UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 Or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 1998
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)
(616) 385-2600
(Registrant's telephone number, including area code)
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 and 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:
96,433,309 shares of Common Stock, $.10 par value, as of October 29,
1998.
PART I. - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
STRYKER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share amounts)
<TABLE>
September 30 December 31
1998 1997
----------- -----------
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 223,069 $ 154,027
Marketable debt securities 135,731 197,041
Accounts receivable, less allowance
of $10,200 (1997 - $11,700) 191,173 176,214
Inventories 165,971 136,246
Deferred income taxes 86,140 78,896
Prepaid expenses and other current assets 16,666 14,184
--------- ---------
Total Current Assets 818,750 756,608
Property, Plant and Equipment, less allowance
for depreciation of $156,852 (1997 - $136,582) 182,998 163,867
Other Assets 69,927 64,600
--------- ---------
TOTAL ASSETS $1,071,675 $ 985,075
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 51,662 $ 55,034
Accrued compensation 45,373 43,927
Income taxes 50,599 36,971
Accrued expenses and other liabilities 65,427 93,452
Current maturities of long-term debt 71,280 73,627
--------- ---------
Total Current Liabilities 284,341 303,011
Long Term Debt, excluding current maturities 3,874 4,449
Other Liabilities 28,455 29,168
Minority Interest 29,235 35,672
Stockholders' Equity
Common stock, $.10 par value:
Authorized - 150,000 shares
Outstanding - 96,418 shares (1997 - 96,059) 9,642 9,606
Additional paid-in capital 8,433 18
Retained earnings 718,949 612,939
Accumulated other comprehensive loss (11,254) (9,788)
--------- ---------
Total Stockholders' Equity 725,770 612,775
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,071,675 $ 985,075
========= =========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
STRYKER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in thousands, except per share amounts)
<TABLE>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $260,965 $238,143 $781,826 $725,715
Cost of sales 111,810 97,805 324,680 296,022
-------- -------- -------- --------
Gross profit 149,155 140,338 457,146 429,693
Operating expenses:
Research, development and engineering 12,978 14,253 41,428 42,312
Selling, general and administrative 87,129 82,590 263,451 254,691
-------- -------- -------- --------
100,107 96,843 304,879 297,003
-------- -------- -------- --------
Operating income 49,048 43,495 152,267 132,690
Other income 4,412 2,290 10,823 7,633
-------- -------- -------- --------
Earnings before income taxes 53,460 45,785 163,090 140,323
Income taxes 18,710 16,815 57,080 51,953
-------- -------- -------- --------
Net earnings $ 34,750 $ 28,970 $106,010 $ 88,370
======== ======== ======== ========
Net earnings per share of common stock:
Basic $.36 $.30 $1.10 $.92
==== ==== ==== ====
Diluted $.35 $.30 $1.08 $.90
==== ==== ==== ====
Average outstanding shares for the
period:
Basic 96,362 96,038 96,253 96,298
Diluted 98,039 98,175 98,040 98,149
See accompanying notes to condensed consolidated financial statements.
</TABLE>
STRYKER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(Amounts in thousands, except per share amounts)
<TABLE>
Accumulated
Additional Other
Common Paid-In Retained Comprehensive
Stock Capital Earnings Loss Total
------- ---------- -------- ---------- --------
Balance at
<S> <C> <C> <C> <C> <C>
January 1, 1998 $9,606 $18 $612,939 ($9,788) $612,775
--------
Comprehensive income:
Net earnings 106,010 106,010
Net unrealized losses
on securities (203) (203)
Foreign currency
translation adjustments (1,263) (1,263)
--------
Comprehensive income 104,544
--------
Sales of 357 shares of
common stock under
stock option and
benefit plans,
including $4,504
income tax benefit 36 8,415 8,451
------- ---------- -------- --------- --------
Balance at
September 30, 1998 $9,642 $8,433 $718,949 ($11,254) $725,770
======= ========== ======== ========= ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
In 1997 the Company declared a cash dividend of eleven cents per share
to shareholders of record on December 31, 1997, payable on January 30, 1998.
