ITEM 2. PROPERTIES
The Company's principal owned domestic facilities are located in Kalamazoo and Portage, Michigan. A 190,000 square foot Portage facility completed in 1992 houses manufacturing (80,000 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 (122,000 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 20,000 square feet of warehousing space in Kalamazoo.
The Company leases 185,000 square feet in an industrial park in Allendale, New Jersey for its orthopaedic implant business; 56,000 square feet in San Jose, California for its endoscopic systems business; 28,000 square feet in Clackamas, Oregon for production of maternity beds and furniture; 20,000 square feet in St. Louis, Missouri for its Medical service business; and 65,000 square feet in Arroyo, Puerto Rico for the assembly of disposable tubing sets and other manufacturing. The Company's 135 physical therapy clinics are all located in leased offices.
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 139,000 square feet, 74,000 square feet is devoted to warehousing, with the balance used for administrative offices. Matsumoto also leases 53,000 square feet at certain branch locations, with 30,000 square feet used for warehousing and 23,000 square feet used for administrative offices.
In Europe, the Company maintains 16,000 square feet in Bordeaux, France (5,000 of which is leased) for its spinal implant manufacturing operation. Manufacturing and warehousing account for 11,000 square feet of the total and the remainder is used for administrative offices. In addition, the Company maintains two buildings (one of which is leased) in Uden, The Netherlands. The 49,000 square foot owned facility is currently for sale. A 20,000 square foot leased facility contains 9,000 square feet used for manufacturing and warehousing with the balance used for administrative offices. The Company also leases other foreign sales and administration offices.
In addition, the Company leases 12,000 square feet in Kalamazoo, Michigan for its administrative offices.
ITEM 3.

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.
ITEM 4.

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.

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 40 of the 1994 Annual Report (page 55 of the EDGAR filing) and dividend information for the years ended December 31, 1993 and 1994 under the caption "Ten Year Review" on pages 22 and 23 of the 1994 Annual Report (page 35 of the EDGAR filing) 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, 1994 there were 3,684 stockholders of record of the Company's common stock.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The financial information for each of the five years in the period ended December 31, 1994 under the caption "Ten Year Review" on pages 22 and 23 of the 1994 Annual Report (pages 35 and 36 of the EDGAR filing) is incorporated herein by reference.
ITEM 7.

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 24 through 27 of the 1994 Annual Report (pages 37 through 40 of the EDGAR filing) is incorporated herein by reference.
ITEM 8.

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 28 through 41 of the 1994 Annual Report (pages 41 through 56 of the EDGAR filing) are incorporated herein by reference.
Quarterly results of operations appearing under the caption "Summary of Quarterly Data" on page 40 of the 1994 Annual Report (page 55 of the EDGAR filing) are incorporated herein by reference.
ITEM 9.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.

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 1995 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, 1995.
John W. Brown, age 60, 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, a bank, and the Health Industry Manufacturers Association and a Trustee of Kalamazoo College.
Dean H. Bergy, age 35, 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 41, 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 55, 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 42, 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 33, 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 48, 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 42, 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.

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 1995 proxy statement is incorporated herein by reference.
ITEM 12.

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 1995 proxy statement is incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (Executive compensation plans and arrangements are referenced as exhibits 10(i), (ii), (iii) and (iv).)
(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 2 - Plan of Acquisition (i) Offer to Purchase Shares of Matsumoto Medical Instruments, Inc. by Stryker Corporation dated June 6, 1994-- Incorporated by reference to Exhibit 2 to the Company's Form 10-Q for the quarter ended June 30, 1994 (Commission File No. 0-9165).
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.
(iii)* Supplemental Savings and Retirement Plan (as Amended Effective January 1, 1995).
(iv)* Description of bonus arrangements between the Company and certain officers, including Messrs. Brown, Elenbaas, Laube, Lipes, Simpson and Winkel.
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 1994 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 1994.
(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: 3/20/95 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 3/20/95 DAVID J. SIMPSON 3/20/95 John W. Brown, Chairman, President David J. Simpson, Vice President, and Chief Executive Officer Chief Financial Officer and (Principal Executive Officer) Secretary (Principal Financial Officer)
HOWARD E. COX, JR. 3/20/95 DEAN H. BERGY 3/20/95 Howard E. Cox, Jr. - Director Dean H. Bergy, Controller (Principal Accounting Officer)
DONALD M. ENGELMAN 3/20/95 RONDA E. STRYKER 3/20/95 Donald M. Engelman, Ph.D. - Director Ronda E. Stryker - Director
JEROME H. GROSSMAN 3/20/95 WILLIAM U. PARFET 3/20/95 Jerome H. Grossman, M.D. - Director William U. Parfet - Director
JOHN S. LILLARD 3/20/95 John S. Lillard - Director
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1994
STRYKER CORPORATION
KALAMAZOO, MICHIGAN
FORM 10-K--ITEM 14(a)(1), (2) AND (d)
STRYKER CORPORATION AND SUBSIDIARIES
Index to 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, 1994, are incorporated by reference in Item 8:
Report of independent auditors
Consolidated balance sheet--December 31, 1994 and 1993.
Consolidated statement of earnings--years ended December 31, 1994, 1993 and 1992.
Consolidated statement of stockholders' equity--years ended December 31, 1994, 1993 and 1992.
Consolidated statement of cash flows--years ended December 31, 1994, 1993 and 1992.
Notes to consolidated financial statements--December 31, 1994.
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.
