-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ms5hF/beV6pKsI8QnKxnDAP/eG2IxiBxdN2ZuGqNSDuAyM/dnIJqFO06uC/I4iJ6 tXeAEjtPzSAQFilyu33epw== 0000310764-97-000009.txt : 19970508 0000310764-97-000009.hdr.sgml : 19970508 ACCESSION NUMBER: 0000310764-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970507 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STRYKER CORP CENTRAL INDEX KEY: 0000310764 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 381239739 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09165 FILM NUMBER: 97597428 BUSINESS ADDRESS: STREET 1: 2725 FAIRFIELD ROAD CITY: KALAMAZOO STATE: MI ZIP: 49002 BUSINESS PHONE: 6163852600 MAIL ADDRESS: STREET 1: P.O. BOX 4085 CITY: KALAMAZOO STATE: MI ZIP: 49003-4085 10-Q 1 1ST QTR 1997 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 -------------- 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 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. 96,004,692 shares of Common Stock, $.10 par value, as of April 30, 1997. PART I - FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS STRYKER CORPORATION AND SUBSIDIARIES (UNAUDITED) March 31 December 31 1997 1996 -------- -------- (in thousands, except per share amounts) ASSETS CURRENTS ASSETS Cash and cash equivalents $143,609 $175,673 Marketable debt securities 161,690 191,900 Accounts receivable, less allowance of $9,600 (1996 - $9,500) 175,304 166,052 Inventories 126,439 127,387 Deferred income taxes 74,082 78,034 Prepaid expenses and other current assets 13,875 14,491 -------- -------- TOTAL CURRENT ASSETS 694,999 753,537 PROPERTY, PLANT AND EQUIPMENT, less allowance for depreciation 167,654 172,303 OTHER ASSETS 69,135 67,666 -------- -------- $931,788 $993,506 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 48,707 $ 62,433 Accrued compensation 25,762 37,693 Income taxes 46,260 56,723 Accrued expenses and other liabilities 77,207 90,489 Current maturities of long-term debt 2,013 4,403 -------- -------- TOTAL CURRENT LIABILITIES 199,949 251,741 LONG-TERM DEBT, excluding current maturities 84,589 89,502 OTHER LIABILITIES 34,616 36,034 MINORITY INTEREST 77,959 85,868 STOCKHOLDERS' EQUITY Common stock, $.10 par value: Authorized-150,000 shares Outstanding-96,075 shares (1996-96,787) 9,608 9,679 Additional paid-in capital 0 5,922 Retained earnings 530,290 514,318 Unrealized gains (losses) on securities (741) 1,196 Foreign translation adjustments (4,482) (754) -------- -------- TOTAL STOCKHOLDERS' EQUITY 534,675 530,361 -------- -------- $931,788 $993,506 ======== ======== See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS STRYKER CORPORATION AND SUBSIDIARIES (UNAUDITED) Three Months Ended March 31 1997 1996 -------- -------- (in thousands, except per share amounts) Net Sales $239,536 $217,623 Costs and expenses: Cost of sales 97,685 89,336 Research, development and engineering 13,698 12,264 Selling, general and administrative 84,013 76,155 -------- -------- 195,396 177,755 -------- -------- OPERATING INCOME 44,140 39,868 Other income 4,019 1,897 -------- -------- EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST 48,159 41,765 Income taxes 17,820 15,870 -------- -------- EARNINGS BEFORE MINORITY INTEREST 30,339 25,895 Minority interest (319) (875) -------- -------- NET EARNINGS $ 30,020 $ 25,020 ======== ======== Net earnings per share of common stock $.31 $.26 ==== ==== Average outstanding shares for the period 96,863 97,146 See accompanying notes to condensed consolidated financial statements.
In 1996 the Company declared a cash dividend of ten cents per share to shareholders of record on December 31, 1996, payable on January 31, 1997. No cash dividends have been declared during 1997. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS STRYKER CORPORATION AND SUBSIDIARIES (UNAUDITED) Three Months Ended March 31 1997 1996 -------- -------- (in thousands) OPERATING ACTIVITIES Net earnings $ 30,020 $ 25,020 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation 6,393 5,925 Amortization 3,345 1,038 Minority interest 319 875 Changes in operating assets and liabilities, net of effects of business acquisitions: Accounts receivable (16,113) (3,913) Inventories (5,880) (8,759) Accounts payable (13,041) 1,874 Accrued expenses (15,517) (6,762) Income taxes (12,231) 12,729 Other (239) (4,845) -------- ----- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (22,944) 23,182 INVESTING AND FINANCING ACTIVITIES Purchases of property, plant and equipment (7,050) (7,803) Sales (purchases) of marketable securities 30,210 (10,960) Business acquisitions (4,999) (3,399) Payments on borrowings (1,278) (359) Dividends paid (9,679) (4,370) Proceeds from exercise of stock options 3,255 2,259 Repurchases of common stock (23,296) (2,436) Other 4,920 (1,267) -------- -------- NET CASH USED IN INVESTING AND FINANCING ACTIVITIES (7,917) (28,335) Effect of exchange rate changes on cash and cash equivalents (1,203) 31 -------- -------- DECREASE IN CASH AND CASH EQUIVALENTS ($ 32,064) ($ 5,122) ======== ======== See accompanying notes to condensed consolidated financial statements.