No cash dividends have been declared during 1998.
STRYKER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<TABLE>
Nine Months Ended
September 30
1998 1997
-------- --------
OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $ 106,010 $ 88,370
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 20,086 19,480
Amortization 4,029 5,765
Minority interest (1,361) 89
Changes in operating assets and liabilities,
net of effects of business acquisitions:
Increase in accounts receivable (14,030) (14,127)
Increase in inventories (23,651) (15,123)
Decrease in accounts payable (5,069) (10,456)
Increase (decrease) in accrued expenses (9,076) 3,688
Increase (decrease) in income taxes 4,892 (21,045)
Other (5,653) (5,839)
--------- --------
Net cash provided by operating activities 76,177 50,802
INVESTING AND FINANCING ACTIVITIES
Purchases of property, plant and equipment (35,814) (25,995)
Sales of marketable securities 61,310 12,955
Business acquisitions (27,166) (28,338)
Payments on borrowings (1,261) (5,413)
Dividends paid (10,580) (9,679)
Proceeds from exercise of stock options 6,943 4,054
Repurchases of common stock 0 (25,576)
Other 581 6,441
-------- --------
Net cash used in investing
and financing activities (5,987) (71,551)
Effect of exchange rate changes on
cash and cash equivalents (1,148) (1,193)
-------- --------
Increase (decrease) in cash and cash equivalents $ 69,042 ($21,942)
======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
STRYKER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
Note 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. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1997.
As of January 1, 1998 the Company adopted Financial Accounting Standards
Board (FASB) Statement No. 130, "Reporting Comprehensive Income". Statement
No. 130 establishes rules for the reporting of comprehensive income and its
components; however, the adoption of this statement had no impact on the
Company's net earnings or stockholders' equity. Statement No. 130 requires
unrealized gains or losses on the Company's available-for-sale securities and
foreign currency translation adjustments, which, prior to adoption, were
reported separately in stockholders' equity, to be aggregated and disclosed
as accumulated other comprehensive income (loss), a component of
stockholders' equity. Management has elected to disclose total comprehensive
income as a subtotal in the Condensed Consolidated Statement of Stockholders'
Equity. Prior year financial statements have been reclassified to conform to
the requirements of Statement No. 130. Other comprehensive income for the
nine months ended September 30, 1997 was $80,528. Other comprehensive income
for the three months ended September 30, 1998 and 1997 was $45,775 and
$28,284, respectively.
Note 2. INVENTORIES
<TABLE>
Inventories are as follows (in thousands):
September 30 December 31
1998 1997
--------- ---------
<S> <C> <C>
Finished goods $ 129,103 $ 103,744
Work-in-process 15,674 10,661
Raw material 28,913 29,560
--------- ---------
FIFO Cost 173,690 143,965
Less LIFO reserve 7,719 7,719
--------- ---------
$ 165,971 $ 136,246
========= =========
FIFO cost approximates replacement cost.
</TABLE>
Note 3. BUSINESS ACQUISITIONS
During the first nine months of 1998, the Company's subsidiary,
Physiotherapy Associates, Inc., purchased certain physical therapy clinic
operations at an aggregate cost of $2.1 million. In addition, the Company
purchased two domestic distributors of its orthopaedic implants at a cost of
$15.0 million and a Canadian manufacturer of hospital beds, at a cost of $8.1
million. The Company also purchased an additional 2% of the outstanding
common stock of Matsumoto Medical Instruments, Inc. at a cost of $2.0
million, thereby increasing its direct ownership of Matsumoto to 77%. All of
the above acquisitions were accounted for by the purchase method. Any
intangible assets acquired in the above acquisitions are being amortized over
periods ranging from five to fifteen years. Pro forma consolidated operating
results including the acquisitions would not differ significantly from
reported results.