FORM 10-K--ITEM 14(c)
STRYKER CORPORATION AND SUBSIDIARIES
Exhibit Index
Exhibit Page* (2) Plan of acquisition (i) Offer to Purchase Shares of Matsumoto Medical Instruments, Inc. by Stryker Corporation dated June 6, 1994 . . . . . . . . . . . . . . . . . . 12**
(3) Articles of incorporation and by-laws (i) Restated Articles of Incorporation and amendment thereto dated December 28, 1993. . . . . . . . . 12**
(ii) By Laws . . . . . . . . . . . . . . . . . . . . . 12**
(10) Material contracts (i) 1988 Stock Option Plan as amended. . . . . . . . 12**
(ii) Supplemental Savings and Retirement Plan . . . . 19
(iii) Supplemental Savings and Retirement Plan (as Amended Effective January 1, 1995) . . . . . 26
(iv) Description of bonus arrangements between the Company and certain officers, including Messrs. Brown, Elenbaas, Laube, Lipes, Simpson and Winkel . . . . . . . . . . . . . . . . . . . 33
(11) Statement re computation of per share earnings (i) Statement Re: Computation of earnings per share of common stock. . . . . . . . . . . . . . . . . 34
(13) Annual report to security holders (i) Portions of the 1994 Annual Report that are incorporated herein by reference . . . . . . . . 35
(21) Subsidiaries of the registrant (i) List of Subsidiaries . . . . . . . . . . . . . . 57
(23) Consents of experts and counsel (i) Consent of Independent Auditors . . . . . . . . 58
(27) Financial data schedule (i) Financial data schedule (included in EDGAR filing only) . . . . . . . . . . . . . . . . . . 59
* 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(ii)
STRYKER CORPORATION SUPPLEMENTAL SAVINGS AND RETIREMENT PLAN
1. PURPOSE OF THE PLAN
The purpose of this Stryker Corporation Supplemental Savings and Retirement Plan is to provide a select group of the Company's executives with an opportunity to defer a portion of their annual pay and to receive the benefit of Company contributions, to the extent such benefits are unavailable to such executives under the Savings Plan (as hereinafter defined) as a result of limitations imposed by the Internal Revenue Code of 1986, as amended, or other limitations imposed by the terms of such plan.
2. DEFINITIONS
2.01 ACCOUNT shall mean the bookkeeping account maintained for a Participant to record his Pay Deferrals, Matching Contributions, and Company Discretionary Contributions, together with earnings thereon credited pursuant to Section 7.03.
2.02 ADMINISTRATOR shall mean the Company. The Company may periodically delegate some or all its duties as Administrator to a committee appointed by the Board.
2.03 BOARD shall mean the Board of Directors of the Company.
2.04 CODE shall mean the Internal Revenue Code of 1986, as amended from time to time.
2.05 COMPANY shall mean Stryker Corporation and any successor thereto. Where the context requires, "Company" shall also include any employer related to the Company any of whose employees ahve been designated as eligible to participate in the Plan.
2.06 COMPANY DISCRETIONARY CONTRIBUTION shall mean the amount credited to a Participant's Account pursuant to Article 6.
2.07 COMPENSATION shall mean "Compensation" as defined in the Savings Plan; provided, however, that for purposes of the Plan the limitation on a Participant's Compensation for a Plan Year shall be 200% of the Section 401(a)(17) Limitation for such Plan Year.
2.08 DEFERABLE COMPENSATION shall mean a Participant's Compensation for a Plan Year that is ineligible for deferral under the Savings Plan because it is earned after the Participant's pay deferrals under the Savings Plan have attained the dollar limitation under Section 402(g)(1) of the Code (or such lesser limitation on pay deferrals as may apply to the Participant under the terms of the Savings Plan) for such Plan Year.
2.09 DISCRETIONARY CONTRIBUTION PERCENTAGE shall mean the employer's discretionary contribution for a Plan Year under the Savings Plan, expressed as a percentage of a participant's includible compensation for such Plan Year under the Savings Plan.
2.10 EFFECTIVE DATE shall mean January 1, 1994.
2.11 EMPLOYEE shall mean an employee of the Company.
2.12 ENTRY DATE shall mean January 1 of any Plan Year.
2.13 INVESTMENT ELECTION shall mean a Participant's election under Article 7 of the investment fund or funds used to measure the investment performance of the Participant's Account.
2.14 MATCHING CONTRIBUTION shall mean the amount credited to a Participant's Account pursuant to Article 5.
2.15 PARTICIPANT shall mean an Employee who satisfies the requirements for participation in the Plan pursuant to Section 3.01 and whose Account has not been distributed.
2.16 PAY DEFERRAL ELECTION shall mean a Participant's election pursuant to Section 4.01 to defer a portion of his Deferable Compensation.
2.17 PAY DEFERRALS shall mean the amounts credited to a Participant's Account pursuant to Section 4.01.
2.18 PLAN shall mean this Stryker Corporation Supplemental Savings and Retirement Plan, as amended from time to time.
2.19 PLAN YEAR shall mean the calendar year.
2.20 SAVINGS PLAN shall mean the Stryker Corporation Savings and Retirement Plan for Salaried, Clerical, and Technical Employees, as amended from time to time.
2.21 SECTION 401(a)(17) LIMITATION shall mean the dollar limitation under Section 401(a)(17) of the Code in effect for a Plan Year.
2.22 SELECT GROUP shall mean, with respect to a Plan Year, the select group of management or highly compensated Employees who are designated by the Board of Directors as eligible to participate in this Plan.
2.23 UNFORESEEABLE EMERGENCY shall have the meaning ascribed thereto in Section 11.03.
2.24 VALUATION DATE shall mean the last day of each calendar quarter.
3. PARTICIPATION
3.01 PARTICIPATION. Any Employee who is a member of the Select Group shall become eligible to participate in the Plan as of the Entry Date coincident with or next following the latest of (i) the Effective Date, (ii) the date he becomes eligible to participate in the Savings Plan, or (iii) the date he becomes a member of the Select Group. Participation in the Plan shall terminate when all amounts credited to a Participant's Account have been distributed.
4. PAY DEFERRALS
4.01 PAY DEFERRAL ELECTIONS
(a) A Participant may elect to defer a portion of his Deferable Compensation otherwise payable during the Plan Year by making a written election on such form as the Administrator shall designate. Such election shall specify a whole percentage of the Participant's Deferable Compensation which the Participant elects to defer, which percentage may not exceed the maximum percentage of compensation that may be deferred by nonhighly compensated employees under the terms of the Savings Plan. Such election must be made prior to
the first day of such Plan Year or such earlier date as the Administrator may specify, and may not be modified or revoked after the commencement of such Plan Year except as provided in Sections 4.02 and 11.01.
(b) An amount deferred pursuant to a Pay Deferral Election shall be withheld from the Deferable Compensation otherwise payable to the Participant, and shall be credited to the Participant's Account as of the date on which such amount was withheld.
