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Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
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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
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STRYKER CORPORATION
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(Exact name of registrant as specified in its charter)
Michigan 38-1239739
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 4085, Kalamazoo, Michigan 49003-4085
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 616/385-2600
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK $.10
PAR VALUE
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Based on the closing sales price of February 29, 1996 the aggregate market
value of the voting stock held by nonaffiliates of the registrant was
approximately $1,818,000,000.
The number of shares outstanding of the registrant's common stock, $.10 par
value, was 48,575,841 at February 29, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual stockholders report for the year ended December 31,
1995 are incorporated by reference into Parts II and IV.
Portions of the proxy statement filed with the Securities and Exchange
Commission relating to the 1996 Annual Meeting of Stockholders (the "1996
proxy statement") are incorporated by reference into Part III.
PART I
ITEM I. BUSINESS
GENERAL
Stryker Corporation and its subsidiaries (the "Company" or "Stryker") develop,
manufacture and market specialty surgical and medical products, including
orthopaedic implants, powered surgical instruments, endoscopic systems and
patient care and handling equipment for the global market and provide physical
therapy services in the United States. Stryker was incorporated in Michigan
in 1946 as the successor company to a business founded in 1941 by Dr. Homer H.
Stryker, a leading orthopaedic surgeon and the inventor of several orthopaedic
products.
In October 1992, the Company's subsidiary, Stryker France S.A., acquired Dimso
S.A. and its subsidiary companies in France and Spain. Dimso designs and
manufactures the Diapason and Stryker 2S spinal implant systems in addition to
other orthopaedic products. The Company's European Division had previously
marketed the Stryker 2S spinal implant system since 1990.
In August 1993, the Company purchased 20% of the outstanding common stock of
Matsumoto Medical Instruments, Inc. ("Matsumoto"), Osaka, Japan. Matsumoto is
one of the largest distributors of medical devices in Japan and is the
exclusive distributor of Stryker products in that country. In August 1994,
the Company purchased an additional 31% of Matsumoto's outstanding common
stock, thereby increasing its direct ownership in Matsumoto to 51%. The
results of operations for Matsumoto were consolidated with Stryker beginning
in August 1994.
In June 1994, the Company purchased the Steri-Shield product line, which is a
personal protection system for operating room personnel, from a private
company.
The Company's subsidiary, Physiotherapy Associates, Inc., has also purchased a
number of physical therapy clinic operations during each of the last five
years.
PRODUCT SALES
The principal classes of products listed below accounted for the following
amounts ($000's) and percentages of net sales during each of the three years
ended December 31:
1995 1994 1993
______________ ______________ ______________
$ % $ % $ %
________ ____ ________ ____ ________ ____
Stryker Surgical Products $608,646 70% $502,961 74% $447,042 80%
Stryker Medical Products 158,516 18 135,520 20 110,293 20
Matsumoto Distributed
Products 104,790 12 43,439 6 -- --
________ ____ ________ ____ ________ ____
$871,952 100% $681,920 100% $557,335 100%
======== ==== ======== ==== ======== ====
Approximately two-thirds of the Company's sales in 1995 and 1993 and
approximately 60% of the Company's sales in 1994 consisted of products with
short lives and service revenues, such as implants (while implants have a long
useful life to the patient, they have a one-time use to the hospital),
physical therapy revenues, disposables, expendable tools and parts and service
and repair charges. The balance of sales in each of the years were of
products that could be considered capital equipment, having useful lives in
excess of one year.
The Company's backlog of firm orders is not considered material to an
understanding of its business.
STRYKER SURGICAL PRODUCTS
Stryker Surgical products are designed and manufactured by Osteonics,
Allendale, New Jersey; Dimso, Bordeaux, France; Stryker Instruments,
Kalamazoo, Michigan; and Stryker Endoscopy, Santa Clara, California. The
principal specialty served by Stryker Surgical products is orthopaedics.
Orthopaedic reconstructive products, such as hip, knee and spinal implants,
heavy-duty powered instruments, pulsating irrigation systems, cement injection
systems, medical video cameras and arthroscopes are manufactured and marketed
for use by the orthopaedic surgeon.
Osteonics designs and manufactures innovative total and partial hip and knee
replacements for sale around the world. These artificial implants are made of
cobalt chrome or titanium alloys and are implanted in patients whose natural
joints have been damaged by arthritis, osteoporosis, other diseases or injury.
In late 1990, Osteonics became the first company to receive clearance from the
U.S. Food & Drug Administration (FDA) to commercially release for sale in the
U.S. a hip implant with HA surface treatment. HA is a naturally occurring
calcium phosphate material that demonstrates a high level of biocompatibility
due to its resemblance to human bone. Osteonics' clinical experience with HA-
coated hip stems now extends over eight years and their clinical performance
continues to equal or exceed that of any comparable stem reported in the
scientific literature.
