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 March 31, 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:
96,274,401 shares of Common Stock, $.10 par value, as of April 30, 1998.
PART I. - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
STRYKER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share amounts)
March 31 December 31
1998 1997
----------- -----------
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 70,680 $ 154,027
Marketable debt securities 264,776 197,041
Accounts receivable, less allowance
of $11,900 (1997 - $11,700) 184,596 176,214
Inventories 152,084 136,246
Deferred income taxes 78,733 78,896
Prepaid expenses and other current assets 18,671 14,184
--------- ---------
Total Current Assets 769,540 756,608
Property, Plant and Equipment, less allowance
for depreciation of $141,667 (1997 - $136,582) 164,367 163,867
Other Assets 63,381 64,600
--------- ---------
TOTAL ASSETS $ 997,288 $ 985,075
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 58,586 $ 55,034
Accrued compensation 29,156 43,927
Income taxes 53,484 36,971
Accrued expenses and other liabilities 69,277 93,452
Current maturities of long-term debt 72,288 73,627
--------- ---------
Total Current Liabilities 282,791 303,011
Long Term Debt, excluding current maturities 3,754 4,449
Other Liabilities 28,852 29,168
Minority Interest 34,572 35,672
Stockholders' Equity
Common stock, $.10 par value:
Authorized - 150,000 shares
Outstanding - 96,208 shares (1997 - 96,059) 9,621 9,606
Additional paid-in capital 3,627 18
Retained earnings 648,949 612,939
Accumulated other comprehensive income (14,878) (9,788)
--------- ---------
Total Stockholders' Equity 647,319 612,775
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 997,288 $ 985,075
========= =========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
STRYKER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in thousands, except per share amounts)
Three Months Ended
March 31
1998 1997
-------- --------
<S> <C> <C>
Net sales $253,588 $239,536
Cost of sales 101,413 97,685
-------- --------
Gross profit 152,175 141,851
Operating expenses:
Research, development and engineering 13,030 13,698
Selling, general and administrative 86,894 84,013
-------- --------
99,924 97,711
-------- --------
Operating income 52,251 44,140
Other income 3,149 3,700
-------- --------
Earnings before income taxes 55,400 47,840
Income taxes 19,390 17,820
-------- --------
Net earnings $ 36,010 $ 30,020
======== ========
Net earnings per share of common stock:
Basic $.37 $.31
==== ====
Diluted $.37 $.30
==== ====
Average outstanding shares for the period:
Basic 96,114 96,863
Diluted 98,056 98,478
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
STRYKER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(Amounts in thousands, except per share amounts)
Accumulated
Additional Other
Common Paid-In Retained Comprehensive
Stock Capital Earnings Income 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 36,010 36,010
Net unrealized gains
on securities 11 11
Foreign currency
translation adjustments (5,101) (5,101)
--------
Comprehensive income 30,920
--------
Sales of 149 shares of
common stock under
stock option and
benefit plans,
including $1,273
income tax benefit 15 3,609 3,624
------- ---------- -------- ---------- -------
Balance at
March 31, 1998 $9,621 $3,627 $648,949 ($14,878) $647,319
======= ========== ======== ========== ========
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.
<TABLE>
STRYKER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
Three Months Ended
March 31
1998 1997
-------- --------
OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $36,010 $30,020
Adjustments to reconcile net earnings to
net cash provided by (used in) operating
activities:
Depreciation 6,561 6,393
Amortization 1,314 3,345
Minority interest (409) 319
Changes in operating assets and liabilities,
net of effects of business acquisitions:
Increase in accounts receivable (9,911) (16,113)
Increase in inventories (15,841) (5,880)
Increase (decrease) in accounts payable 3,843 (13,041)
Decrease in accrued expenses (21,144) (15,517)
Increase (decrease) in income taxes 16,460 (12,231)
Other (4,579) (239)
-------- --------
Net cash provided by (used in) operating
activities 12,304 (22,944)
INVESTING AND FINANCING ACTIVITIES
Purchases of property, plant and equipment (8,049) (7,050)
Sales (purchases) of marketable securities (67,735) 30,210
Business acquisitions (12,712) (4,999)
Payments on borrowings (388) (1,278)
Dividends paid (10,580) (9,679)
Proceeds from exercise of stock options 3,624 3,255
Repurchases of common stock 0 (23,296)
Other (157) 4,920
-------- --------
Net cash used in investing
and financing activities (95,997) (7,917)
Effect of exchange rate changes on
cash and cash equivalents 346 (1,203)
-------- --------
Decrease in cash and cash equivalents ($83,347) ($32,064)
========= ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
STRYKER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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 shareholders' 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 shareholders' equity, to be aggregated and disclosed as
accumulated other comprehensive income, a component of shareholders' 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 reclassed to conform to the requirements of
Statement No. 130. Other comprehensive income for the three months ended March
31, 1997 was $24,355.