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. 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, 1996. 2. INVENTORIES Inventories are as follows (in thousands): March 31 December 31 1997 1996 --------- ----------- Finished goods $ 91,200 $ 94,424 Work-in-process 10,429 8,328 Raw material 32,164 31,989 --------- ----------- FIFO Cost 133,793 134,741 Less LIFO reserve 7,354 7,354 --------- ----------- $126,439 $127,387 ========= ===========
FIFO cost approximates replacement cost. 3. BUSINESS ACQUISITIONS During the first quarter of 1997, the Company's subsidiary, Physiotherapy Associates, Inc., purchased certain physical therapy clinic operations at an aggregate cost of $1.7 million. In addition, the Company purchased an additional 1% of the outstanding common stock of Matsumoto Medical Instruments, Inc. at a cost of $1.3 million, thereby increasing its direct ownership interest in Matsumoto to 53%. The Company also purchased the InfraVision product line, which is an infra-red detection technology used in laparoscopic surgery, at a cost of $2.0 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 % 1996 1995 Change -------- -------- ------ Domestic/International Sales Domestic $149,592 $133,687 12 International 89,944 83,936 7 -------- -------- Total Net Sales $239,536 $217,623 10 ======== ======== Product Line Sales Stryker Surgical $178,619 $161,475 11 Stryker Medical 51,337 43,562 18 Matsumoto Distributed Products 9,580 12,586 (24) -------- -------- Total Net Sales $239,536 $217,623 10 ======== ========
Stryker Corporation's net sales increased 10% in the first quarter of 1997 compared to the same period in 1996. Increased unit volume generated a 13% sales increase. Net sales also increased 4% as a result of acquired businesses. These increases were partially offset by a 5% decrease arising from changes in foreign currency exchange rates, a 1% decline from a divested business and a 1% decline in selling prices. The Company's domestic sales increased 12% in the first quarter of 1997 compared to 1996. The domestic sales increase results from higher shipments of orthopaedic implants, powered surgical instruments and endoscopic equipment and increased revenue from physical therapy services and higher shipments of hospital beds and stretchers. International sales increased 7% in the first quarter of 1997 compared to the same period of 1996. The increase in international sales is the result of strong shipments of Stryker Surgical products, which more than offset unfavorable currency comparisons which reduced the dollar value of the international sales increase by $9.8 million, or 12%, for the quarter. Stryker Surgical product sales (principally orthopaedic products) increased 11%, led by increased shipments of orthopaedic implants, powered surgical instruments and endoscopic equipment reduced by lower dollar translation of foreign currency sales. Stryker Medical product sales (principally stretchers/beds and physical therapy services) increased 18% in the first quarter resulting from higher physical therapy revenues and increased shipments of hospital beds and stretchers. Sales of Matsumoto distributed products, which are sourced from other companies for sale in Japan, declined 24% in the first quarter but were comparable to fourth quarter 1996 levels. The decline resulted principally from unfavorable foreign currency comparisons in Japan. In January 1997, the Company sold its Sterilizer Service Division, which was engaged in the sale, service and repair of sterilizers and related hospital equipment. The Division reported sales of $9.6 million in 1996 as part of the Stryker Medical Group. This transaction did not have a material impact on the Company's operating results. Cost of sales in the first quarter of 1997 represented 40.8% of sales compared to 41.1% in the same period of 1996. Research, development and engineering (R,D&E) expense increased 12% in the first quarter, and represented 5.7% of sales in 1997 principally as a result of 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 products which were introduced at the American Academy of Orthopaedic Surgeons in February 1997 including the ScorpioT Knee system, TPST advanced micro-powered instruments, the Advanced Cement Mixing System, the Model 882 3-Chip Camerar and the TempestT Arthroscopy Pump. Selling, general and administrative (S,G&A) expenses increased 10% in the first quarter of 1997 compared to the same period of 1996. The increase in S,G&A costs is principally a result of increased sales expenses resulting from higher shipments. S,G&A costs increased to 35.1% of sales in the first quarter of 1997 compared to 35.0% in the same period of 1996. Other income increased $2.1 million in the first quarter of 1997 compared to the first quarter of 1996 due to increased interest income attributable to higher levels of invested cash and lower interest expense on the Company's yen denominated debt. The effective tax rate decreased to 37% in the first quarter of 1997 compared to 38% in the first quarter of 1996 due to a decline in earnings reported by Matsumoto, which are taxed at the higher Japanese tax rate. The earnings decline at Matsumoto also led to a reduction in the minority interest charge in the first quarter of 1997 as compared to the same period of 1996. In the first quarter of 1997, earnings before income