the immediately preceding Interest Period and concluding six months
thereafter; provided, however, no Interest Period may extend beyond the Final
Maturity Date and the initial Interest Period for the second borrowing on
March 31, 1995, shall commence on the date of borrowing and conclude on the date
which coincides with the end of the then current Interest Period for the initial
borrowing of Loans hereunder. For purposes of determining an Interest Period, a
month means a period starting on one day in a calendar month and ending on a
numerically corresponding day in the next calendar month; provided, however,
that if there is no numerically corresponding day in the month in which an
Interest Period is to end or if an Interest Period begins on the last day of a
calendar month, then such Interest Period shall end on the last Banking Day of
the calendar month in which such Interest Period is to end.
"LIBOR" shall mean for each Interest Period, the per annum rate for
deposits in Japanese yen for a period of six months which appears on Telerate
Page 3755 under the column designated B.O.T. as of 11:00 a.m., London time, two
Banking Days prior to the commencement of such Interest Period; provided,
however, that with respect to the initial Interest Period for the second
borrowing of Loans hereunder on March 31, 1995, LIBOR shall be determined as
specified above for a period equal to such initial Interest Period. If such
rate does not appear on Telerate Page 3755 on such day, the rate will be
determined on the basis of the rates at which deposits in Japanese yen are
offered by the Agent at approximately 11:00 a.m., London time, on such day to
prime banks in the London interbank market for a period of six months commencing
on that day.
"Loan" or "Loans" shall have the meaning specified in Section II hereof.
"Majority Banks" shall mean Banks holding 50% or more of the outstanding
principal amount of the Loans.
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"Maximum Leverage Ratio" shall mean, at any date of determination
thereof, the ratio of any senior indebtedness outstanding to tangible net worth,
as such shall be determined in accordance with generally accepted accounting
principles.
"Minimum Tangible Net Worth" shall mean, at any date of determination
thereof, the sum of the following, determined in accordance with generally
accepted accounting principles: a) the amount of total stockholders' equity
minus b) the net book value of intangible assets.
"Note" or "Notes" shall mean the Note of each Bank in the form attached
as Exhibit A.
"Potential Default" shall mean the occurrence of any event which, with
the lapse of time, the giving of notice, or both, would become an Event of
Default.
"Yen Prime Rate" shall mean the rate publicly announced from time to
time by the Agent as its short term prime rate for loans made in Japanese yen
currency. Any change in the Yen Prime Rate shall take effect on the date
specified in the public announcement of such change. The Yen Prime Rate is set
by the Agent based on various factors including but not limited to the Agent's
costs and desired return, general economic conditions and is used as a reference
point in pricing some loans. The Agent may make loans at, above or below, the
Yen Prime Rate.
SECTION II. LOANS UNDER THE CREDIT AGREEMENT
(A) Subject to the terms and conditions set forth in this Agreement,
each Bank, by its acceptance hereof, severally agrees to make a loan or loans
(individually a "Loan" or collectively the "Loans") to the Borrower in the
amount of its commitment to make Loans set forth on the signature pages hereof.
Subject to the terms and conditions set forth in this Agreement, Loans shall be
made in two borrowings, the first borrowing of Loans to be made on
August 1, 1994, in the aggregate principal amount of 5,196,480,575 yen, and the
second borrowing of Loans to be made on March 31, 1995, in the aggregate
principal amount of 847,860,365yen . Each borrowing of Loans shall be made
ratably from the Banks in proportion to their commitments.
(B) The Borrower authorizes the Banks to make (or cause to be made)
appropriate notations on their records or on the grid attached to their Notes
evidencing the disbursement date and the principal amount of the Loans, as well
as the repayment of the principal amount thereof and the payment of all interest
thereon.
(C) Subject to the provisions of Section VI hereof, the proceeds of
each Loan shall be made available to the Borrower at the principal office of The
Sanwa Bank, Limited, Tokyo, Japan ("Sanwa") for the account of its Chicago
Branch (the "Sanwa Account") in immediately available Japanese yen. Not later
than 11:30 a.m. (Tokyo time) on the date specified for any Loan to be made
hereunder, each Bank shall make its portion of such Loan available to the
Borrower in immediately available Japanese yen at the Sanwa Account, with
written confirmation to the Agent. Sanwa hereby agrees to wire transfer the
proceeds of the Loans in accordance with the written instructions of the
Borrower delivered to the Agent or Sanwa. The instructions of the Borrower with
respect to the initial borrowing of Loans are attached hereto as Exhibit B.