In June 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information". Results of operations and
financial position will be unaffected by implementation of this new standard.
Statement No. 131 is effective for financial periods beginning after December
15, 1997 and requires comparative information for earlier years to be restated.
The Statement does not require interim period disclosures in the year of
adoption. Management is currently evaluating disclosure requirements under the
new standard.
Note 2. INVENTORIES
Inventories are as follows (in thousands):
March 31 December 31
1998 1997
--------- ---------
Finished goods $ 111,156 $ 103,744
Work-in-process 13,468 10,661
Raw material 35,179 29,560
--------- ---------
FIFO Cost 159,803 143,965
Less LIFO reserve 7,719 7,719
--------- ---------
$ 152,084 $ 136,246
========= =========
FIFO cost approximates replacement cost.
Note 3. BUSINESS ACQUISITIONS
During the first quarter of 1998, the Company's subsidiary, Physiotherapy
Associates, Inc., purchased certain physical therapy clinic operations at an
aggregate cost of $0.9 million. In addition, the Company purchased a domestic
distributor of its orthopaedic implants at a cost of $11.3 million. 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.
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
March 31 %
1998 1997 Chg
-------- -------- ----
Domestic/International Sales
Domestic $171,152 $149,592 14.4
International 82,436 89,944 (8.3)
-------- --------
Total net sales $253,588 $239,536 5.9
======== ========
Product Line Sales
Stryker Surgical $193,552 $178,619 8.4
Stryker Medical 51,350 51,337 0.0
Distributed Products 8,686 9,580 (9.3)
-------- --------
Total net sales $253,588 $239,536 5.9
======== ========
Stryker Corporation's net sales increased 6% in the first quarter of 1998
compared to the same period in 1997. Increased unit volume generated a 6%
sales increase. Net sales also increased 2% from business acquisitions and 1%
from the conversion of certain portions of the Osteonics' domestic distribution
network to direct sales. These increases were partially offset by a 2%
decrease in sales from unfavorable foreign currency comparisons and a combined
1% decrease from a decline in selling prices and divested businesses.
The Company's domestic sales increased 14% in the first quarter of 1998
compared to 1997. The domestic sales increase results from strong shipments of
endoscopic equipment, powered surgical instruments and orthopaedic implants and
increased revenue from physical therapy services. International sales
decreased 8% in the first quarter of 1998 when compared to 1997 as unfavorable
foreign currency comparisons and lower shipments in Asian markets more than
offset higher shipments in Europe and other international markets. Unfavorable
foreign currency comparisons lowered the dollar value of international sales by
$4.8 million or 5% for the quarter.
Worldwide sales of Stryker Surgical products (principally orthopaedic
products) increased 8% in the first quarter. 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) in the first
quarter were comparable with the prior year first quarter as increased physical
therapy revenue was offset by lower shipments of hospital beds and stretchers.
Sales of Distributed products, which are sourced from other companies
principally for sale in Japan, declined 9% in the first quarter.