(c) A Pay Deferral Election applies only to the Deferable Compensation for the Plan Year to which such election relates. To defer a portion of his Deferable Compensation in a subsequent Plan Year a Participant must make a new Pay Deferral Election.
4.02 SUSPENSION OF DEFERRALS. Notwithstanding anything to the contrary in this Article 4, in the event the Administrator approves a Participant's request for a suspension of deferrals pursuant to Section 11.01 on account of an Unforeseeable Emergency, the Participant's Pay Deferral Election shall be suspended (and the Participant shall be ineligible to make a new Pay Deferral Election) with respect to any Compensation otherwise payable during the period beginning on the date of such withdrawal or effective date of such approval and ending on the last day of the next succeeding Plan Year.
5. MATCHING CONTRIBUTIONS
5.01 For each Plan Year, the Company shall credit to the Account of each eligible Participant a Matching Contribution equal to the lesser of (i) 100% of such Participant's Pay Deferrals for such Plan Year or (ii) 4% of such Participant's Compensation in excess of the Section 401(a)(17) Limitation for such Plan Year. Such Matching Contribution shall be credited to the Participant's Account by the March 15 following the end of such Plan Year.
5.02 A Participant shall be eligible for a Matching Contribution with respect to a Plan Year only if he is eligible for a matching contribution under the Savings Plan for such Plan Year.
6. COMPANY DISCRETIONARY CONTRIBUTIONS
6.01 For each Plan Year, the Company shall credit to the Account of each eligible Participant a Company Discretionary Contribution equal to such Participant's Compensation in excess of the Section 401(a)(17) Limitation for such Plan Year, multiplied by the Discretionary Contribution Percentage for such Plan Year. Such Company Discretionary Contribution shall be credited to the Participant's Account by the March 15 following the end of such Plan Year.
6.02 A Participant shall be eligible for a Company Discretionary Contribution with respect to a Plan Year only if he is eligible for an employer discretionary contribution under the Savings Plan for such Plan Year.
7. INVESTMENT PERFORMANCE ELECTIONS
7.01 INITIAL ELECTION. Prior to the commencement of his participation in the Plan, each Participant shall file an initial Investment Election which shall designate from among the investment funds available for selection under the Plan the investment fund or funds which shall be used to measure the investment performance of the Participant's Account.
7.02 CHANGE IN ELECTION. A Participant may change his Investment Election effective as of the first day of any calendar quarter by filing a written notice with the Administrator at least 30 days in advance of such date.
7.03 CREDITING OF INVESTMENT RETURN. As of each Valuation Date, each Participant's Account shall, under such procedures as the Administrator shall establish, be credited with any income, and debited with any loss, that would have been realized if the amounts credited to his Account had been invested in accordance with his Investment Election. References in the Plan to Investment Elections are for the sole purpose of attributing hypothetical investment performance to each Participant's Account. Nothing herein shall require the Company to invest, earmark, or set aside its general assets in any specific manner.
7.04 AVAILABLE INVESTMENT FUNDS. The investment funds available for selection under the Plan shall be the investment funds (other than the employer stock fund) available for investment under the Savings Plan.
8. ACCOUNTS
8.01 MAINTENANCE OF ACCOUNTS. The Administrator shall maintain or cause to be maintained records showing the individual balances of each Account. At least once per quarter each Participant shall be furnished with a statement setting forth the value of his Account.
8.02 VESTING. A benefit shall be payable under this Plan only to the extent that it is vested. The portion of a Participant's Account attributable to Pay Deferrals, together with credited earnings or losses thereon, shall be fully vested at all times. The portion of a Participant's Account attributable to Matching Contributions and Company Discretionary Contributions, and credited earnings and losses with respect thereto, shall be vested only to the extent that matching contributions and employer discretionary contributions credited to the Participant's account under the Savings Plan are vested. The nonvested portion of a Participant's Account shall be forfeited at the same time, and under the same conditions, as the nonvested portion of his account under the Savings Plan is forfeited.
9. DISTRIBUTION OF BENEFITS
9.01 BENEFIT PAYMENT ELECTION. Prior to the commencement of his participation in the Plan, each Participant shall file a benefit payment election with the Administrator on such form as the Administrator shall prescribe specifying (i) whether the Participant's benefit is to be paid in a lump sum, in substantially equal annual installments, or in a combination thereof, (ii) the year in which such lump-sum payment is to be made or such installments are to commence, and (iii) if installments are elected, the number of such installments. Except as provided in Section 11.02, no portion of a Participant's benefit may be distributed prior to his separation from service. Lump-sum payments may not be made later than, and installment payments may not extend beyond, the tenth anniversary of the date of the Participant's separation from service.
9.02 CHANGE IN ELECTION. A Participant's benefit payment election may be changed from time to time, provided, however, that no such change shall be effective if the Participant's separation from service from the Company occurs less than one year after the date such change is made. In such event the Participant's benefit shall be paid in
accordance with his most recent election or change in election (other than a change in election made less than one year before his separation from service).
9.03 DISTRIBUTION OF BENEFITS. Except as otherwise provided in Article 10 and Section 11.02, a Participant's Account shall be distributed in accordance with his benefit election made in accordance with Section 9.01 (after giving effect to any modifications to such election pursuant to Section 9.02). The payment of any installment or lump sum shall, in accordance with the Participant's election, be made either (i) within 90 days after the end of the calendar quarter during which the Participant separates from service or (ii) within the first 90 days of a calendar year commencing after the Participant separates from service.
10. DEATH OF A PARTICIPANT
10.01 Except as otherwise provided in Section 10.02, in the event of a Participant's death prior to the distribution of his entire Account balance, the remaining balance in his Account shall be distributed in accordance with his benefit payment election made pursuant to Section 9.01 (after giving effect to any modifications to such election pursuant to Section 9.02). Such distribution shall be made to the beneficiary designated by the Participant under the Savings Plan, unless the Participant has specifically designated a different beneficiary under this Plan in a writing filed with the Administrator.
10.02 A Participant may elect to have any amount remaining in his Account upon his death paid to his beneficiary in a lump sum within 60 days after the Administrator has received notification of his death, rather than in accordance with his benefit payment election under Section 9.01. Such a lump-sum death benefit election may be made or revoked at any time, provided, however, that no such election or revocation shall be effective if made less than one year before the date of the Participant's death.