Sanwa shall promptly confirm in writing to the Agent the sending of the wire
transfers in accordance with the Borrower's instructions.
(D) Unless the Agent and Sanwa shall have been notified by a Bank prior
to the date of a Loan to be made by such Bank (which notice shall be effective
upon receipt) that such Bank does not intend to make the proceeds of such Loan
available to Sanwa, the Agent and Sanwa may assume that such Bank has made such
proceeds available to Sanwa on such date and the Agent or Sanwa may in reliance
upon such assumption (but shall not be required to) make available to the
Borrower a corresponding amount. If such corresponding amount is not in fact
made available to Sanwa by such Bank, and the Agent or Sanwa has made such
amount available to the Borrower, the Agent or Sanwa, as the case may be, shall
be entitled to receive such amount on demand from such Bank (or, if such Bank
fails to pay such amount forthwith upon such demand, to recover such amount from
the Borrower) together with interest thereon in respect of each day during the
period commencing on the date such amount was made available to the Borrower and
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ending on but excluding the date the Agent or Sanwa, as the case may be,
recovers such amount, at a rate per annum (computed on the basis of a 360 day
year and actual days elapsed) equal to the Yen Prime Rate from time to time in
effect. If such Bank shall repay to the Agent or Sanwa, as the case may be,
such corresponding amount, such amount so repaid shall constitute such Bank's
Loan for purposes of this Agreement.
SECTION III. INTEREST PAYMENTS
(A) The Borrower shall pay interest (calculated on the basis of a 360
day year and actual days elapsed) on the unpaid principal amount of the Loans
from and including the disbursement date thereof to but not including the date
of maturity (whether by acceleration or otherwise) at a rate of interest per
annum equal to the sum of 0.25% plus LIBOR. Interest shall be due and payable
on each Interest Payment Date for the days elapsed from the prior Interest
Payment Date (or the disbursement date, in the case of the initial Interest
Payment Date) to but not including the current Interest Payment Date.
(B) In the event that any payment of principal of the Loans, or any
payment of interest thereon, or any fee is not made on the due date thereof, the
Borrower shall pay interest on such principal or fees and, to the extent
permitted by law, on such interest, for the day such payment was due until the
day of actual payment thereof at a rate of interest per annum (computed on the
basis of a 360 day year and actual days elapsed) equal to the sum of 2% plus the
rate of interest in effect thereon at the time of such default until the end of
the Interest Period then applicable thereto and, thereafter, at a rate per annum
equal to the sum of 2% plus the Yen Prime Rate from time to time in effect.
(C) If any change shall occur in applicable law, rule or regulation or
in the interpretation or administration thereof or in any request or guideline
imposed by the United States or Japanese governments or any central bank or
governmental authority charged with interpretation or administration of any law,
rule, regulation or guideline resulting in increased taxation of payments to
any Bank, or the imposition of any increased reserve, special deposit, minimum
capital, capital ratio or similar requirement affecting this Agreement or its
Note, and the result of any of the foregoing is an increase in cost to such Bank
of making or maintaining its Loan, or to reduce any amount received or
receivable by such Bank under the Agreement or its Note by an amount that such
Bank shall deem to be material, then such Bank shall notify the Borrower and the
Agent of the increased amounts due to such Bank to compensate the Bank for such
additional costs or reductions, subject only to the Borrower's right to prepay
the Loan as provided in Section IV(D) hereof.
(D) Notwithstanding any other provisions of this Agreement or any Note,
if at any time any Bank shall determine in good faith that any change in
applicable law or regulation or in the interpretation thereof makes it unlawful
for such Bank to make or continue to maintain any Loan or to give effect to its
obligations as contemplated hereby, such Bank shall promptly give notice thereof
to the Agent and the Borrower and such Bank's obligations to make or maintain
any such affected Loan under this Agreement shall terminate until it is no
longer unlawful for the Bank to make such affected Loan. The Borrower shall,
on the last day of the then applicable Interest Period or such earlier date
required by such applicable law, prepay the outstanding principal amount of any
such affected Loan made to it, together with all interest accrued thereon and
all other amounts due and payable to the affected Bank under this Agreement;
provided, however, the Borrower may, to the extent permitted by applicable law,
borrow the principal amount of such affected Loans and pay interest thereon from
the date thereof until maturity (whether by acceleration or otherwise) at a rate
per annum (computed on the basis of a 360 day year and actual days elapsed)
equal to the Yen Prime Rate or such other rate of interest, if any, mutually
agreed upon in writing by the Borrower and all of the Banks.