Cost of sales in the first quarter of 1998 represented 40.0% of sales
compared to 40.8% in the same period of 1997. The lower cost of sales
percentage in 1998 resulted from product mix and the Company's continued
efforts in product cost reductions. Research, development and engineering
(R,D&E) expense decreased 5% for the first quarter and represented 5.1% of
sales in 1998 compared to 5.7% in the first quarter of 1997. 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 three months of 1998 including
the Quantum 5000 lightsource, the TPS Reciprocating Saw, the InterPulse System,
the First Care Ultra bed and the international introduction of the Scorpio Knee
system. Selling, general and administrative (S,G&A) expenses increased 3.4% in
the first quarter of 1998 and represented 34.3% of sales compared to 35.1% 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 decreased $0.6 million, or 14.9%, in the first quarter of
1998 compared to the same period of 1997. The decrease in other income in the
first quarter is due to a decrease in foreign currency transaction gains.
The effective tax rate decreased to 35.0% in the first quarter of 1998
compared to 37.2% in the same period of 1997. The decrease in the income tax
rate is due to a more favorable mix of operating results among tax
jurisdictions, principally Japan, and tax-free interest on short-term
investments. Earnings before income taxes increased 15.8% and net earnings
increased 20.0% in the first quarter of 1998 when compared to 1997.
Liquidity and Capital Resources
_______________________________
Stryker's financial position at March 31, 1998 remained strong with cash
and marketable securities of $335.5 million. Working capital at March 31, 1997
increased by $33.1 million to $486.7 million from $453.6 million at December
31, 1997. Accounts receivable at March 31, 1998 increased 5% from
December 31, 1997 and days sales outstanding increased 1 day from 62 days at
December 31, 1997 to 63 days at March 31, 1998. Inventories at March 31, 1998
increased 12% from December 31, 1997 and days in inventory increased 15 days to
142 days from 127 days at December 31, 1997.
The Company provided $12.3 million of cash from operations in the first
three months of 1998, compared to a use of cash of $22.9 million in the same
period of 1997. The large use of cash in the prior year is the result of
paying attorney fees and taxes totaling $37.9 million on the patent judgement
received in the fourth quarter of 1996. Excluding these payments, cash
provided by operations in the first quarter of 1997 would be $15.0 million. In
the first three months, $12.7 million of cash was used for acquisitions, $11.3
million of which related to the purchase of a previous distributor. Cash and
marketable securities of $335.5 million and anticipated future cash flows from
operations are expected to be sufficient to fund future operating and capital
requirements. The Company also has unsecured lines of credit with banks
totaling $53.3 million, none of which was utilized at March 31, 1998.
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 21, 1998, the
stockholders elected seven directors to serve until the next Annual
Meeting of Stockholders. The voting results for each nominee were
as follows:
Shares
-------------------------
Name For Withheld
------------------------- ---------- --------
John W. Brown 88,911,422 561,390
Howard E. Cox, Jr. 88,921,244 551,568
Donald M. Engelman, Ph.D. 88,919,519 553,293
Jerome H. Grossman, M.D. 88,921,359 551,453
John S. Lillard 88,907,181 565,631
William U. Parfet 88,848,944 623,868
Ronda E. Stryker 88,948,043 524,769
The stockholders also approved at the Annual Meeting the adoption
of the 1998 Stock Option Plan (Exhibit 10(i) in this Form 10-Q).
The voting results were 72,641,981 votes for, 6,376,503 votes
against, and 596,210 votes abstained.
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 10(i) - 1998 Stock Option Plan
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)
May 7, 1998 JOHN W. BROWN
_________________ _________________________________________
Date John W. Brown, Chairman, President
and Chief Executive Officer
(Principal Executive Officer)
May 7, 1998 DAVID J. SIMPSON
_________________ _________________________________________
Date David J. Simpson, Vice President,
Chief Financial Officer and Secretary
(Principal Financial Officer)
Exhibit 10(i)
1998 Stock Option Plan
of
STRYKER CORPORATION
(effective April 21, 1998)
1. Purpose. The purpose of the 1998 Stock Option Plan of Stryker
Corporation (the "Plan") is to advance the interests of Stryker Corporation
(the "Company") and its subsidiaries by providing a larger personal and
financial interest in the success of the Company and its subsidiaries to
employees and directors upon whose judgment, interest and special efforts the
Company and its subsidiaries are dependent for the successful conduct of its
and their operations and to enable the Company and its subsidiaries to compete
effectively with others for the services of new employees and directors as may
be needed for the continued improvement of the enterprise. It is believed that
the acquisition of such interest will stimulate the efforts of such employees
and directors on behalf of the Company and its subsidiaries and strengthen
their desire to continue to serve the Company and its subsidiaries.