Note 4. SUBSEQUENT EVENTS
On August 14, 1998, the Company announced it had entered into a
definitive agreement to acquire Howmedica, the orthopaedic division of
Pfizer, Inc., for $1.9 billion in cash. On October 22, 1998, the Company
reached an agreement with Pfizer to reduce the purchase price for Howmedica
to $1.65 billion in cash as a result of changes in the financial markets.
The transaction, which will be accounted for as a purchase, is expected to be
financed with a combination of cash and debt, and is expected to be completed
in the fourth quarter of 1998 subject to regulatory approvals.
On October 16, 1998, the Company announced that it entered into a
definitive agreement to acquire the manufacturing rights and facilities for
its OP-1 bone growth device from Creative BioMolecules, Inc., for
approximately $20 million plus future increases in royalty payments. The
transaction will be accounted for as a purchase and is expected to close in
the fourth quarter of 1998.
Note 5. DERIVATIVE FINANCIAL INSTRUMENTS
In the third quarter, the Company entered into an interest rate swap
agreement which fixed the base rate, or 90 day LIBOR, at a weighted average
rate of 5.8% on $700 million of the $1.65 billion floating rate debt facility
associated with the purchase of Howmedica (see Note 4). The interest rate
swap has been designated as a hedge of an anticipated transaction, with any
changes in fair value being deferred. If for any reason the Howmedica
acquisition does not close, the Company will be required to close out its
hedge positions and will recognize a corresponding gain or loss in the
statement of earnings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results Of Operations
_____________________
The table below sets forth domestic/international and product line sales
information:
Three Months Ended Nine Months Ended
September 30 % September 30 %
1998 1997 Chg 1998 1997 Chg
-------- -------- --- -------- -------- ---
Domestic/International Sales
Domestic $180,204 $157,965 14 $530,980 $464,632 14
International 80,761 80,178 1 250,846 261,083 (4)
-------- -------- -------- --------
Total net sales $260,965 $238,143 10 $781,826 $725,715 8
======== ======== ======== ========
Product Line Sales
Stryker Surgical $192,626 $178,845 8 $587,393 $545,806 8
Stryker Medical 61,806 51,487 20 171,561 155,013 11
Distributed Products 6,533 7,811 (16) 22,872 24,896 (8)
-------- -------- -------- --------
Total net sales $260,965 $238,143 10 $781,826 $725,715 8
======== ======== ======== ========
For the nine months ended September 30, 1998, Stryker Corporation's net
sales increased 8% compared to the same period in 1997. Increased unit
volume generated an 8% sales increase. Net sales also increased 3% from
business acquisitions and 1% from the acquisition of certain portions of the
Osteonics' domestic distribution network and the resulting direct sales.
These increases were partially offset by a 3% decrease in sales from
unfavorable foreign currency comparisons and a combined 1% decrease from a
decline in selling prices and divested businesses. For the third quarter, net
sales increased 10% when compared to the third quarter of 1997. Increased
unit volume generated an 11% sales increase. Net sales also increased 3%
from business acquisitions and 1% from the acquisition of certain portions of
the Osteonics' domestic distribution network and the resulting direct sales.
These increases were partially offset by a 3% decrease in sales from
unfavorable foreign currency comparisons and a 2% decrease from a decline in
selling prices.
The Company's domestic sales increased 14% in the third quarter and the
first nine months of 1998 compared to 1997. The domestic sales increase
results from strong shipments of endoscopic equipment, powered surgical
instruments and orthopaedic implants, increased revenue from physical therapy
services and higher shipments of hospital beds and stretchers. International
sales increased 1% in the third quarter and declined 4% in the first nine
months of 1998 when compared to 1997 as unfavorable foreign currency
comparisons and lower shipments in Japan generally offset higher shipments in
Europe, the Pacific Rim and other international markets. Unfavorable foreign
currency comparisons lowered the dollar value of international sales by $6.9
million, or 9%, for the third quarter and $19.1 million, or 7%, for the first
nine months.