Dimso designs and manufactures spinal implant systems for use by spinal
surgeons in the treatment of degenerative spinal diseases and deformities and
to stabilize the spine in trauma cases. During 1995, Osteonics began to
market a version of the Dimso spinal implant system in the United States
following the receipt of U.S. FDA acceptance for limited surgical indications.
Stryker's broad line of powered surgical drills, saws, fixation and reaming
equipment and other surgical instruments are used by surgeons for drilling,
burring, rasping or cutting bone, wiring or pinning bone fractures, preparing
hip or knee surfaces for the placement of artificial hip or knee joints,
performing cranial operations or treating skin defects by surgical abrasion.
Hundreds of different sized and shaped drill bits, burrs, blades, chisels and
other attachments are available to the surgeon.
In conjunction with joint replacement surgery, the Company's High Vacuum
Cement Injection System is used to mix and inject cement under high vacuum for
cemented implant applications. SurgiLav Plus(R), the Company's disposable,
self-contained pulsed lavage system, is used to cleanse the surgical site
during joint replacement surgery.
The Company's endoscopic systems include medical video cameras, light sources,
arthroscopes, laparoscopes, powered instruments and manual instruments. These
systems are used in less-invasive surgery, such as arthroscopy and
cholecystectomy (gall bladder removal), in which the surgeon operates on a
patient through a series of small punctures rather than through an open
incision as required by conventional surgery.
Small, light, "micro" powered tools produced by Stryker Instruments and
Stryker Endoscopy are used in such specialties as maxillofacial surgery,
functional endoscopic sinus surgery, otology, neurosurgery, spinal surgery,
podiatry and plastic surgery. In addition, the oral surgeon is served by the
Company's line of powered oral surgery instruments.
The Company also produces a number of other operating room or surgery related
products. The Company's CBC-ConstavacTM system is a post-operative wound
drainage and blood reinfusion device that enables joint replacement patients
to receive their own blood rather than donor blood. The Steri-Shield(R)
Personal Protection System product line purchased in 1994 is an enclosed hood
and toga that helps protect operating room personnel against contamination
from blood and airborne particles.
STRYKER MEDICAL PRODUCTS
Stryker Medical products consist of specialty hospital beds and stretchers and
general patient room beds manufactured by the Company's Medical Division in
Kalamazoo, Michigan and Clackamas, Oregon and rehabilitation services provided
through Physiotherapy Associates, Inc. The Medical Division designs and
manufactures innovative specialty stretchers/beds for many departments within
the hospital, including emergency, recovery, intensive care, surgery and
maternity. These products service the particular treatment needs of each
department by providing multiple or custom combinations of hydraulic jacks,
removable top sections, built-in weighing systems, on-board x-ray equipment,
patient-warming systems and a vast number of additional standard or optional
features. In 1993, the Medical Division introduced its first general patient
room bed, the MPS(TM) Acute Care Bed, which offers many innovative safety
features including a stable twin pedestal design and Center of Gravity Bed
Exit Alarm System. In 1994, the Medical Division introduced its Rugged(TM)
Ambulance Cot which is purchased by ambulance services and used for patient
transport. Medical Division products are generally assembled on a
design-to-order basis.
Stryker Medical product sales also include revenue of the Company's
Physiotherapy Associates, Inc. subsidiary. This organization operates
outpatient rehabilitation centers, which offer physical, occupational and
speech therapy to patients who have suffered orthopaedic or neurological
injuries. It focuses, in particular, on expediting injured workers' return to
work. Physiotherapy Associates, Inc. is headquartered in Memphis, Tennessee
and operates 158 outpatient physical therapy centers in 19 states.
MATSUMOTO DISTRIBUTED PRODUCTS
Matsumoto Distributed Products represent products sourced by Matsumoto Medical
Instruments, Inc., the Company's 51% owned subsidiary, from other companies
for sale in Japan. These products are sold for use in the areas of
orthopaedics, ophthalmology, general surgery and emergency care.
PRODUCT DEVELOPMENT
Most of the Company's products and product improvements have been developed
internally. In addition, the Company maintains close working relationships
with physicians and medical personnel in hospitals and universities who assist
in product research and development. New and improved products play a
critical role in the Company's sales growth. The Company has placed increased
emphasis on the development of proprietary products and product improvements
to complement and expand its existing product lines.