2. Participants. Options may be granted under the Plan to any
employee or director of the Company and its subsidiaries. The employees and
directors of the Company and its subsidiaries to whom options are granted and
the terms of such options shall be determined by the Stock Option Committee
appointed pursuant to Section 10 hereof, except that the full Board of
Directors, acting by affirmative vote of a majority of the directors then in
office, shall make such determinations in the case of directors who are not
also employees of the Company or any subsidiary ("Non-Employee Directors"). A
grantee may hold more than one option. The number of shares of Common Stock,
par value $.10 per share (the "Common Stock"), of the Company subject to
options that may be granted under this Plan in any calendar year to any
employee or director shall not exceed 500,000 (the "Annual Limit"). To the
extent required by Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), shares subject to options that are canceled shall
continue to be counted against the Annual Limit and, if the purchase price of
the shares subject to an option is reduced after the grant of such option, the
transaction shall be treated as a cancellation of such option and the grant of
a new option and both options shall be counted against the Annual Limit.
Nothing contained in this Plan, nor in any option granted pursuant to
this Plan, shall confer upon any employee or director any right to the
continuation of his or her employment or directorship nor limit in any way the
right of the Company or its subsidiaries to terminate such employment or
directorship at any time.
As used herein, the term "subsidiary" shall mean any present or
future entity that is controlled by the Company, directly or through one or
more intermediaries.
3. Effectiveness and Termination of Plan. This Plan shall become
effective upon approval thereof by the holders of a majority of the votes cast
at a meeting held, among other things, for such purpose, provided that the
total vote cast on the proposal represents over 50% in interest of the Common
Stock entitled to vote at the meeting. The date of the meeting at which such
approval is given shall be the adoption date of this Plan. This Plan shall
terminate on the earliest of (i) ten (10) years from its adoption date (ii)
when all shares of Common Stock that may be issued under this Plan shall have
been issued through exercise of options granted under this Plan or (iii) at any
earlier time that the Board of Directors may determine.
Any option outstanding under this Plan at the time of its termination
shall remain in effect in accordance with its terms and conditions and those of
this Plan.
4. The Common Stock. The aggregate number of shares of Common Stock
of the Company that may be issued under this Plan shall consist of 10,000,000
shares, subject to further adjustment as provided in Section 7 hereof. Such
number of shares may be set aside out of the authorized but unissued shares of
Common Stock of the Company not reserved for any other purpose or out of shares
of Common Stock held in or acquired for the treasury of the Company. All or
any shares of Common Stock subjected under this Plan to an option that, for any
reason, is canceled, terminates, lapses or expires unexercised as to such
shares may again be subjected to an option under this Plan.
5. Types of Options and Terms and Conditions.
(a) Options granted under this Plan shall be in the form of (i)
incentive stock options as defined in Section 422 of the Code ("incentive stock
options") or (ii) options not qualifying under said Section ("nonstatutory
stock options").
(b) Options may be granted at any time and from time to time prior
to the termination of this Plan. Except as hereinafter provided, all options
granted pursuant to this Plan shall be subject to the following terms and
conditions:
(i) Price. The purchase price of the shares of Common Stock
issuable upon exercise of options granted under this Plan shall be not
less than 100% of the fair market value of the Common Stock on the date of
the grant of the option. For purposes of this Plan, "fair market value"
of the Common Stock shall mean the closing sales price of the Common Stock
(or the closing bid, if no sales were reported) as reported on the New
York Stock Exchange-Composite Transactions for the last market trading day
prior to the time of determination or, if the Common Stock is not then
listed on the New York Stock Exchange, the price determined in good faith
by the Stock Option Committee (or the Board of Directors in the case of
options granted to Non-Employee Directors). The purchase price shall be
paid in full at the time of such purchase, in (A) cash, (B) shares of
Common Stock of the Company (which, in the case of shares acquired upon
exercise of an option, must have been owned for more than six months)
valued at the fair market value of the Common Stock on the date of
purchase or (C) any combination of cash and Common Stock. In addition, if
the Stock Option Committee (or the Board of Directors in the case of
options granted to Non-Employee Directors) so provides at the time of
grant, an option may be exercised by delivering a properly executed
exercise notice together with irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds
necessary to pay the purchase price and applicable withholding taxes in
full and such other documents as the Stock Option Committee (or the Board
of Directors in the case of options granted to Non-Employee Directors) may
determine. The purchase price shall be subject to adjustment, but only as
provided in Section 7 hereof.