taxes and minority interest increased 15% and net earnings increased 20% compared to the first quarter of 1996. Liquidity and Capital Resources - ------------------------------- Stryker's financial position at March 31, 1997 remained strong with cash and marketable securities of $305.3 million and working capital of $495.1 million. Accounts receivable at March 31, 1997 increased 6% from December 31, 1996 as a result of increased sales and a 4-day increase in days sales outstanding from a record low of 62 days at December 31, 1996 to 66 days at March 31, 1997. Inventories at March 31, 1997 decreased 1% from December 31, 1996 and days in inventory increased to 123 days from 104 days at December 31, 1996. The Company used $22.9 million of cash from operations in the first quarter of 1997, compared to $23.2 million of cash generated in the same period of 1996. The large use of cash in the first quarter is the result of paying attorney fees and taxes totaling $37.9 million on the patent judgment received in the fourth quarter of 1996. Excluding those payments, cash flow from operations would be $7.9 million. During the first quarter of 1997, the Company repurchased 904,000 shares of common stock in the open market at a cost of $23.3 million. In April 1997 the Company repurchased an additional 88,800 shares of common stock at a cost of $2.3 million, bringing an end to the April 24, 1996 repurchase authorization made by the Company's Board of Directors authorizing the repurchase of 1,000,000 common shares. On April 30, 1997 the Company's Board of Directors approved a new stock repurchase plan which authorizes the repurchase of 1,000,000 shares of common stock. Shares repurchased under the share repurchase programs will be used for employee stock option plans and other corporate purposes. Cash and marketable securities of $305.3 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 $52.4 million, none of which was utilized at March 31, 1997. 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 30, 1997, 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 90,019,981 374,310 Howard E. Cox, Jr. 90,021,429 372,862 Donald M. Engelman, Ph.D. 90,013,954 380,337 Jerome H. Grossman, M.D. 90,015,469 378,822 John S. Lillard 89,984,963 409,328 William U. Parfet 89,962,346 431,945 Ronda E. Stryker 90,022,169 372,122
The stockholders also approved at the Annual Meeting an amendment to the 1988 Stock Option Plan to limit the number of shares of common stock subject to stock options that may be granted in any calendar year to 300,000 to any person. The voting results were 87,558,103 votes for, 561,395 votes against, and 1,067,194 votes abstained, while 1,207,599 shares were withheld. 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 10(i) Material contracts: Amendment of 1988 Stock Option Plan 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) May 7, 1997 JOHN W. BROWN - ---------------------------- -------------------------------- Date John W. Brown, Chairman, President and Chief Executive Officer (Principal Executive Officer) May 7, 1997 DAVID J. SIMPSON - ---------------------------- -------------------------------- Date David J. Simpson, Vice President, Chief Financial Officer and Secretary (Principal Financial Officer) Exhibit 10(i) Amendment of 1988 Stock Option Plan of STRYKER CORPORATION (effective April 30, 1997) The first paragraph of Section 2 of the 1988 Stock Option Plan of Stryker Corporation was amended, effective April 30, 1997, to read in its entirety as follows: 2. Participants. The key employees and directors of the Company and its subsidiaries to whom options may be granted under this Plan shall be determined by the Board of Directors or the Stock Option Committee, if any is appointed as provided in Section 10 hereof. Options may not be granted to members of the Stock Option Committee during the period of their service thereon. 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 stock options that may be granted under this Plan in any calendar year to any key employee or director shall not exceed 300,000. Exhibit 11 Computation Of Earnings Per Share Of Common Stock Three Months Ended March 31 1997 1996 ----------- ----------- Average number of shares outstanding 96,863,000 97,146,000 ----------- ----------- Net earnings $30,020,000 $25,020,000 =========== =========== Net earnings per share of common stock $.31 $.26 ==== ==== Primary: Average shares outstanding 96,863,000 97,146,000 Net effect of dilutive stock options, based on the treasury stock method using average market price 1,611,000 1,638,000 ----------- ----------- Total Primary Shares 98,474,000 98,784,000 =========== =========== Fully Diluted: Average shares outstanding 96,863,000 97,146,000 Net effect of dilutive stock options, using the period- end market price, if higher than average market price 1,611,000 1,638,000 ----------- ----------- Total Fully Diluted Shares 98,474,000 98,784,000 =========== ===========
Note: Shares subject to stock options are not included in the earnings per share computation because the present effect thereof is not materially dilutive. EX-27 2
5 1,000 3-MOS DEC-31-1997 MAR-31-1997 143609 161690 175304 9600 126439 694999 167654 120570 931788 199949 0 0 0 9608 525067 931788 239536 239536 97685 195396 (4019) 0 1233 48159 17820 0 0 0 0 30020 .31 .31
-----END PRIVACY-ENHANCED MESSAGE-----