(E) Notwithstanding any other provision of this Agreement or any Note,
if prior to the commencement of any Interest Period the Agent or any Bank shall
determine (i) that deposits in the amount of any Loan scheduled to be
outstanding are not available to the Agent or such Bank in the relevant market
or (ii) by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining LIBOR, or (iii) LIBOR does not
accurately reflect the cost to any Bank of making or maintaining any Loan
hereunder, the Agent or such Bank shall promptly give notice thereof to the
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Borrower and the Banks to make or maintain any such Loan in such amount and
for any such Interest Period shall terminate until deposits in such amount and
for the relevant Interest Period shall again be readily available in the
relevant market, adequate and reasonable means exist for ascertaining LIBOR and
such rate shall accurately reflect the cost to the Banks of making and
maintaining such Loan. Upon the giving of such notice, the Borrower may elect
to either (i) prepay such affected Loan or (ii) borrow the principal amount of
such affected Loan and pay interest thereon from the date thereof until maturity
(whether by acceleration or otherwise) at a rate per annum (computed on the
basis of a 360 day year and actual days elapsed) equal to the Yen Prime Rate
from time to time in effect, or such other rate of interest, if any, mutually
agreed upon in writing by the Borrower and all of the Banks, subject to all
terms and conditions of this Agreement.
SECTION IV. PAYMENTS
(A) The Borrower shall make all payments hereunder and under the Notes
by wire transfer to the Agent at The Bank of Tokyo, Ltd., Tokyo, Japan for
credit to the account of The Bank of Tokyo, Ltd., Chicago Branch
Account #315-0115304 Ref: Stryker Attn: Joseph Howard, or as the Agent may
otherwise direct, for the ratable benefit of the Banks not later than 11:30 a.m.
(Tokyo time) on the date any such payment is due. All such payments shall be
made in immediately available and freely transferable Japanese yen at the place
of payment without setoff or counterclaim. The Agent shall promptly remit to
each Bank its ratable share of such payments when received by the Agent to the
offices and accounts of the Banks in Tokyo, Japan specified by each Bank in a
written notice to the Agent.
(B) Principal and interest accrued on the Loans shall be paid in full
on the Final Maturity Date.
(C) All payments made to the Banks under this Agreement shall be
applied first to the payment of interest due on the Loans, and then to the
payment of the principal amount of the Loans outstanding on the date of the
payment.
(D) The Borrower may prepay the Loans in whole, or in part but, if in
part, then in an amount not less than 1,000,000,000 yen or an integral multiple
thereof (with accrued interest to the date of such prepayment) prior to the
Final Maturity Date on five (5) business days prior written notice of its intent
to prepay to the Agent. Such notice, once received by the Agent, shall be
irrevocable. Prepayments shall be subject to a prepayment penalty specified in
Section IV(E) hereof.
(E) In the event any Bank shall incur any loss, cost or expense
(including, without limitation, any loss, cost or expense incurred by reason
of the liquidation or re-employment of deposits or other funds acquired by such
Bank to fund or maintain any Loan or the relending or reinvesting of such
deposits or amounts paid or prepaid to such Bank) as a result of (i) any payment
or prepayment for any reason of a Loan on a date other than the last day of the
then applicable Interest Period; or (ii) any failure by the Borrower to borrow
any Loan on the dates specified in Section II(A) hereof, then, upon the demand
of such Bank, the Borrower shall pay to the Bank such amount as will reimburse
the Bank for such loss, cost or expense. If a Bank makes a claim for
compensation, it shall provide to the Borrower and the Agent a certificate
setting forth the amount of such loss, cost or expense in reasonable detail and
such certificate shall be conclusive and binding on the Borrower as to the
amount thereof except in the case of manifest error.