Total expenditures for product research, development and engineering were
$43,771,000 in 1995; $39,630,000 in 1994; and $36,199,000 in 1993. Research,
development and engineering expenses increased in 1995 and 1994 due
principally to the development of new implant designs (the Omnifit Plus
forged cobalt chrome hip stem was developed in 1994 and the Secur-Fit(TM) HA
total hip implant system and Restoration(TM) HA Hip System for revision
surgery were developed in 1995), further enhancements to instrumentation
related to knee replacement procedures, including development of the Insight
Positioning and Alignment System in 1995, the development of advanced powered
instruments and video technology (a new line of powered micro instruments for
oral/maxillofacial procedures, the Sapphire View(TM) arthroscope system and a
low cost high resolution 1-chip camera, all introduced in 1994 and the 4100
Cordless Driver, the first battery-powered wire driver, the next generation
810 3-Chip(R) Camera System and the StrykeFlow suction/irrigator for
laparoscopic surgery, all introduced in 1995), the development of new
specialized operating room equipment (the second generation ConstaVac(TM)
CBCII Blood Conservation System introduced in 1994), the development of new
patient handling equipment (the Rugged(TM) Ambulance Cot introduced in 1994
and the Stryker Stretcher Chair introduced in 1995) and ongoing clinical
trials of the Company's OP-1 bone growth device.
In 1991 the Company received FDA approval to begin human clinical trials of
its OP-1 bone growth device which was developed by Creative BioMolecules, Inc.
(Creative), a biopharmaceutical company, as part of a long-term research
program funded by Stryker since 1985. This device is composed of a
recombinant human osteogenic protein (OP-1) and a bioresorbable carrier. This
osteogenic protein is naturally present in the human body and directs a
cascade of cellular events that result in bone growth. In preclinical
studies, OP-1 has induced the formation of new bone when implanted into bone
defect sites. The ongoing human clinical studies, which began in 1992, will
compare the efficacy of the OP-1 bone growth device to autografts in the
repair of non-union fractures in the tibia. In late 1995, the FDA allowed the
Company to enlarge the scope of these trials for expanded indications of non-
union fractures in all long bones.
Stryker owns the patents on osteogenic protein technology and has the
exclusive right under those patents to develop, market and sell OP-1 for
treatment, repair or replacement of bone and joint tissue. Creative has
exclusive license to the technology under the patents for use in other
applications. Others, including Genetics Institute, Inc., are also attempting
to develop osteogenic proteins for the treatment, repair or replacement of
bone and joint tissue. These other companies have filed and obtained patents
in the U.S. and elsewhere claiming such proteins and methods of making and
using them and may in the future file and obtain other such patents. The
Company can provide no assurance that it will not need a license under one or
more of those patents to market or sell OP-1 for treatment, repair or
replacement of bone and joint tissue or whether such licenses will be
available.
MARKETING
Most of the Company's products are marketed in the United States directly to
more than 5,000 hospitals, and to doctors and other health care facilities, by
the Company's sales force consisting of approximately 340 salespersons.
Stryker maintains separate and dedicated sales forces for each of its
principal product lines to provide focus and a high level of expertise to each
medical specialty served. Certain products, primarily orthopaedic implants,
are sold to hospitals in the United States through both direct sales forces
and independent dealer organizations.
Approximately 30% of the Company's domestic revenues in 1995 were accounted
for by sales to hospital cooperative buying groups and other large national
accounts and 1% by sales to the Veterans Administration and other hospitals
operated by the Federal government.
International sales accounted for 45% of total revenues in 1995. Stryker
products are sold in over 100 foreign countries primarily through more than
400 local dealers whose efforts are coordinated by approximately 580 sales and
marketing personnel who are local nationals. Certain limited markets are
served through direct sales efforts. Stryker distributes its products through
sales subsidiaries and branches with offices located in The Netherlands,
Belgium, Finland, France, Germany, Italy, Spain, Switzerland, the United
Kingdom, Australia, Hong Kong, Japan, Canada and Mexico. Stryker exports
products to dealers and to customers in Latin America, the Middle East,
Singapore, Korea, India, Taiwan, Malaysia, the CIS (former Soviet Union) and
China. Additional information regarding the Company's foreign and domestic
operations and export sales appearing in "Note 9--Geographic Data" on page 34
of the 1995 Annual Report is incorporated herein by reference.
The Company's business is generally not seasonal in nature; however, the
number of orthopaedic surgeries is lower during the summer months.