11. UNFORESEEABLE EMERGENCIES
11.01 SUSPENSION OF DEFERRALS. In the vent of a Participant's Unforeseeable Emergency, such Participant may request a suspension of his Pay Deferral in accordance with Section 4.02 (if a suspension is not already in effect pursuant to such section). Any such request shall be subject to the approval of the Administrator, which approval shall not be granted unless such need cannot be relieved (i) through reimbursement or compensation by insurance or otherwise or (ii) by liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). If the request is granted, such suspension shall be effective as of such date as the Administrator shall prescribe.
11.02 EMERGENCY WITHDRAWAL. In the event of a Participant's Unforeseeable Emergency, such Participant may request an emergency withdrawal from his Account. Any such request shall be subject to the approval of the Administrator, which approval (a) shall not be granted unless the Participant's Pay Deferral Election have been suspended pursuant to Section 4.02, (b) shall only be granted to the extent reasonably needed to satisfy the need created by the Unforeseeable Emergency, and (c) shall not be granted to the extent that such need may be relieved (i) through reimbursement or compensation by insurance or otherwise or (ii) by liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).
11.03 UNFORESEEABLE EMERGENCY. An "Unforeseeable Emergency" means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or his dependent, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control. Examples of circumstances not qualifying as an Unforeseeable Emergency include the need to send a Participant's child to college and the desire to purchase a home.
12. ADMINISTRATION
The Plan shall be administered by the Administrator, which shall have discretionary authority to determine eligibility for benefits and to construe the terms of the Plan. The Administrator's good-faith determination with respect to any issue relating to the interpretation of the Plan shall be conclusive and final.
13. GENERAL PROVISIONS
13.01 NO CONTRACT OF EMPLOYMENT. The establishment of the Plan shall not be construed as conferring any legal rights upon any Participant for a continuation of employment, nor shall it interfere with the rights of the Company to discharge a Participant and to treat him without regard to the effect which such treatment might have upon him as a Participant in the Plan.
13.02 WITHHOLDING. As a condition to a Participant's entitlement to benefits hereunder, the Company shall have the right to deduct from any amounts otherwise payable to a Participant, whether pursuant to the Plan or otherwise, or otherwise to collect from the Participant, any required withholding taxes with respect to benefits under the Plan.
13.03 NON-ASSIGNABILITY OF BENEFITS. Subject to any applicable law, no benefit under the Plan shall be subject in any manner to, nor shall the Company be obligated to recognize, any purported anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so shall be void. No such benefit shall in any manner be liable for or subject to garnishment, attachment, execution, or a levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant.
13.04 SUCCESSOR EMPLOYERS. The Plan shall be binding upon the successors and assigns of the Company. The Company shall require any successor (whether direct or indirect, and whether by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company, by written agreement to expressly assume and agree to perform the Company's obligations under the Plan in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. The provisions of this Section 13.04 shall continue to apply to each subsequent employer of the Participant hereunder in the event of any subsequent merger, consolidation, or transfer of assets of such subsequent employer.
13.05 GOVERNING LAW. The laws of the State of Michigan shall govern the construction of this Plan and the rights and the liabilities hereunder of the parties hereto.
13.06 PRONOUNS. The masculine pronoun shall mean the feminine wherever appropriate.
14. SOURCE OF BENEFITS
The Plan is an unfunded plan maintained by the Company for the purpose of providing deferred compensation for a select group of management or highly compensated employees. Benefits under the Plan shall be payable from the general assets of the Company except to the extent paid from the Stryker Corporation Supplemental Savings and Retirement Plan Trust (a grantor trust of the type commonly known as a "rabbi trust"). The Plan shall not be construed as conferring on a Participant any right, title, interest, or claim in or to any specific asset, reserve, account, or property or any kind possessed by the Company. To the extent that a Participant or any other person acquires a right to receive payments from the Company, such right shall be no greater than the right of an unsecured general creditor.
15. EFFECTIVE DATE
This Plan shall be effective as of January 1, 1994.
16. AMENDMENT OR TERMINATION
The Board of Directors of the Company reserves the right to amend or terminate this Plan at any time; provided, however, that without such Participant's written consent, no amendment or termination of the Plan shall adversely affect the right of any Participant to receive, or otherwise result in a material adverse effect on such Participant's rights under the Plan with respect to, his accrued vested benefits as determined as of the date of amendment or termination.
IN WITNESS OF WHICH, the Company has adopted the Plan this 21st day of January 1994.
STRYKER CORPORATION
By: THOMAS R. WINKEL Thomas R. Winkel, Vice President
EXHIBIT 10(iii)
STRYKER CORPORATION SUPPLEMENTAL SAVINGS AND RETIREMENT PLAN (as Amended Effective January 1, 1995)
1. PURPOSE OF THE PLAN
The purpose of this Stryker Corporation Supplemental Savings and Retirement Plan is to provide a select group of the Company's executives with an opportunity to defer a portion of their annual pay and to receive the benefit of Company contributions, to the extent such benefits are unavailable to such executives under the Savings Plan (as hereinafter defined) as a result of limitations imposed by the Internal Revenue Code of 1986, as amended, or other limitations imposed by the terms of such plan.
2. DEFINITIONS
2.01 ACCOUNT shall mean the bookkeeping account maintained for a Participant to record his Pay Deferrals, Matching Contributions, and Company Discretionary Contributions, together with earnings thereon credited pursuant to Section 7.03.
2.02 ADMINISTRATOR shall mean the Company. The Company may periodically delegate some or all its duties as Administrator to a committee appointed by the Board.
2.03 BOARD shall mean the Board of Directors of the Company.
2.04 CODE shall mean the Internal Revenue Code of 1986, as amended from time to time.
2.05 COMPANY shall mean Stryker Corporation and any successor thereto. Where the context requires, "Company" shall also include any employer related to the Company any of whose employees have been designated as eligible to participate in the Plan.