(ii) Duration and Exercise of Options. Options may be granted for
terms of up to but not exceeding ten (10) years from the date the
particular option is granted. Options shall be exercisable as provided by
the Stock Option Committee (or the Board of Directors in the case of
options granted to Non-Employee Directors) at the time of grant thereof.
(iii) Termination of Employment or Service as a Director. Upon the
termination of the grantee's employment or service as a director, his or
her rights to exercise an option shall be only as follows:
Death, Disability or Retirement. If the grantee's employment is
terminated by reason of death, disability or retirement, the grantee or
the grantee's estate may, within one year following such termination,
exercise the option with respect to all or any part of the shares of
Common Stock subject thereto, regardless of whether the right to purchase
such shares had accrued on or before the last day on which the grantee was
either an employee or director of the Company or any subsidiary. If an
incentive stock option is exercised after the exercise period that is
applicable for purposes of Section 422 of the Code, such option shall be
treated as a nonstatutory stock option. For purposes of this Plan,
"disability" shall mean qualifying for and receiving payments under a
disability pay plan of the Company or any subsidiary and "retirement"
shall mean termination of employment with the Company and/or its
subsidiaries on or after the grantee's 65th birthday or the grantee's 60th
birthday if the grantee has completed ten (10) years of service with the
Company and/or its subsidiaries.
Other Reasons. If the grantee ceases to be an employee or director for
any reason other than those provided above under "Death, Disability or
Retirement," the grantee or the grantee's estate (in the event of the
grantee's death after such termination) may, within the one month period
following such termination, exercise the option with respect to only such
number of shares of Common Stock as to which the right of exercise had
accrued on or before the last day on which the grantee was either an
employee or director of the Company or any subsidiary unless the Stock
Option Committee (or the Board of Directors in the case of options granted
to Non-Employee Directors) determines that the option shall be exercisable
as to a greater portion thereof.
General. Notwithstanding the foregoing, no option shall be exercisable in
whole or in part (A) after the termination date provided in the option, or
(B) except as provided in the second paragraph of Section 10 or in the
event of termination of employment or service as a director because of
disability, retirement or death, unless the grantee shall have continued
in the employ of, or to serve as a director of, the Company or one of its
subsidiaries for one year following the date the option was granted. A
grantee's "estate" shall mean the grantee's legal representatives upon the
grantee's death or any person who acquires the right under the laws of
descent and distribution to exercise an option by reason of the grantee's
death.
(iv) Transferability of Option. Except as otherwise provided
herein, options shall be transferable only by will or the laws of descent
and distribution and shall be exercisable during the grantee's lifetime
only by him or her. A grantee may transfer any nonstatutory stock option
granted under this Plan to members of his or her immediate family (defined
as a spouse, children and/or grandchildren) or to one or more trusts for
the benefit of such family members if the instrument evidencing such
option expressly so provides and the grantee does not receive any
consideration for the transfer; provided, however, that any such
transferred option shall continue to be subject to the same terms and
conditions that were applicable to such option immediately prior to its
transfer (except that such transferred option may not be further
transferred by the transferee during the transferee's lifetime). An
option and all rights thereunder shall terminate immediately if the holder
attempts to or does sell, assign, transfer, pledge, hypothecate or
otherwise dispose of the option or any rights thereunder to any person
except as permitted herein.