COMPETITION
The Company is one of the six leading competitors in the U.S. market for
orthopaedic reconstructive products, the others being Zimmer, USA Inc. (a
subsidiary of Bristol-Myers, Squibb, Inc.), DePuy (a subsidiary of Boehringer
Mannheim Corporation, a German company), Howmedica, Inc. (a subsidiary of
Pfizer, Inc.), Biomet and J&J Professional, Inc. (a subsidiary of Johnson &
Johnson). While competition abroad varies from area to area, the Company
believes it is also a leading factor in the international markets, with these
same companies being its principal competitors.
In the international market for spinal implants, the Company is one of the
four market leaders through its Dimso S.A. subsidiary, with the principal
competitors being Sofamor Danek Group, Inc., AcroMed Corporation and the
Synthes companies. The Company entered the U.S. market for spinal implants
during 1995 and faces competition from these same companies.
In the powered surgical instruments market, Stryker is one of the three market
leaders, with the principal domestic competitors being Zimmer and Midas-Rex,
Inc.. These same companies are competitors in the international markets along
with Aesculap-Werke AG, a large European manufacturer,
In the arthroscopy market, the Company considers itself to be one of the three
market leaders, with the principal competitors being Smith & Nephew Endoscopy
(a division of Smith & Nephew PLC) and Linvatec, Inc. (a subsidiary of
Bristol-Myers, Squibb, Inc.). In the laparoscopic imaging products market,
the Company considers itself to be one of the four market leaders, with the
principal competitors being Karl Storz GmbH & Co. (a German company), Circon
Corporation and Olympus Optical Co. Ltd. (a Japanese company).
The Company's primary competitor in the hospital bed market is Hill-Rom (a
division of Hillenbrand Industries) and in the specialty stretcher market the
primary competitors are Ferno-Washington, Hausted, Inc., Hill-Rom and Midmark
Corporation.
In the outpatient physical therapy market, the Company's primary competitors
are physician owned/independent practices and hospital-based services. There
are also several other national rehabilitation companies, such as HealthSouth
Corporation and NovaCare, Inc.
In the area of research and development of the Company's OP-1 bone growth
device with Creative Biomolecules, Inc., the Company believes that several
companies are engaged in the research and development of morphogenic proteins
for the repair of hard and soft tissues. Genetics Institute, Inc., a company
in which American Home Products Corporation holds a majority interest, has
also begun human clinical trials of a recombinant bone morphogenetic protein
for repair of orthopaedic and other skeletal defects. A number of other
companies currently provide various other therapies, including allografts,
bone fillers and electrical stimulation devices, for the treatment, repair or
replacement of bone and joint tissue. The Company's OP-1 bone growth device
would ultimately compete with these products and traditional therapies such as
autografts.
The principal factors which the Company believes differentiate its products in
these highly competitive markets and enable it to compete effectively are
innovative products, reliability, service and reputation. The Company is not
able to predict the effect that continuing efforts to reduce health care
expenses generally and hospital costs in particular will have on the future
sales of its products or its competitive position. (See "Regulation and
Product Quality.") The Company believes that its competitive position in the
future will depend to a large degree upon the new products and improvements in
existing products it is able to develop. While the Company does not consider
patents a major factor in its overall competitive success, patents and
trademarks are significant to the extent that a product or attribute of a
product represents a unique design or process. Patent or trademark protection
of such products restricts competitors from duplicating these unique product
designs and features. Stryker seeks to obtain patent protection whenever
possible on its products. The Company currently has approximately 120 U.S.
patents and 70 foreign patents which generally expire in the next 10-15 years.
MANUFACTURING AND SOURCES OF SUPPLY
The Company's manufacturing processes consist primarily of precision
machining, metal fabrication, assembly operations and the investment casting
of cobalt chrome and finishing of cobalt chrome and titanium. Approximately
23% of the Company's cost of sales in 1995 represented finished products which
were purchased complete from outside suppliers. The Company also purchases
parts and components, such as forgings, castings, gears, bearings, casters and
electrical components and uses outside sources for certain finishing
operations such as plating, hardening and coating of machined components and
sterilization of certain products. The principal raw materials used by the
Company are stainless steel, aluminum, cobalt chrome and titanium alloys. In
all, purchases from outside sources were approximately 48% of the total cost
of sales in 1995.
While the Company relies on single sources for certain purchased materials and
services, it believes alternate sources are available if needed. The Company
has not experienced any significant difficulty in the past in obtaining the
materials necessary to meet its production schedules.
Products manufactured by the Company's Medical Division are generally
assembled to order, while other products are stocked in inventory.
REGULATION AND PRODUCT QUALITY
The Medical Device Amendments of 1976 to the Federal Food, Drug and Cosmetic
Act, the Safe Medical Devices Act of 1990, and regulations issued or proposed
thereunder, provide for regulation by the FDA of the manufacture of medical
devices, including most of the Company's products.