2.06 COMPANY DISCRETIONARY CONTRIBUTION shall mean the amount credited to a Participant's Account pursuant to Article 6.
2.07 COMPENSATION shall mean "Compensation" as defined in the Savings Plan; provided, however, that for purposes of the Plan the limitation on a Participant's Compensation for a Plan Year shall be 200% of the Section 401(a)(17) Limitation for such Plan Year.
2.08 DEFERABLE COMPENSATION shall mean a Participant's Compensation for a Plan Year that is ineligible for deferral under the Savings Plan because it is earned after the Participant's pay deferrals under the Savings Plan have attained the dollar limitation under Section 402(g)(1) of the Code (or such lesser limitation on pay deferrals as may apply to the Participant under the terms of the Savings Plan) for such Plan Year.
2.09 DISCRETIONARY CONTRIBUTION PERCENTAGE shall mean the employer's discretionary contribution for a Plan Year under the Savings Plan, expressed as a percentage of a participant's includible compensation for such Plan Year under the Savings Plan.
2.10 EFFECTIVE DATE shall mean January 1, 1994.
2.11 EMPLOYEE shall mean an employee of the Company.
2.12 ENTRY DATE shall mean January 1 of any Plan Year.
2.13 INVESTMENT ELECTION shall mean a Participant's election under Article 7 of the investment fund or funds used to measure the investment performance of the Participant's Account.
2.14 MATCHING CONTRIBUTION shall mean the amount credited to a Participant's Account pursuant to Article 5.
2.15 PARTICIPANT shall mean an Employee who satisfies the requirements for participation in the Plan pursuant to Section 3.01 and whose Account has not been distributed.
2.16 PAY DEFERRAL ELECTION shall mean a Participant's election pursuant to Section 4.01 to defer a portion of his Deferable Compensation.
2.17 PAY DEFERRALS shall mean the amounts credited to a Participant's Account pursuant to Section 4.01.
2.18 PLAN shall mean this Stryker Corporation Supplemental Savings and Retirement Plan, as amended from time to time.
2.19 PLAN YEAR shall mean the calendar year.
2.20 SAVINGS PLAN shall mean the Stryker Corporation 401(k) Savings and Retirement Plan, as amended from time to time.
2.21 SECTION 401(a)(17) LIMITATION shall mean the dollar limitation under Section 401(a)(17) of the Code in effect for a Plan Year.
2.22 SELECT GROUP shall mean, with respect to a Plan Year, the select group of management or highly compensated Employees who are designated by the Board of Directors as eligible to participate in this Plan.
2.23 UNFORESEEABLE EMERGENCY shall have the meaning ascribed thereto in Section 11.03.
2.24 VALUATION DATE shall mean the last day of each calendar quarter.
3. PARTICIPATION
3.01 PARTICIPATION. Any Employee who is a member of the Select Group shall become eligible to participate in the Plan as of the Entry Date coincident with or next following the latest of (i) the Effective Date, (ii) the date he becomes eligible to participate in the Savings Plan, or (iii) the date he becomes a member of the Select Group. Participation in the Plan shall terminate when all amounts credited to a Participant's Account have been distributed.
4. PAY DEFERRALS
4.01 PAY DEFERRAL ELECTIONS
(a) A Participant may elect to defer a portion of his Deferable Compensation otherwise payable during the Plan Year by making a written election on such form as the Administrator shall designate. Such election shall specify a whole percentage of the Participant's Deferable Compensation which the Participant elects to defer, which percentage may not exceed the maximum percentage of compensation that may be deferred by nonhighly compensated employees under the terms of the Savings Plan. Such
election must be made prior to the first day of such Plan Year or such earlier date as the Administrator may specify, and may not be modified or revoked after the commencement of such Plan Year except as provided in Sections 4.02 and 11.01.
(b) An amount deferred pursuant to a Pay Deferral Election shall be withheld from the Deferable Compensation otherwise payable to the Participant, and shall be credited to the Participant's Account as of the date on which such amount was withheld.
(c) A Pay Deferral Election applies only to the Deferable Compensation for the Plan Year to which such election relates. To defer a portion of his Deferable Compensation in a subsequent Plan Year a Participant must make a new Pay Deferral Election.
4.02 SUSPENSION OF DEFERRALS. Notwithstanding anything to the contrary in this Article 4, in the event the Administrator approves a Participant's request for a suspension of deferrals pursuant to Section 11.01 on account of an Unforeseeable Emergency, the Participant's Pay Deferral Election shall be suspended (and the Participant shall be ineligible to make a new Pay Deferral Election) with respect to any Compensation otherwise payable during the period beginning on the date of such withdrawal or effective date of such approval and ending on the last day of the next succeeding Plan Year.
5. MATCHING CONTRIBUTIONS
5.01 For each Plan Year, the Company shall credit to the Account of each eligible Participant a Matching Contribution equal to the lesser of (i) 50% of such Participant's Pay Deferrals for such Plan Year or (ii) 4% of such Participant's Compensation in excess of the Section 401(a)(17) Limitation for such Plan Year. Such Matching Contribution shall be credited to the Participant's Account by the March 15 following the end of such Plan Year.
5.02 A Participant shall be eligible for a Matching Contribution with respect to a Plan Year only if he is eligible for a matching contribution under the Savings Plan for such Plan Year.
6. COMPANY DISCRETIONARY CONTRIBUTIONS
6.01 For each Plan Year, the Company shall credit to the Account of each eligible Participant a Company Discretionary Contribution equal to such Participant's Compensation in excess of the Section 401(a)(17) Limitation for such Plan Year, multiplied by the Discretionary Contribution Percentage for such Plan Year. Such Company Discretionary Contribution shall be credited to the Participant's Account by the March 15 following the end of such Plan Year.
6.02 A Participant shall be eligible for a Company Discretionary Contribution with respect to a Plan Year only if he is eligible for an employer discretionary contribution under the Savings Plan for such Plan Year.
7. INVESTMENT PERFORMANCE ELECTIONS
7.01 INITIAL ELECTION. Prior to the commencement of his participation in the Plan, each Participant shall file an initial Investment Election which shall designate from among the investment funds available for selection under the Plan the investment fund or funds which shall be used to measure the investment performance of the Participant's Account.
7.02 CHANGE IN ELECTION. A Participant may change his Investment Election effective as of the first day of any calendar quarter by filing a written notice with the Administrator at least 30 days in advance of such date.