(v) Surrender of Options. The Stock Option Committee (or the Board
of Directors in the case of options granted to Non-Employee Directors) may
require the surrender of outstanding options as a condition precedent to
the grant of new options. Upon each such surrender, the option or options
surrendered shall be canceled and the shares of Common Stock of the
Company previously subject to the option or options under this Plan shall
thereafter be available for the grant of options under this Plan.
(vi) Other Terms and Conditions. Options may also contain such
other provisions, which shall not be inconsistent with any of the
foregoing terms, as the Stock Option Committee (or the Board of Directors
in the case of options granted to Non-Employee Directors) shall deem
appropriate.
(c) Incentive stock options granted pursuant to this Plan shall be
subject to all the terms and conditions included in subsection (b) and to the
following terms and conditions:
(i) No incentive stock option shall be granted to an individual who
is not an employee of the Company or a "subsidiary corporation" as defined
in Section 424(f) of the Code;
(ii) No incentive stock option shall be granted to an employee who
owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company; and
(iii) No incentive stock option may be granted under this Plan if
such grant, together with any applicable prior grants that are incentive
stock options within the meaning of Section 422(b) of the Code, would
exceed any maximum established under the Code for incentive stock options
that may be granted to an individual employee.
6. Rights of a Shareholder. A recipient of an option shall have no
rights as a shareholder with respect to any shares issuable or transferable
upon exercise thereof until the date of issuance of a stock certificate for
such shares. Except as otherwise provided pursuant to Section 7 hereof, no
adjustment shall be made for dividends or other rights for which the record
date is prior to the date of such stock certificate.
7. Adjustment of and Changes in Common Stock. In the event that the
shares of Common Stock of the Company, as presently constituted, shall be
changed into or exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, split-up,
combination of shares, or otherwise) or if the number of such shares of Common
Stock shall be increased through the payment of a stock dividend or a dividend
on the shares of Common Stock of rights or warrants to purchase securities of
the Company shall be made, then there shall be substituted for or added to each
share of Common Stock theretofore appropriated or thereafter subject or that
may become subject to an option under this Plan, the number and kind of shares
of stock or other securities into which each outstanding share of Common Stock
of the Company shall be so changed, or for which each such share shall be
exchanged, or to which each such share shall be entitled, as the case may be,
and references herein to the Common Stock shall be deemed to be references to
any such stock or other securities as appropriate. Outstanding options shall
also be appropriately amended as to price and other terms as may be necessary
to reflect the foregoing events. In the event there shall be any other change
in the number or kind of the outstanding shares of the Common Stock of the
Company, or of any stock or other securities into which such Common Stock shall
have been changed or for which it shall have been exchanged, then if the Board
of Directors shall, in its sole discretion, determine that such change
equitably requires an adjustment in any option theretofore granted or that may
be granted under this Plan, such adjustments shall be made in accordance with
such determination. Fractional shares resulting from any adjustment in options
pursuant to this Section 7 may be settled in cash or otherwise as the Board of
Directors shall determine. Notice of any adjustment shall be given by the
Company to each holder of an option that shall have been so adjusted and such
adjustment (whether or not such notice is given) shall be effective and binding
for all purposes of this Plan.
8. Securities Act Requirements. No option granted pursuant to this
Plan shall be exercisable in whole or in part, and the Company shall not be
obligated to sell any shares of Common Stock subject to any such option, if
such exercise and sale would, in the opinion of counsel for the Company,
violate the Securities Act of 1933 (or other Federal or State statutes having
similar requirements), as in effect at that time. Each option shall be subject
to the further requirement that, if at any time the Board of Directors shall
determine in its discretion that the listing or qualification of the shares of
Common Stock subject to such option under any securities exchange requirements
or under any applicable law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the issue of shares thereunder, such option may not be exercised in whole
or in part unless such listing, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Board of
Directors.