Worldwide sales of Stryker Surgical products (principally orthopaedic
products) increased 8% in the third quarter and the first nine months. The
sales gains resulted from higher shipments of endoscopic equipment, powered
surgical instruments and orthopaedic implants, partially offset by the lower
dollar translation of foreign currency sales. Worldwide sales of Stryker
Medical products (principally stretchers/beds and physical therapy services)
increased 20% in the third quarter and 11% in the first nine months resulting
from increased physical therapy revenues and higher shipments of hospital
beds and stretchers. Sales of distributed products, which are sourced from
other companies principally for sale in Japan, decreased 16% in the third
quarter and declined 8% in the first nine months.
Cost of sales for the first nine months of 1998 represented 41.5% of
sales compared to 40.8% in the same period of 1997. In the third quarter,
the cost of sales percentage increased to 42.8% from 41.1% in the third
quarter of 1997. The higher cost of sales rate resulted from changes in
sales mix and the general weakness in foreign currencies which has increased
the cost of U.S. dollar based inventory purchases for the Company's
international operations. Research, development and engineering (R,D&E)
expense decreased 2.1% for the first nine months of 1998, and represented
5.3% of sales in 1998 compared to 5.8% in the same period of 1997. In the
third quarter, these expenses decreased 8.9%, and were 5.0% of sales in 1998
compared to 6.0% in 1997. R,D&E expense decreased in the third quarter due
to cost reductions at Stryker Biotech in anticipation of the acquisition of
the manufacturing rights and facilities from Creative BioMolecules. The
Company's R,D&E spending represents the continued development of the OP-1
bone growth device at Stryker Biotech and the Company-wide focus on new
product development. The Company's commitment to product development has
resulted in several new product introductions in the first nine months of
1998 including the Quantum 5000 lightsource, the TPS Reciprocating Saw, the
InterPulse System, System 4, the next generation battery powered instrument
system, Scorpio CR Knee implant and the international introduction of the
Scorpio Knee system. Selling, general and administrative (S,G&A) expenses
increased 3.4% in the first nine months and 5.5% in the third quarter of 1998
compared to the same periods of 1997. These costs decreased to 33.7% of
sales in the first nine months of 1998 compared to 35.1% of sales in the same
period of 1997. In the third quarter, S,G&A costs represented 33.4% of sales
compared to 34.7% in the same period of 1997. The increase in S,G,&A costs
is principally a result of increased selling expenses from larger sales
forces and an increase in sales. Other income increased $3.2 million, or
41.8%, for the first nine months and $2.1 million, or 92.7%, in the third
quarter of 1998 compared to the same periods of 1997. The increase in other
income in the first nine months and third quarter is due to increased
interest income attributable to higher levels of invested cash and lower
interest expense on the Company's yen denominated debt partially offset by
foreign currency transaction losses.
The effective tax rate decreased to 35.0% for the first nine months of
1998 compared to 37.0% in the same period of 1997 and to 35.0% in the third
quarter of 1998 compared to 36.7% in 1997 as a result of a more favorable mix
of operating results among tax jurisdictions and tax-free interest on short-
term investments. For the first nine months of 1998, earnings before income
taxes increased 16.2% and net earnings increased 20.0% compared to the first
nine months of 1997. Earnings before income taxes increased 16.8% and net
earnings increased 20.0% in the third quarter of 1998 when compared to 1997.
Liquidity and Capital Resources
_______________________________
Stryker's financial position at September 30, 1998 remained strong with
cash and marketable securities of $358.8 million and working capital of
$534.4 million. Accounts receivable at September 30, 1998 increased 8% from
December 31, 1997 as a result of increased sales and a 4-day increase in days
sales outstanding from 62 days at December 31, 1997 to 66 days at September
30, 1998. Inventories at September 30, 1998 increased 22% from December 31,
1997 and days in inventory increased 13 days to 140 days from 127 days at
December 31, 1997 partially as a result of inventories purchased in acquiring
portions of the Osteonics' domestic distribution network.