(F) Each Bank may, at its option, elect to make, fund or maintain its
Loans hereunder at the branch or office specified on the signature pages hereof
or such other of its branches or offices as such Bank may from time to time
elect.
(G) Notwithstanding any provision of this Agreement to the contrary,
each Bank shall be entitled to fund and maintain its funding of all or any part
of its Loans in any manner it sees fit, it being understood however, that for
the purposes of this Agreement all determinations hereunder shall be made as if
each Bank had actually funded and maintained each Loan during each Interest
Period for such Loan through the purchase of deposits in the relevant market
having a maturity corresponding to such Interest Period and bearing an interest
rate equal to LIBOR for such Interest Period.
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(H) If any sum becomes payable pursuant to this Agreement on a day
which is not a Business Day (which in the case of interest is the Interest
Payment Date with respect thereto), the date for payment thereof shall be
extended, without penalty, to the next succeeding Business Day (which in the
case of interest shall be the Interest Payment Date with respect thereto), and
such extended time shall be included in the computation of interest.
SECTION V. GENERAL REPRESENTATIONS AND WARRANTIES BY THE BORROWER
The Borrower represents and warrants to the Banks as follows:
i) The Borrower is in good standing, validly existing and duly
organized under the laws of the State of Michigan.
ii) The Borrower has the corporate power to enter into this Agreement
and to execute the Notes and all other documents, instruments and
agreements executed in connection herewith and to observe and perform the
terms and provisions hereof.
iii) The execution, delivery and performance of this Agreement and the
Notes have been duly authorized and approved by the Board of Directors of
the Borrower.
iv) All corporate action on the part of Borrower, its directors or
stockholders, necessary for the authorization, execution, delivery and
performance of this Agreement and the Notes or other instrument or agreement
required hereunder, has been duly taken.
v) There is no litigation, tax claim, proceeding or dispute pending,
or, to the knowledge of Borrower, threatened, against or affecting Borrower
or its property, the adverse determination of which might materially affect
Borrower's financial condition or operations or impair Borrower's ability to
perform its obligations hereunder or under the Notes or other instrument or
agreement required hereunder.
vi) No Event of Default, as defined in Section VIII of this Agreement,
shall have occurred and be continuing.
vii) The making and performance of this Agreement and the Notes by the
Borrower will not violate any provisions of any law or regulation, federal,
state or local, or any corporate authorization of the Borrower.
SECTION VI. CONDITIONS PRECEDENT
(A) The obligation of the Banks to make any Loan is subject to the
conditions precedent that the Banks shall have received on or before the date of
disbursement the following, in form and substance satisfactory to the Agent:
i) A certified copy of the resolutions of the Board of Directors of
the Borrower, authorizing the execution and delivery of this Agreement and
the Notes;
ii) The executed Notes, in the form attached as Exhibit A.
iii) An executed copy of this Agreement.
iv) A certificate, signed by the Secretary or an Assistant Secretary of
the Borrower and dated as of the date of this Agreement, as to the
incumbency of the person or persons authorized to execute and deliver this
Agreement and the Notes and any other document or instrument required
hereunder.
v) An opinion of counsel of the Borrower, in a form satisfactory to
the Agent, concerning the due authorization and enforceability of this
Agreement and the Notes.
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(B) As of the time of the making of each Loan hereunder (including the
initial Loan):
(i) each of the representations and warranties set forth in Section V
hereof shall be and remain true and correct as of said time, except to the
extent that any such representation or warranty relates solely to an earlier
date; and
(ii) the Borrower shall be in full compliance with all of the terms
and conditions hereof, and no Event of Default or Potential Default shall
have occurred and be continuing or will have occurred as a result of making
such Loan.
The execution and delivery by the Borrower of the Notes pursuant hereto or the
Borrower's acceptance of the proceeds of any such Loan shall be and constitute a
warranty to the matters specified in subsections (i) and (ii) above.