The FDA's "Good Manufacturing Practices" regulations set forth standards for
the Company's manufacturing processes, require the maintenance of certain
records and provide for unscheduled inspections of the Company's facilities
by the FDA. There are also certain requirements of state, local and foreign
governments which must be complied with in the manufacturing and marketing of
the Company's products. The Company believes that the manufacturing and
quality control procedures it employs meet the requirements of these
regulations.
Most of the Company's new products fall into FDA classifications which require
notification of and review by the FDA before marketing (submitted as a
510(k)). The Company's Osteogenic Protein Device (see "Product Development")
requires extensive clinical testing, consisting of safety and efficacy
studies, followed by a Pre-Market Approval (PMA) application. The Company
currently is in the clinical testing stage of this process and has not yet
filed a PMA application. A panel of industry and medical experts will review
the results of clinical studies and make their recommendations to the FDA. If
there is a positive recommendation by the panel, the FDA may grant a PMA
allowing the product to be marketed.
Stryker also is subject to the laws that govern the manufacture and
distribution of medical devices of each country in which the Company
manufactures or sells products. The member states of the European Union
("EU") have adopted the European Medical Device Directives, which create a
single set of medical device regulations for all EU member countries. These
regulations require companies that wish to manufacture and distribute medical
devices in EU member countries to obtain CE marks for their products by
June 14, 1998. Stryker has received authorization to apply the CE mark to its
hip, knee and spinal implant products and continues to work to obtain CE marks
for all other products that it will manufacture or distribute in EU member
states.
Government agencies and legislative bodies in the United States and other
countries are considering various proposals designed to hold down increases in
health care costs. It is impossible to predict at this time the long-term
impact of such cost containment measures on the Company's future business.
EMPLOYEES
At December 31, 1995, the Company had 4,629 employees worldwide, including
1,348 involved in manufacturing, warehousing and distribution operations,
1,205 in marketing and sales, 240 in research, development and engineering,
605 providing physical, occupational and speech therapy and the balance in
general management and administration. No employees are covered by collective
bargaining agreements. The Company believes that its employee relations are
satisfactory.
ITEM 2. PROPERTIES
The Company's principal owned domestic facilities are located in Kalamazoo and
Portage, Michigan. A 212,000 square foot Portage facility completed in 1992
houses manufacturing (86,000 square feet) and warehousing and distribution
(25,000 square feet) for surgical instrument products, with the remaining
portion of the facility used for Division offices. The Medical Division is
located in two facilities, one in Portage which was completed in 1985 and
contains manufacturing and warehousing (127,000 square feet) and Division
offices (23,000 square feet), and another in Kalamazoo which contains
manufacturing and warehousing (64,000 square feet) and offices (22,000 square
feet). The Medical Division also leases 11,000 square feet of warehousing
space in Kalamazoo.
The Company leases 198,000 square feet in an industrial park in Allendale, New
Jersey for its orthopaedic implant business, 115,000 square feet of which is
used for manufacturing and warehousing; 111,000 square feet in Santa Clara,
California for its endoscopy business, 49,000 square feet of which is used for
manufacturing and warehousing; 28,000 square feet in Clackamas, Oregon for
production of maternity beds and furniture; 41,000 square feet in Fenton,
Missouri for its Medical service business; and 65,000 square feet in Arroyo,
Puerto Rico for the manufacture of various products. The Company's 158
physical therapy clinics and its administrative offices are all located in
leased offices which total 523,000 square feet.
The Company's subsidiary, Matsumoto Medical Instruments, Inc., maintains its
principal facilities in two buildings in Osaka, Japan, but also owns buildings
used for branch warehousing and sales offices in eight other cities throughout
Japan. Of the total owned 105,000 square feet, 37,000 square feet is devoted
to warehousing, with the balance used for administrative offices. Matsumoto
also leases 51,000 square feet at certain branch locations, with 27,000 square
feet used for warehousing and 24,000 square feet used for administrative
offices.
In Europe, the Company maintains 33,000 square feet in Bordeaux, France (5,000
of which is leased) for its spinal implant manufacturing operation.
Manufacturing and warehousing account for 26,000 square feet of the total and
the remainder is used for administrative offices. The Company also leases
other foreign sales and administration offices which total 163,000 square
feet.
In addition, the Company leases 12,000 square feet in Kalamazoo, Michigan for
its administrative offices.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant and plaintiff in various legal actions arising in
the normal course of business. The Company does not anticipate material
losses as a result of these actions.