The Company generated $76.2 million of cash from operations in the first
nine months of 1998 compared to $50.8 million in the same period of 1997.
The lower level of cash provided by operations in 1997 is primarily due to
first quarter payments in 1997 of attorney fees and taxes totaling $37.9
million relating to the gain on patent judgement received in the fourth
quarter of 1996. Excluding those payments, cash provided from operations in
the first nine months of 1997 would have been $88.7 million. The decrease in
cash from operations from the adjusted 1997 amount is due principally to
higher inventory levels and decreases in accrued expenses. In the first nine
months of 1998, $27.2 million of cash was used for acquisitions, $15.0
million of which related to the purchase of two domestic implant
distributors. In addition to cash and marketable securities of $358.8
million, the Company has unsecured lines of credit with banks totaling $53.3
million, none of which was utilized at September 30, 1998.
On August 14, 1998, the Company announced it had entered into a
definitive agreement to acquire Howmedica, the orthopaedic division of
Pfizer, Inc., for $1.9 billion in cash. On October 22, 1998, the Company
reached an agreement with Pfizer to reduce the purchase price for Howmedica
to $1.65 billion in cash as a result of changes in the financial markets.
The transaction is expected to be financed with a combination of cash and
debt, and is expected to be completed in the fourth quarter of 1998. The
Company is currently seeking bank financing to complete the acquisition of
Howmedica. The credit facilities being sought would provide up to $1.65
billion of financing to complete the acquisition and provide a revolving
credit line to meet the working capital needs of the combined companies.
On October 16, 1998, the Company announced that it entered into a
definitive agreement to acquire the manufacturing rights and facilities for
its OP-1 bone growth device from Creative BioMolecules, Inc., for
approximately $20 million in cash plus future increases in royalty payments.
The transaction is expected to close in the fourth quarter of 1998.
Other Matters
_____________
The Company has in place a comprehensive plan to prepare for the Year
2000 (Y2K) so that its computer and other systems will function properly with
respect to dates in the year 2000 and beyond. The scope of the Company's Y2K
plan includes replacement or upgrades of information technology such as
software or hardware, non information technology systems that may include
embedded chips such as microcontrollers contained in manufacturing equipment
and in Company products and the readiness of key third parties such as
suppliers, customers and financial institutions. If needed conversions or
modifications are not made or completed, the Y2K issue could have a material
impact on the operations of the Company.
The Company expects that it will be Y2K compliant by September 1999. The
majority of the Company's products that contain embedded chips are now Y2K
compliant. The Company will continue testing throughout 1999 and will
formulate and finalize any contingency plans needed during that time. The
total estimated incremental cost for the Y2K project is approximately $3.0
million. All costs will be expensed as incurred and will be funded through
operating cash flows.
The Company is in contact with key third parties, such as suppliers,
customers and financial institutions to assure no interruption of its
business relationships occur due to Y2K compliance issues. However, if the
needed conversions or modifications to computer or other systems are not
made, or are not completed timely by these third parties, the Y2K issue could
have a material impact on the operations of the Company.
The costs and timing of the Y2K project are based on management's best
estimates, which were derived utilizing assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific
factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct relevant computer codes, and similar
uncertainties.
In the third quarter, the Company entered into an interest rate swap
agreement which fixed the base rate, or 90 day LIBOR, at a weighted average
rate of 5.8% on $700 million of the $1.65 billion floating rate debt facility
associated with the purchase of Howmedica. The interest rate swap has been
designated as a hedge of an anticipated transaction, with any changes in fair
value being deferred. If for any reason the Howmedica acquisition does not
close, the Company will be required to close out its hedge positions and will
recognize a corresponding gain or loss in the statement of earnings.