SECTION VII. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as any of the Loans or Notes
are outstanding hereunder, any credit is available to or in use by the Borrower
and until the full and final payment of all indebtedness incurred hereunder, it
will:
i) Repay the Loans according to the terms hereof and the Notes
evidencing the same;
ii) Promptly give written notice to the Banks of:
(a) any material dispute which may exist between Borrower and
any governmental regulatory body or law enforcement authority
which, if decided to the detriment of the Borrower, would
materially alter the Borrower's ability to perform its obligation
under this Agreement; and
(b) any Event of Default or any event which, upon a lapse of
time or notice or both, would become an Event of Default; and
(c) any other matter which has resulted or might result in a
material adverse change in Borrower's financial condition or
operations.
iii) Promptly provide to the Lender its quarterly unaudited
financial statements within 60 days of the end of its first, second and
third fiscal quarters; and its annual audited financial statements within
90 days following its fiscal year end.
iv) Borrower shall maintain a Minimum Tangible Net Worth of not
less than $250,000,000 at all times while this Agreement shall be in
effect.
v) Borrower shall maintain a Maximum Leverage Ratio of not
greater than 1.0:1 at all times while this Agreement shall be in effect.
vi) The proceeds of the Loans shall be used for the purchase of
common stock in Matsumoto Medical Instruments, Inc.
SECTION VIII. EVENTS OF DEFAULT
Each of the following shall constitute an "Event of Default" under
this Agreement:
i) Failure by the Borrower to pay interest or any principal
amount due on the Loans or any fee not later than three (3) Banking Days
after the due date thereof or failure of the Borrower to pay any other
amount hereunder when due;
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ii) Failure of the Borrower to cure a default or comply with the
provisions of this Agreement (other than as described in Subsection (i)
above) within fifteen (15) days of written demand by the Agent or any Bank
(unless Borrower shall have and continue to be using its best efforts to
cure said default or comply with such provisions);
iii) Any representation or warranty made by the Borrower under this
Agreement shall prove to have been materially false when made and Borrower
had actual knowledge of such falsity at the time such representation or
warranty was made;
iv) The commencement or filing of any insolvency, bankruptcy or
similar proceeding by the Borrower, or the Borrower shall not pay, or
admit in writing its inability to pay, its debts generally as they come
due, or the Borrower has taken any corporate action in furtherance of any
of the foregoing purposes;
v) An involuntary petition shall be filed under any bankruptcy
statute against Borrower, or a receiver or trustee shall be appointed to
take possession of the properties of Borrower, unless such petition or
appointment or possession is set aside or withdrawn or ceases to be in
effect within sixty (60) days from the date of said filing or appointment
or taking of possession;
vi) Any default shall occur under (1) the Credit Agreement dated
as of August 4, 1993, between the Borrower and The Sanwa Bank, Limited,
Chicago Branch, as amended (the "Sanwa Credit Agreement") or (2) any other
agreement involving the borrowing of money or the advance of credit or the
guaranty thereof involving U.S. $50,000,000.00 or more to which Borrower
may be a party as borrower, if such default gives to the holder of the
obligation concerned the right to accelerate the indebtedness;
vii) A final judgment, order or decree shall be entered in any
proceeding in law or in equity, in an amount in excess of U.S.
$50,000,000.00 against the Borrower, where such judgment is not satisfied,
stayed or deferred by a court or by agreement within 180 days of the entry
thereof; or
viii) Any lien, security interest or pledge of assets or any other
encumbrance upon or with respect to the property of the Borrower shall
occur in an amount in excess of U.S. $50,000,000.00, other than purchase
money liens incurred in the ordinary course of business or to secure
indebtedness incurred solely for the purchase of such property.
SECTION IX. REMEDIES
(A) When any Event of Default, other than an Event of Default described
in Sections VIII(iv) or (v) hereof, has occurred and is continuing, the Majority
Banks may, by notice to the Borrower, take either or both of the following
actions: (i) terminate the remaining commitments of the Banks to make Loans
hereunder on the date (which may be the date thereof) stated in such notice,
and (ii) declare the principal of and the accrued interest on the Loans then
outstanding to be forthwith due and payable and thereupon said Loans, including
both principal and interest, shall be and become immediately due and payable
together with all other amounts payable under this Agreement without further
demand, presentment, protest or notice of any kind.
(B) When any Event of Default described in Sections VIII (iv) or (v)
hereof has occurred and is continuing, then the principal of and accrued
interest on the Loans then outstanding shall immediately become due and payable
together with all other amounts payable under this Agreement without
presentment, demand, protest or notice of any kind, and the obligation of the
Banks to extend further credit pursuant to any of the terms of this Agreement
shall immediately terminate.