In July 1995, a decision was issued by a Federal District Court in a patent
suit brought by the Company against Intermedics Orthopedics, Inc. and its
distributor for infringement of the Company's U.S. patent on its Omniflex Hip
System. The Court held that the Company's patent is valid and enforceable and
that the Company is entitled to damages and attorney fees. In a subsequent
decision, the Court fixed the damage award at $72,700,000, including interest.
Intermedics has appealed the Court's decision. Until the appeal process is
complete, management is unable to determine the financial impact of the
Court's decision on the Company. Accordingly, the financial statements for
the year ended December 31, 1995, incorporated herein by reference, do not
give recognition to any gain which might ultimately be realized as a result of
this decision.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS
Certain information with respect to the executive officers of the Company is
set forth in Item 10 of this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded in the over-the-counter market on The
Nasdaq Stock Market under the symbol STRY. Quarterly stock prices appearing
under the caption "Summary of Quarterly Data" on page 36 of the 1995 Annual
Report and dividend information for the years ended December 31, 1994 and 1995
under the caption "Ten Year Review" on page 18 of the 1995 Annual Report are
incorporated herein by reference. The Company's Board of Directors intends to
consider a year-end cash dividend annually at its December meeting.
On December 31, 1993, the Company's Board of Directors authorized the
repurchase in the open market from time to time, depending upon revailing
market conditions, of up to 600,000 shares of its common stock. At March 20,
1996, 122,500 shares had been repurchased under this plan.
On December 31, 1995 there were 3,260 stockholders of record of the Company's
common stock.
ITEM 6. SELECTED FINANCIAL DATA
The financial information for each of the five years in the period ended
December 31, 1995 under the caption "Ten Year Review" on pages 18 and 19 of
the 1995 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 20 through 23 of the
1995 Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and its subsidiaries and
report of independent auditors, included on pages 24 through 37 of the 1995
Annual Report are incorporated herein by reference.
Quarterly results of operations appearing under the caption "Summary of
Quarterly Data" on page 36 of the 1995 Annual Report are incorporated herein
by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Information regarding the directors of the Company appearing under the caption
"Election of Directors" and the information appearing under the caption
"Miscellaneous - Section 16 Reporting" in the 1996 proxy statement is
incorporated herein by reference.
Information regarding the executive officers of the Company appears below.
All officers are elected annually. Reported ages are as of January 31, 1996.
John W. Brown, age 61, has been Chairman of the Board since January 1981, and
President and Chief Executive Officer of the Company since February 1977. He
is also a director of Lunar Corporation, a medical products company, First of
America Bank Corporation, a bank, the Health Industry Manufacturers
Association and The American Business Conference.
Dean H. Bergy, age 36, was appointed Controller upon joining the Company in
June 1994. He had previously been a Senior Manager at Ernst & Young LLP,
independent public accountants, since October 1988.
Ronald A. Elenbaas, age 42, was appointed President of the Surgical Group in
1985 and has been a Vice President of the Company since August 1983.
Previously he was the Director of Surgical Sales since May 1982. Since
joining the Company in September 1975 he has held various other positions,
including Sales Representative, Marketing Product Manager, Plant Manager,
Canadian Sales Director, Assistant to the President and Director of Customer
Relations.
William T. Laube, III, age 56, was appointed President of Stryker Pacific
Group in 1985 and has been a Vice President of the Company since March 1979.
Since joining the Company in July 1975 he has held various international sales
management positions.
Edward B. Lipes, age 43, was appointed a Vice President of the Company in May
1994 and has been President of Osteonics Corp. since August 1989. He held the
position of President, Physiotherapy Associates, Inc. upon joining the Company
in April 1988.
Julia M. Paradine-Rice, age 34, was appointed Treasurer of the Company in June
1994. She had previously held the position of Assistant Treasurer since 1990
and also held the position of Corporate Accounting Manager since joining the
Company in 1988.
David J. Simpson, age 49, was appointed Vice President, Chief Financial
Officer and Secretary upon joining the Company in June 1987. He had
previously been Vice President and Treasurer of Rexnord Inc., a manufacturer
of industrial and aerospace products, since July 1985.
Thomas R. Winkel, age 43, was appointed President of Stryker Americas/Middle
East in March 1992 and has been a Vice President of the Company since December
1984. He had previously been Vice President, Administration since June 1987.
Since joining the Company in October 1978 he has held various other positions,
including Assistant Controller, Secretary and Corporate Controller.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding the compensation of the management of the Company
appearing under the captions "Director Compensation" and "Executive
Compensation" in the 1996 proxy statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the captions "Beneficial Ownership of More than 5% of
the Outstanding Common Stock" and "Beneficial Ownership of Management" in the
1996 proxy statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(Executive compensation plans and arrangements are referenced as
exhibits 10(i), (ii) and (iii).)