9. Withholding. Appropriate provision (which may, in accordance
with rules determined by the Stock Option Committee (or the Board of Directors
in the case of options granted to Non-Employee Directors), include the election
by the grantee to have the Company withhold from the Common Stock to be issued
upon exercise of an option a number of shares having an aggregate fair market
value that would satisfy the withholding amount due or to deliver to the
Company shares of Common Stock already owned having such aggregate fair market
value to satisfy the withholding amount) shall be made for all taxes required
to be withheld from shares of Common Stock issued under this Plan under the
applicable laws or other regulations of any governmental authority, whether
federal, state or local, and domestic or foreign. To that end, the Company may
at any time take such steps as it may deem necessary or appropriate (including
sale or retention of shares) to provide for payment of such taxes.
10. Administration and Amendment of Plan. The Board of Directors
shall appoint a Stock Option Committee composed of two or more directors. The
Board of Directors (but not the Stock Option Committee) may from time to time
remove members from such Committee or add members thereto, and vacancies in
such Committee, however caused, shall be filled by the Board. The Stock Option
Committee (or the Board of Directors in the case of options granted to Non-
Employee Directors) from time to time may adopt rules and regulations for
carrying out this Plan. The interpretation and construction by the Stock
Option Committee (or the Board of Directors in the case of options granted to
Non-Employee Directors) of any provision of this Plan or any option granted
pursuant hereto shall be final and conclusive. No member of the Stock Option
Committee or the Board of Directors shall be liable for any action or
determination made in good faith with respect to this Plan or any option
granted pursuant thereto. The Board of Directors (but not the Stock Option
Committee) may from time to time make such changes in and additions to this
Plan as it may deem proper and in the best interests of the Company, without
further action on the part of the shareholders of the Company except as
required by law, regulation or by the rules of the principal trading market of
the Company's Common Stock at that time; provided, however, that, unless the
shareholders of the Company shall have first approved thereof (i) except as
provided in Section 7 hereof, the total number of shares of Common Stock
subject to this Plan and the Annual Limit shall not be increased and the
minimum purchase price shall not be changed (ii) no option shall be exercisable
more than ten (10) years after the date it is granted and (iii) the expiration
date of this Plan shall not be extended.
The Board of Directors shall have the power, in the event of any
disposition of substantially all of the assets of the Company, its dissolution
or of any consolidation or merger of the Company with or into any other
corporation, to amend all outstanding options to permit the exercise of all
such options prior to the effectiveness of any such transaction and to
terminate such options as of such effectiveness. If the Board of Directors
shall exercise such power, all options then outstanding and subject to such
requirement shall be deemed to have been amended to permit the exercise thereof
in whole or in part by the grantee at any time or from time to time as
determined by the Board of Directors prior to the effectiveness of such
transaction and such options shall be deemed to terminate upon such
effectiveness.
Exhibit 11
<TABLE>
STRYKER CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
March 31, 1998
Three Months Ended
March 31
1998 1997
----------- -----------
Basic:
<S> <C> <C>
Average number of shares outstanding 96,114,000 96,863,000
----------- -----------
Net earnings $36,010,000 $30,020,000
=========== ===========
Basic net earnings per share of
common stock $.37 $.31
==== ====
Diluted:
Average number of shares outstanding 96,114,000 96,863,000
Net effect of dilutive stock options,
based on the treasury stock method
using average market price 1,942,000 1,615,000
----------- -----------
Total diluted shares 98,056,000 98,478,000
=========== ===========
Diluted net earnings per share of
common stock $.37 $.30
==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 70,680
<SECURITIES> 264,776
<RECEIVABLES> 196,496
<ALLOWANCES> 11,900
<INVENTORY> 152,084
<CURRENT-ASSETS> 769,540
<PP&E> 164,367
<DEPRECIATION> 141,667
<TOTAL-ASSETS> 997,288
<CURRENT-LIABILITIES> 282,791
<BONDS> 0
0
0
<COMMON> 9,621
<OTHER-SE> 637,698
<TOTAL-LIABILITY-AND-EQUITY> 997,288
<SALES> 253,588
<TOTAL-REVENUES> 253,588
<CGS> 101,413
<TOTAL-COSTS> 201,337
<OTHER-EXPENSES> (3,149)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 933
<INCOME-PRETAX> 55,400
<INCOME-TAX> 19,390
<INCOME-CONTINUING> 36,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,010
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