(C) In connection with the foregoing, the Borrower agrees to pay
reasonable attorneys' fees whenever an attorney is used by the Agent or any Bank
to collect on or enforce payment of any amounts rightfully due and owing to the
Banks hereunder. All rights and remedies of the Banks arising pursuant to the
provisions of this Agreement are cumulative, and may be exercised concurrently
or separately; and the exercise or partial exercise of any right or remedy shall
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not preclude any other or further or future exercise of any other right or
remedy. No failure on the part of the Banks to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof
(or of any similar or other right or remedy in the future).
SECTION X. THE AGENT FOR THE BANKS
(A) For the convenience of the parties hereto, The Bank of Tokyo,
Chicago Branch is appointed Agent hereunder for the Banks with such powers as
are specifically delegated to the Agent by the terms of this Agreement,
together with such other powers as are reasonably incidental thereto, and by
its execution hereto accepts such agency, solely for the purposes herein set
forth. The Agent will transmit promptly to each Bank each notice received by it
from the Borrower hereunder, will advise the Banks promptly upon receipt of
all the documents listed in Section VI and will provide each of the Banks with
a copy of each of the said documents when these are available. The Agent shall
have no authority to enforce, nor any duty or responsibility for the enforcement
of, any of the terms hereof or the Notes, except as a Bank hereunder; however,
the Agent shall promptly notify each Bank of any event of which it has actual
notice which is or would be, with the passage of time or the giving of notice,
or both, an Event of Default under Section VIII hereof. Neither the Agent nor
any of its directors, officers or employees shall be liable for any action taken
or omitted to be taken by it or them hereunder, except for its or their own
gross negligence or willful misconduct. The Agent shall be protected in acting
upon any notice, request, certificate, letter, statements (oral or written) or
other documents believed by it in good faith to be genuine and correct and to
have been signed or sent by the proper person or persons. As to any matters not
expressly provided for by this Agreement, the Agent shall in all cases be fully
protected in acting, or refraining from acting, hereunder in accordance with the
instructions of the Majority Banks, and such instructions of the Majority Banks
and any action taken or not taken pursuant thereto shall be binding on all
Banks.
(B) The Agent takes no responsibility for the truth of any warranties
or representations given or made herein, and the Agent shall not be responsible
to the Banks for the validity, effectiveness, enforceability or sufficiency of
this Agreement, the Notes or any other related documents.
(C) Each Bank warrants that it has made its own independent
investigation of the financial condition and affairs of the Borrower in
connection with the making and continuance of the Loans hereunder and has not
relied upon any placement memorandum or other information provided to such Bank
by the Agent and each Bank represents that it shall continue throughout the
duration of this Agreement to make its own independent appraisal of the
Borrower.
(D) The Agent shall be under the same obligations and be entitled to
the same rights and powers in its capacity as a Bank as if it were not the Agent
and the Agent shall not be obliged by reason of its position as Agent to account
to any other Bank for any sum received by it hereunder in its capacity as a Bank
or for the profit element thereof and the Agent may, without liability to
account to the other Banks, accept deposits from, lend money to, and generally
engage in any kind of banking or trust business with the Borrower as if it
were not the Agent or a Bank, as the case may be.
(E) The Borrower and (to the extent not reimbursed by the Borrower)
each Bank (pro-rata in accordance with the respective commitments of the Banks)
agrees to indemnify the Agent from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred or asserted against the Agent (in its capacity as such) in any way
relating to or arising out of this Agreement, provided that neither the
Borrower nor any Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements arising from the Agent's gross negligence or willful
misconduct.
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(F) Except for action expressly required of the Agent hereunder the
Agent shall in all cases be fully justified in failing or refusing to act
hereunder unless it shall be indemnified to its reasonable satisfaction by the
Banks against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action.
(G) Subject to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by giving notice thereof to the
Banks and the Borrower and the Agent may be removed at any time for cause by the
Majority Banks. Upon any such resignation or removal, the Majority Banks shall
have the right to appoint a successor Agent without cost to the Borrower. If
no successor Agent shall have been so appointed by the Majority Banks and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving notice of resignation or the Majority Banks' removal of the
retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent without cost to the Borrower, which shall be a bank which has an
office in Chicago, Illinois. Upon the acceptance of any appointment as
successor Agent hereunder, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or removal
hereunder as Agent, the provision of this Section X shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Agent. Unless an Event of Default shall have
occurred and be continuing, the Borrower shall have the right to approve any
successor Agent (such approval not to be unreasonably withheld).