(a)(1) and (2) - The response to this portion of Item 14 is
submitted as a separate section of this report
following the signature page.
(a)(3) - Exhibits
Exhibit 3 - Articles of Incorporation and By-
Laws
(i) Restated Articles of Incorporation
and amendment thereto dated
December 28, 1993--Incorporated by
reference to Exhibit 3(i) to the
Company's Form 10-K for the year
ended December 31, 1993 (Commission
File No. 0-9165).
(ii) By-Laws--Incorporated by reference
to Exhibit 3(ii) to the Company's
Form 10-Q for the quarter ended
June 30, 1988 (Commission File
No. 0-9165).
Exhibit 4 - Instruments defining the rights
of security holders, including
indentures--The Company agrees to
furnish to the Commission upon request
a copy of each instrument pursuant to
which long-term debt of the Company
and its subsidiaries not exceeding 10%
of the total assets of the Company and
its consolidated subsidiaries is
authorized.
Exhibit 10 - Material contracts
(i)* 1988 Stock Option Plan as amended--
Incorporated by reference to Exhibit
10(i) to the Company's Form 10-K for
the year ended December 31, 1992
(Commission File No. 0-9165).
(ii)* Supplemental Savings and Retirement
Plan (as Amended Effective January 1,
1995--Incorporated by reference to
Exhibit 10(iii) to the Company's Form
10-K for the year ended December 31,
1994 (Commission File No. 0-9165)
(iii)* Description of bonus arrangements
between the Company and certain
officers, including Messrs. Brown,
Elenbaas, Laube, Lipes, Simpson and
Winkel.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
--continued
Exhibit 11 - Statement re computation of per share
earnings
(i) Statement Re: Computation of earnings
per share of common stock.
Exhibit 13 - Annual report to security holders
(i) Portions of the 1995 Annual Report that
are incorporated herein by reference.
Exhibit 21 - Subsidiaries of the registrant
(i) List of Subsidiaries.
Exhibit 23 - Consents of experts and counsel
(i) Consent of Independent Auditors.
Exhibit 27 - Financial data schedule
(i) Financial data schedule (included in
EDGAR filing only).
(b) Reports on Form 8-K - No reports on Form 8-K were required to be
filed in the fourth quarter of 1995.
(c) Exhibits - The response to this portion of Item 14 is submitted
as a separate section of this report following the signature
page.
(d) Financial statement schedules - The response to this portion of
Item 14 is submitted as a separate section of this report
following the signature page.
*compensation arrangement
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
-----------------------------------------
Date: 3/20/96 DAVID J. SIMPSON
---------------------- -----------------------------------------
David J. Simpson, Vice President, Chief
Financial Officer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
JOHN W. BROWN 3/20/96 DAVID J. SIMPSON 3/20/96
- ----------------------------------- -----------------------------------
John W. Brown, Chairman, President David J. Simpson, Vice President,
and Chief Executive Officer Chief Financial Officer and
Secretary
(Principal Executive Officer) (Principal Financial Officer)
HOWARD E. COX, JR. 3/20/96 DEAN H. BERGY 3/20/96
- ----------------------------------- -----------------------------------
Howard E. Cox, Jr. - Director Dean H. Bergy, Controller
(Principal Accounting Officer)
DONALD M. ENGELMAN 3/20/96 RONDA E. STRYKER 3/20/96
- ----------------------------------- -----------------------------------
Donald M. Engelman, Ph.D.- Director Ronda E. Stryker - Director
JEROME H. GROSSMAN 3/20/96 WILLIAM U. PARFET 3/20/96
- ----------------------------------- -----------------------------------
Jerome H. Grossman, M.D. - Director William U. Parfet - Director
JOHN S. LILLARD 3/20/96
- -----------------------------------
John S. Lillard - Director
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1995
STRYKER CORPORATION
KALAMAZOO, MICHIGAN
FORM 10-K--ITEM 14(a)(1), (2) AND (d)
STRYKER CORPORATION AND SUBSIDIARIES
List of Financial Statements and Financial Statement Schedule
The following consolidated financial statements of Stryker Corporation and
subsidiaries and report of independent auditors, included in the annual
stockholders report of the registrant for the year ended December 31, 1995,
are incorporated by reference in Item 8:
Report of independent auditors
Consolidated balance sheets--December 31, 1995 and 1994.
Consolidated statements of earnings--years ended December 31, 1995, 1994
and 1993.
Consolidated statements of stockholders' equity--years ended December 31,
1995, 1994 and 1993.
Consolidated statements of cash flows--years ended December 31, 1995,
1994 and 1993.