7.03 CREDITING OF INVESTMENT RETURN. As of each Valuation Date, each Participant's Account shall, under such procedures as the Administrator shall establish, be credited with any income, and debited with any loss, that would have been realized if the amounts credited to his Account had been invested in accordance with his Investment Election. References in the Plan to Investment Elections are for the sole purpose of attributing hypothetical investment performance to each Participant's Account. Nothing herein shall require the Company to invest, earmark, or set aside its general assets in any specific manner.
7.04 AVAILABLE INVESTMENT FUNDS. The investment funds available for selection under the Plan shall be the investment funds (other than the employer stock fund) available for investment under the Savings Plan.
8. ACCOUNTS
8.01 MAINTENANCE OF ACCOUNTS. The Administrator shall maintain or cause to be maintained records showing the individual balances of each Account. At least once per quarter each Participant shall be furnished with a statement setting forth the value of his Account.
8.02 VESTING. A benefit shall be payable under this Plan only to the extent that it is vested. The portion of a Participant's Account attributable to Pay Deferrals, together with credited earnings or losses thereon, shall be fully vested at all times. The portion of a Participant's Account attributable to Matching Contributions and Company Discretionary Contributions, and credited earnings and losses with respect thereto, shall be vested only to the extent that matching contributions and employer discretionary contributions credited to the Participant's account under the Savings Plan are vested. The nonvested portion of a Participant's Account shall be forfeited at the same time, and under the same conditions, as the nonvested portion of his account under the Savings Plan is forfeited.
9. DISTRIBUTION OF BENEFITS
9.01 BENEFIT PAYMENT ELECTION. Prior to the commencement of his participation in the Plan, each Participant shall file a benefit payment election with the Administrator on such form as the Administrator shall prescribe specifying (i) whether the Participant's benefit is to be paid in a lump sum, in substantially equal annual installments, or in a combination thereof, (ii) the year in which such lump-sum payment is to be made or such installments are to commence, and (iii) if installments are elected, the number of such installments.
Except as provided in Section 11.02, no portion of a Participant's benefit may be distributed prior to his separation from service. Lump-sum payments may not be made later than, and installment payments may not extend beyond, the tenth anniversary of the date of the Participant's separation from service.
9.02 CHANGE IN ELECTION. A Participant's benefit payment election may be changed from time to time, provided, however, that no such change shall be effective if the Participant's separation from service from the Company occurs less than one year after the date such change is made. In such event the Participant's benefit shall be paid in accordance with his most recent election or change in election (other than a change in election made less than one year before his separation from service).
9.03 DISTRIBUTION OF BENEFITS. Except as otherwise provided in Article 10 and Section 11.02, a Participant's Account shall be distributed in accordance with his benefit election made in accordance with Section 9.01 (after giving effect to any modifications to such election pursuant to Section 9.02). The payment of any installment or lump sum shall, in accordance with the Participant's election, be made either (i) within 90 days after the end of the calendar quarter during which the Participant separates from service or (ii) within the first 90 days of a calendar year commencing after the Participant separates from service.
10. DEATH OF A PARTICIPANT
10.01 Except as otherwise provided in Section 10.02, in the event of a Participant's death prior to the distribution of his entire Account balance, the remaining balance in his Account shall be distributed in accordance with his benefit payment election made pursuant to Section 9.01 (after giving effect to any modifications to such election pursuant to Section 9.02). Such distribution shall be made to the beneficiary designated by the Participant under the Savings Plan, unless the Participant has specifically designated a different beneficiary under this Plan in a writing filed with the Administrator.
10.02 A Participant may elect to have any amount remaining in his Account upon his death paid to his beneficiary in a lump sum within 60 days after the Administrator has received notification of his death, rather than in accordance with his benefit payment election under Section 9.01. Such a lump-sum death benefit election may be made or revoked at any time, provided, however, that no such election or revocation shall be effective if made less than one year before the date of the Participant's death.
11. UNFORESEEABLE EMERGENCIES
11.01 SUSPENSION OF DEFERRALS. In the vent of a Participant's Unforeseeable Emergency, such Participant may request a suspension of his Pay Deferral in accordance with Section 4.02 (if a suspension is not already in effect pursuant to such section). Any such request shall be subject to the approval of the Administrator, which approval shall not be granted unless such need cannot be relieved (i) through reimbursement or compensation by insurance or otherwise or (ii) by liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). If the request is granted, such suspension shall be effective as of such date as the Administrator shall prescribe.
11.02 EMERGENCY WITHDRAWAL. In the event of a Participant's Unforeseeable Emergency, such Participant may request an emergency withdrawal from his Account. Any such request shall be subject to the approval of the Administrator, which approval (a) shall not be granted unless the Participant's Pay Deferral Election have been suspended pursuant to Section 4.02, (b) shall only be granted to the extent reasonably needed to satisfy the need created by the Unforeseeable Emergency, and (c) shall not be granted to the extent that such need may be relived (i) through reimbursement or compensation by insurance or otherwise or (ii) by liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).
11.03 UNFORESEEABLE EMERGENCY. An "Unforeseeable Emergency" means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or his dependent, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control. Examples of circumstances not qualifying as an Unforeseeable Emergency include the need to send a Participant's child to college and the desire to purchase a home.
12. ADMINISTRATION
The Plan shall be administered by the Administrator, which shall have discretionary authority to determine eligibility for benefits and to construe the terms of the Plan. The Administrator's good-faith determination with respect to any issue relating to the interpretation of the Plan shall be conclusive and final.
13. GENERAL PROVISIONS
13.01 NO CONTRACT OF EMPLOYMENT. The establishment of the Plan shall not be construed as conferring any legal rights upon any Participant for a continuation of employment, nor shall it interfere with the rights of the Company to discharge a Participant and to treat him without regard to the effect which such treatment might have upon him as a Participant in the Plan.
13.02 WITHHOLDING. As a condition to a Participant's entitlement to benefits hereunder, the Company shall have the right to deduct from any amounts otherwise payable to a Participant, whether pursuant to the Plan or otherwise, or otherwise to collect from the Participant, any required withholding taxes with respect to benefits under the Plan.