(H) Unless the Agent shall have been notified by the Borrower prior to
the date on which any payment is due hereunder or under the Notes (which notice
shall be effective upon receipt) that the Borrower does not intend to make such
payment, the Agent may assume that the Borrower has made such payment when due
and the Agent may in reliance upon such assumption (but shall not be required
to) make available to each Bank on such payment date an amount equal to the
portion of such assumed payment such Bank is entitled to hereunder or under the
Notes and, if the Borrower has not in fact made such payment to the Agent, such
Bank shall, on demand, repay to the Agent the amount made available to such
Bank together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to such Bank and ending
on (but excluding) the date such Bank repays such amount to the Agent at a rate
per annum equal to the Yen Prime Rate from time to time in effect.
SECTION XI. RIGHT OF SETOFF
If an Event of Default shall have occurred and be continuing, each Bank
is hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Bank to or for the credit or the account of the
Borrower against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement or the Note of such Bank, irrespective of whether
or not such Bank shall have made any demand under this Agreement or its Note and
although such deposits or other indebtedness may be unmatured. The rights of
each Bank under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Bank may have.
SECTION XII. SETOFF SHARING
Each Bank agrees with each other Bank a party hereto that in the event
such Bank shall receive and retain any payment, whether by setoff or application
of deposit balances or otherwise, on any Note outstanding under this Agreement
in excess of its ratable share of payments on all Notes then outstanding to the
Banks, then such Bank shall purchase for cash at face value, but without
recourse, ratably from each of the other Banks such amount of the Notes held by
each such other Bank (or interest therein) as shall be necessary to cause such
Bank to share such excess payment ratably with all the other Banks; provided,
however, that if any such purchase is made by any Bank, and if such excess
payment or part thereof is thereafter recovered from such purchasing Bank, the
related purchases from the other Banks shall be rescinded ratably and the
purchase price restored as to the portion of such excess payment so recovered,
but without interest.
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SECTION XIII. AMENDMENTS AND WAIVERS
No provision of this Agreement may be amended or waived except in
writing signed by the Borrower and the Majority Banks and, if the rights or
duties of the Agent are affected thereby, by the Agent; provided that no such
amendment or waiver shall, unless signed by all the Banks, (i) increase, reduce
or extend the commitment of any Bank or subject any Bank to any additional
obligation, (ii) change the principal of or rate of interest on any Loan or fees
hereunder, (iii) change the stated time or manner of any payment of principal
of or interest on any Loan or any fees hereunder, (iv) change the percentage of
the commitments or of the aggregate unpaid principal amount of the Notes or the
number of Banks which shall be required for the Banks or any of them to take any
action under this Section or any other provisions of this Agreement, or
(v) amend or waive the provisions of this Section XIII.
SECTION XIV. SUCCESSORS
This Agreement and all of the provisions hereto shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns; provided, however, that the Borrower may not assign or
otherwise transfer this Agreement (or any interest herein) except with the prior
written consent of the Banks.
SECTION XV. NOTICES
All notices required to be sent herein shall be personally delivered to
the other party at the address set forth on the signature pages hereof or be
sent by certified mail (return receipt requested) or overnight courier, postage
prepaid to the address set forth herein. Each party hereto shall be entitled to
designate a different address for the giving of notices hereafter by written
notice to the other party as herein provided. Written notice shall be deemed
to be received on the date delivered to such party (if personally delivered),
or three (3) days after the date of postmark thereon (if delivered by certified
mail).
SECTION XVI. COSTS AND EXPENSES
The Company agrees to pay on demand all costs and expenses of the Agent
in connection with the negotiation, preparation, execution and delivery of this
Agreement and the Notes, or in connection with any consents hereunder or waivers
or amendments hereto, including the reasonable fees and out-of-pocket expenses
of the Agent's attorneys, Messrs. Bell, Boyd & Lloyd, with respect to all the
foregoing.