Notes to consolidated financial statements--December 31, 1995.
The following consolidated financial statement schedule of Stryker Corporation
and subsidiaries is included in Item 14(d):
Schedule II--Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
STRYKER CORPORATION AND SUBSIDIARIES
Col. A Col. B Col. C Col. D Col. E
ADDITIONS
________________________________
(1) (2)
Charged to
Balance at Charged to Costs Other Accounts Deductions-- Balance at End
Description Beginning Period and Expenses --Describe Describe of Period
________________________________ ________________ ________________ ______________ ____________ ______________
DEDUCTED FROM ASSET ACCOUNTS
Allowance for Doubtful Accounts:
Year ended December 31, 1995 $6,400,000 $1,934,000 $534,000 $7,800,000
========== ========== ======== ==========
Year ended December 31, 1994 $3,800,000 $3,090,000 $800,000 $1,290,000 $6,400,000
========== ========== ======== ========== ==========
Year ended December 31, 1993 $2,900,000 $1,660,000 $760,000 $3,800,000
========== ========== ======== ==========
Uncollectible amounts written off, net of recoveries
Represents allowance for doubtful accounts acquired in connection with the acquisition of an additional 31%
interest in Matsumoto Medical Instruments, Inc. in August 1994, thereby increasing the Company's direct
ownership in Matsumoto to 51% and requiring Matsumoto's consolidation with Stryker beginning with that date.
FORM 10-K--ITEM 14(c)
STRYKER CORPORATION AND SUBSIDIARIES
Exhibit Index
EXHIBIT
Page*
(3) Articles of incorporation and by-laws
(i) Restated Articles of Incorporation and amendment
thereto dated December 28, 1993 . . . . . . . . . . . . 13**
(ii) By Laws . . . . . . . . . . . . . . . . . . . . . . . . 13**
(10) Material contracts
(i) 1988 Stock Option Plan as amended . . . . . . . . . . . 13**
(ii) Supplemental Savings and Retirement Plan (as Amended
Effective January 1, 1995). . . . . . . . . . . . . . . 13**
(iii) Description of bonus arrangements between the Company
and certain officers, including Messrs. Brown, Elenbaas,
Laube, Lipes, Simpson and Winkel . . . . . . . . . . . 20
(11) Statement re computation of per share earnings
(i) Statement Re: Computation of earnings per share of
common stock. . . . . . . . . . . . . . . . . . . . . . 21
(13) Annual report to security holders
(i) Portions of the 1995 Annual Report that are
incorporated herein by reference. . . . . . . . . . . . 14**
(21) Subsidiaries of the registrant
(i) List of Subsidiaries. . . . . . . . . . . . . . . . . . 22
(23) Consents of experts and counsel
(i) Consent of Independent Auditors . . . . . . . . . . . . 23
(27) Financial data schedule
(i) Financial data schedule (included in EDGAR filing only)
* Page number in sequential numbering system where such exhibit can be
found, or it is stated that such exhibit is incorporated by reference.
** Incorporated by reference in this Annual Report on Form 10-K.
EXHIBIT (10)(iii)
DESCRIPTION OF BONUS ARRANGEMENTS
The Company has entered into bonus arrangements with certain executive
officers for 1996, including Mr. Brown, Mr. Elenbaas, Mr. Laube, Mr. Lipes,
Mr. Simpson and Mr. Winkel, based on specific performance criteria including
sales, profits and asset management. The aggregate amount of such bonuses is
not expected to exceed $1,500,000.
EXHIBIT (11)
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
Year Ended December 31
1995 1994 1993
----------- ----------- -----------
Average number of shares outstanding 48,468,000 48,367,000 48,356,000
Net earnings $87,010,000 $72,400,000 $60,205,000
=========== =========== ===========
Earnings per share of common stock:
Net earnings $1.80 $1.50 $1.25
===== ===== =====
Primary:
Average shares outstanding 48,468,000 48,367,000 48,356,000
Net effect of dilutive stock options,
based on the treasury stock method
using average market price 799,000 737,000 536,000
----------- ----------- -----------
Total Primary Shares 49,267,000 49,104,000 48,892,000
=========== =========== ===========
Fully Diluted:
Average shares outstanding 48,468,000 48,367,000 48,356,000
Net effect of dilutive stock options,
using the year-end market price, if
higher then average market price 898,000 770,000 586,000
----------- ----------- -----------
Total Fully Diluted Shares 49,366,000 49,137,000 48,942,000
=========== =========== ===========
Note: Shares subject to stock options are not included in the earnings per
share computation because the present effect thereof is not materially
dilutive.