13.03 NON-ASSIGNABILITY OF BENEFITS. Subject to any applicable law, no benefit under the Plan shall be subject in any manner to, nor shall the Company be obligated to recognize, any purported anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so shall be void. No such benefit shall in any manner be liable for or subject to garnishment, attachment, execution, or a levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of the Participant.
13.04 SUCCESSOR EMPLOYERS. The Plan shall be binding upon the successors and assigns of the Company. The Company shall require any successor (whether direct or indirect, and whether by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company, by written agreement to expressly assume and agree to perform the
Company's obligations under the Plan in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. The provisions of this Section 13.04 shall continue to apply to each subsequent employer of the Participant hereunder in the event of any subsequent merger, consolidation, or transfer of assets of such subsequent employer.
13.05 GOVERNING LAW. The laws of the State of Michigan shall govern the construction of this Plan and the rights and the liabilities hereunder of the parties hereto.
13.06 PRONOUNS. The masculine pronoun shall mean the feminine wherever appropriate.
14. SOURCE OF BENEFITS
The Plan is an unfunded plan maintained by the Company for the purpose of providing deferred compensation for a select group of management or highly compensated employees. Benefits under the Plan shall be payable from the general assets of the Company except to the extent paid from the Stryker Corporation Supplemental Savings and Retirement Plan Trust (a grantor trust of the type commonly known as a "rabbi trust"). The Plan shall not be construed as conferring on a Participant any right, title, interest, or claim in or to any specific asset, reserve, account, or property or any kind possessed by the Company. To the extent that a Participant or any other person acquires a right to receive payments from the Company, such right shall be no greater than the right of an unsecured general creditor.
15. EFFECTIVE DATE
This Plan, as amended and restated as set forth herein, shall be effective as of January 1, 1995.
16. AMENDMENT OR TERMINATION
The Board of Directors of the Company reserves the right to amend or terminate this Plan at any time; provided, however, that without such Participant's written consent, no amendment or termination of the Plan shall adversely affect the right of any Participant to receive, or otherwise result in a material adverse effect on such Participant's rights under the Plan with respect to, his accrued vested benefits as determined as of the date of amendment or termination.
IN WITNESS OF WHICH, the Company has adopted the Plan this 14th day of December 1994.
STRYKER CORPORATION
By: THOMAS R. WINKEL Thomas R. Winkel, Vice President
EXHIBIT (10)(iv)
DESCRIPTION OF BONUS ARRANGEMENTS
The Company has entered into bonus arrangements with certain executive officers for 1995, 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 $1,225,000.
EXHIBIT (11)
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
Year Ended December 31 ----------------------------------- 1994 1993 1992 ---------- ---------- ----------
Average number of shares outstanding 48,367,000 48,356,000 47,716,000
Net earnings $72,400,000 $60,205,000 $47,700,000 =========== =========== =========== Earnings per share of common stock: Net earnings $1.50 $1.25 $1.00 ===== ===== ===== Primary: Average shares outstanding 48,367,000 48,356,000 47,716,000
Net effect of dilutive stock options, based on the treasury stock method using average market price 737,000 536,000 1,173,000 ----------- ---------- ---------- Total Primary Shares 49,104,000 48,892,000 48,889,000 ========== ========== ==========
Fully Diluted: Average shares outstanding 48,367,000 48,356,000 47,716,000
Net effect of dilutive stock options, using the year-end market price, if higher then average market price 770,000 586,000 1,199,000 __________ __________ __________ Total Fully Diluted Shares 49,137,000 48,942,000 48,915,000 ========== ========== ==========
Note: Shares subject to stock options are not included in the earnings per share computation because the present effect thereof is not materially dilutive.
CONSOLIDATED STATEMENT OF CASH FLOWS STRYKER CORPORATION AND SUBSIDIARIES
Years Ended December 31 (in thousands) 1994 1993 1992 -------------------------------------- -------- -------- -------- OPERATING ACTIVITIES Net Earnings $72,400 $60,205 $47,700 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 18,717 13,048 10,214 Amortization 2,227 3,135 1,168 Minority interest 4,405 Provision for losses on accounts receivable 2,600 900 400 Deferred income taxes (credit) (3,818) (2,917) (4,171) Changes in operating assets and liabilities, net of effects of business acquisitions: Decrease (increase) in accounts receivable 2,862 (11,305) (20,563) Decrease in inventories 5,798 2,271 726 Increase (decrease) in accounts payable (8,594) 4,982 7,723 Increase (decrease) in income taxes (3,898) 11,092 632 Other 4,994 4,691 6,899 -------- -------- -------- Net Cash Provided by Operating Activities 97,693 86,102 50,728
INVESTING ACTIVITIES Purchases of property, plant and equipment (29,239) (20,160) (31,618) Sales (purchases) of marketable securities 17,661 (54,264) (21,553) Business acquisitions, net of cash acquired (42,557) (34,654) (8,736) -------- -------- -------- Net Cash Used in Investing Activities (54,135) (109,078) (61,907)
FINANCING ACTIVITIES Proceeds from borrowings 59,919 33,563 Payments on borrowings (31,771) (2,016) (7,418) Dividends paid (3,388) (2,898) (2,380) Proceeds from exercise of stock options 1,791 1,389 9,789 Repurchases of common stock (3,109) Other (1,307) (126) (376) -------- -------- -------- Net Cash Provided by (Used in) Financing Activities 22,135 29,912 (385) Effect of exchange rate changes on cash and cash equivalents 1,376 (315) 1,734 -------- -------- -------- Increase (Decrease) in Cash and Cash Equivalents 67,069 6,621 (9,830) Cash and cash equivalents at beginning of year 49,712 43,091 52,921 -------- -------- -------- Cash and Cash Equivalents at End of Year $116,781 $49,712 $43,091 ======== ======== ========
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STRYKER CORPORATION AND SUBSIDIARIES December 31, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS: Stryker Corporation develops, manufactures and markets specialty surgical and medical products which are sold primarily to hospitals throughout the world.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and, effective in August 1994 (see Note 4), its 51% owned subsidiary, Matsumoto Medical Instruments, Inc., after elimination of all significant intercompany accounts and transactions. Minority interest represents the minority stockholders' equity in Matsumoto's net earnings since August 1994 and their equity in Matsumoto's net assets at December 31, 1994. The Company's 20% investment in Matsumoto during the period from August 1993 to July 1994 was accounted for by the equity method.