The information contained in this report includes forward-looking
statements within the meaning of the federal securities laws that are subject
to risks and uncertainties. Factors that could cause the Company's actual
results and financial condition to differ from the Company's expectations
include, but are not limited to: a change in economic conditions that
adversely affects the level of demand for the Company's products; changes in
foreign exchange markets; changes in financial markets; difficulties related
to regulatory requirements attendant to consummation of the Howmedica
acquisition; and to the factors referred to above regarding Y2K issues. All
forward-looking statements contained in this report are qualified in their
entirety by this cautionary statement.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Set forth below is a text of the press release issued by the Company
on Thursday, October 22, 1998.
Kalamazoo, Michigan, October 22, 1998 -- Stryker
Corporation (NYSE: SYK) and Pfizer, Inc. (NYSE: PFE)
announced today that, due to changes in the financial
markets, they have amended their agreement to change the
sale price for the Howmedica unit of Pfizer from the
previously announced $1.9 billion in cash to $1.65 billion
in cash. Goldman Sachs Credit Partners L.P. and Bank of
America have provided a commitment to finance the
transaction.
All other terms and conditions of the agreement remain
substantially the same and the companies continue to expect
to complete the transaction during the fourth quarter.
Stryker Corporation develops, manufactures and markets
specialty surgical and medical products, including
orthopaedic implants, powered surgical instruments,
endoscopic systems, patient care and handling equipment for
the global market and provides outpatient physical therapy
services in the United States.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits listed below are submitted as a separate section of
this report following the signature page:
Exhibit 11 - Statement Re: Computation of Earnings per
Share of Common Stock
Exhibit 27 - Financial Data Schedule (included in EDGAR
filing only)
(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)
November 2, 1998 JOHN W. BROWN
_________________ ________________________________________
Date John W. Brown, Chairman, President
and Chief Executive Officer
(Principal Executive Officer)
November 2, 1998 DAVID J. SIMPSON
_________________ ________________________________________
Date David J. Simpson, Vice President,
Chief Financial Officer and Secretary
(Principal Financial Officer)
Exhibit 11
STRYKER CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
September 30, 1998
<TABLE>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
----------- ----------- ----------- -----------
Basic:
Average number of shares
<S> <C> <C> <C> <C>
outstanding 96,362,000 96,038,000 96,253,000 96,298,000
----------- ----------- ----------- -----------
Net earnings $34,750,000 $28,970,000 $106,010,000 $88,370,000
=========== =========== ============ ===========
Basic net earnings per
share of common stock $.36 $.30 $1.10 $.92
==== ==== ==== ====
Diluted:
Average number of shares
outstanding 96,362,000 96,038,000 96,253,000 96,298,000
Net effect of dilutive
stock options, based on
the treasury stock method
using average market price 1,677,000 2,137,000 1,787,000 1,851,000
----------- ----------- ----------- -----------
Total diluted shares 98,039,000 98,175,000 98,040,000 98,149,000
=========== =========== =========== ===========
Diluted net earnings per
share of common stock $.35 $.30 $1.08 $.90
==== ==== ==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 223,069
<SECURITIES> 135,731
<RECEIVABLES> 191,173
<ALLOWANCES> 10,200
<INVENTORY> 165,971
<CURRENT-ASSETS> 818,750
<PP&E> 182,998
<DEPRECIATION> 156,852
<TOTAL-ASSETS> 1,071,675
<CURRENT-LIABILITIES> 284,341
<BONDS> 0
0
0
<COMMON> 9,642
<OTHER-SE> 716,128
<TOTAL-LIABILITY-AND-EQUITY> 1,071,675
<SALES> 260,965
<TOTAL-REVENUES> 260,965
<CGS> 111,810
<TOTAL-COSTS> 211,917
<OTHER-EXPENSES> (4,412)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 555
<INCOME-PRETAX> 53,460
<INCOME-TAX> 18,710
<INCOME-CONTINUING> 34,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,750
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.35
</TABLE>