SECTION XVII. JUDGMENT CURRENCY
If, for the purpose of obtaining judgment in any court against the
Borrower hereunder, it becomes necessary to convert into the currency in which
such judgment will be awarded any amount payable hereunder in a different
currency, then the conversion shall be made at the spot rate of exchange
determined by the Agent prevailing at the close of business on the day before
the day on which the judgment is given. In the event that there is a difference
between the rate of exchange at which such judgment is determined and the rate
prevailing on the date of payment, the Borrower will pay such additional amount,
if any, as may be necessary to ensure that the amount paid on such date of
payment in the judgment currency is the amount in the currency or currencies
which when converted at the spot rate of exchange determined by the Agent is the
amount then due under this Agreement in such other currency or currencies. Any
amount so due from the Borrower will be due as a separate debt and shall not be
affected by judgment being obtained for any other sum due under or in respect of
this Agreement. The spot rate of exchange shall mean the rate of exchange at
which the Agent could, in accordance with normal banking procedures, buy the
currency or currencies due hereunder for the judgment currency in the interbank
foreign currency markets.
SECTION XVIII. ENTIRETY OF AGREEMENT AND GOVERNING LAW
With respect to the subject matter hereof, this Agreement represents the
entire agreement of the parties, and no provision of this Agreement may be
modified or waived in any manner (including by construction based on subsequent
course of performance) except by the written consent of the parties hereto in
accordance with Section XIII hereof. The validity, interpretation and
enforcement of this Agreement shal be governed by the laws of the State of
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Illinois (irrespective of such state's choice of law rules). The parties hereto
consent to the personal jurisdiction of any federal court located in Cook County
Illinois, regarding any claims pertaining to this Agreement, and the parties
hereby waive trial by jury and any objections based on forum non conveniens.
SECTION XIX. CONSTRUCTION
This Agreement shall be construed without regard to any presumption or
rule requiring construction against the party causing the Agreement to be
drafted. The headings and captions contained in this Agreement are solely for
the convenience of reference and shall not affect their interpretation.
SECTION XX. AUTHORITY
The person(s) signing on behalf of the Borrower and each Bank hereby
represent personally that each is a duly elected officer, and each has the
authority to execute this Agreement (and all documents referenced herein) on
behalf of its principal by virtue of a duly enacted resolution or authorization
of its Board of Directors.
SECTION XXI. COUNTERPARTS
This Agreement may be executed in one or more original counterparts, and
all such original counterparts shall be deemed one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto, by their duly authorized
officers, have caused this Agreement to be duly executed as of the date first
above written.
STRYKER CORPORATION
By:______________________
Title:___________________
2725 Fairfield Road
Kalamazoo, Michigan 49002
Attention: David Simpson
Address and Amount of
Commitment:
69 West Washington Street THE BANK OF TOKYO, LTD.,
Chicago, Illinois 60602 CHICAGO BRANCH, individually Attention:
Joseph Howard and as Agent
By:________________________
2,014,780,314 yen Title:_____________________
10 South Wacker Drive THE SANWA BANK, LIMITED
Chicago, Illinois 60606 CHICAGO BRANCH
Attention: Richard Ault
By:________________________
2,014,780,313 yen Title:_____________________
115 South LaSalle Street THE MITSUBISHI BANK, LIMITED
Suite 2100 CHICAGO BRANCH
Chicago, Illinois 60606
Attention: Diane Tkach
By:________________________
2,014,780,313 yen Title:_____________________
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EXHIBIT (11)--STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
Average number of
shares outstanding 48,358,000 48,356,000 48,386,000 48,337,000
Net earnings $17,010,000 $14,000,000 $34,350,000 $28,450,000
Net earnings per share of
common stock $.35 $.29 $.71 $.59
Primary:
Average shares outstanding 48,358,000 48,356,000 48,386,000 48,337,000
Net effect of dilutive
stock options, based on the
treasury stock method using
average market price 502,000 513,000 597,000 531,000
Total Primary Shares 48,860,000 48,869,000 48,983,000 48,868,000
Fully Diluted:
Average shares outstanding 48,358,000 48,356,000 48,386,000 48,337,000
Net effect of dilutive
stock options using the
year-end market price, if
higher than average market
price 502,000 521,000 597,000 535,000
Total Fully Diluted Shares 48,860,000 48,877,000 48,983 000 48,872,000
Note: Shares subject to stock options are not included in the earnings per share
computation because the present effect thereof is not materially dilutive.