REVENUE RECOGNITION: Revenue is recognized on the sale of products when the related goods have been shipped or services have been rendered.
CASH EQUIVALENTS AND INVESTMENTS: Cash equivalents are highly liquid investments with a maturity of three months or less when purchased. Investments include marketable equity and debt securities classified as current assets and certain noncurrent investments included in other assets.
The Company's investments in marketable equity and debt securities are classified as "available-for-sale" and are carried at fair value, with the unrealized gains and losses, net of income taxes, reported as a separate component of stockholders' equity. Interest and dividends on these securities are included in other income.
INVENTORIES: Inventories are stated at the lower of cost or market. Cost for approximately 75% (63% in 1993) of inventories is determined using the lower of first-in, first-out (FIFO) cost or market. Cost for certain domestic inventories is determined using the last-in, first-out (LIFO) cost method. The FIFO cost for all inventories approximates replacement cost.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated at cost. Depreciation is computed by the straight-line or declining balance methods over the estimated useful lives of the assets.
INTANGIBLE ASSETS: Intangible assets represent the excess of purchase price over fair value of tangible net assets of acquired businesses. Intangible assets, which include patents and intangibles not specifically identifiable, are being amortized using the straight-line method over periods of up to sixteen years.
INCOME TAXES: Effective January 1, 1993, the Company adopted Financial Accounting Standards Board (FASB) Statement No. 109, "Accounting for Income Taxes", which requires the use of the liability method of accounting for deferred income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates in effect for the years in which the differences are expected to reverse. Prior to the adoption of Statement 109, income tax expense was determined using the deferred method. Deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the difference originated.
EARNINGS PER SHARE: Earnings per share is based upon the average number of shares of common stock outstanding during each year. Shares subject to option are not included in earnings per share computations because the present effect thereof is not materially dilutive.
2. INVESTMENTS
Effective January 1, 1994, the Company adopted FASB Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities, " for investments held as of or acquired after that date. In accordance with the Statement, prior period financial statements have not been restated to reflect the change in accounting principle. The beginning balance of stockholders' equity was increased by $1,180,000 (net of $751,000 in deferred income taxes) to reflect the net unrealized holding gains on securities classified as available-for-sale previously carried at cost.
The following is a summary of the Company's investments in marketable equity and debt securities at December 31, 1994 (in thousands):
Gross Unrealized Estimated Cost Gains/(Losses) Fair Value ------- -------------- ----------
Debt securities $87,490 ($2,081) $85,409 Equity securities 7,700 (119) 7,581 ------- ------- -------
$95,190 ($2,200) $92,990 ======= ====== =======
3. INVENTORIES
Inventories are as follows (in thousands):
December 31 ------------------ 1994 1993 -------- ------- Finished goods $86,719 $45,338 Work-in-process 7,552 10,586 Raw material 28,784 28,455 -------- ------- FIFO cost 123,055 84,379 Less LIFO reserve 7,298 7,797 -------- ------- $115,757 $76,582 ======== =======
4. BUSINESS ACQUISITIONS
In August 1994, the Company purchased 31% of the outstanding common stock of Matsumoto Medical Instruments, Inc., Osaka, Japan, thereby increasing its direct ownership interest in Matsumoto to 51%. Matsumoto is one of the largest distributors of medical devices in Japan and is the exclusive distributor of most Stryker products in that country. The cost of the 31% investment, which was based on net book value, was approximately 6.0 billion Yen ($60.7 million). Payment of approximately 847 million Yen ($8.5 million) of the purchase price has been deferred to April 1995. The acquisition was accounted for by the purchase method and the results of operations for Matsumoto were consolidated with Stryker beginning in August 1994. If the acquisition had occurred on January 1, 1993, pro forma net sales for the Company would have been $762,341,000 for 1994 and $694,923,000 for 1993. Pro forma net earnings would not have differed significantly from reported results.
In August 1993, the Company purchased 20% of the outstanding common stock of Matsumoto. The cost of the investment, which was based on net book value, was approximately 3.4 billion yen ($32.8 million). This initial investment was accounted for under the equity method until August 1994, when the additional 31% interest was acquired. The Company's share of Matsumoto's net earnings did not have a material impact on the Company's net earnings in 1993.
In June 1994, the Company purchased the Steri-Shield product line, which is a personal protection system for operating room personnel. The acquisition was accounted for by the purchase method at a total cost of $6,500,000, of which $5,500,000 in royalties will be paid over the next seven years. Intangible assets acquired, principally patents, are being amortized over seven to ten years. Pro forma consolidated results including the purchased business would not differ significantly from reported results.
During 1994, 1993 and 1992, the Company's subsidiary, Physiotherapy Associates, Inc., purchased several physical therapy clinic operations. The aggregate purchase price of these clinics in 1994, 1993 and 1992 was approximately $7,600,000, $1,900,000 and $2,900,000, respectively. Intangible assets acquired, principally employment contracts and goodwill, are being amortized over periods ranging from one to fifteen years. Pro- forma consolidated results including the purchased businesses would not differ significantly from reported results.
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 and other orthopaedic products. The acquisition was accounted for by the purchase method at a total cost of $13,000,000, with approximately $7,000,000 to be paid over the following three years. Intangible assets acquired, principally patents, are being amortized over a ten year period. Pro forma consolidated results including the purchased business would not differ significantly from reported results.
5. BORROWINGS
The Company and its subsidiaries have unsecured short-term line of credit arrangements with banks aggregating $20,000,000 domestically and $25,700,000 equivalent in foreign currencies. Borrowings under these lines at December 31, 1994 were $208,000 ($777,000 at December 31, 1993) in foreign funds at an average interest rate of 12.8% (12.5% in 1993). These lines generally expire on July 31, 1995.
Long-term debt is as follows (in thousands):
December 31 ----------------- 1994 1993 ------- ------- Bank loans $86,616 $30,736 Other 14,029 1,428 ------- ------- 100,645 32,164 Less current maturities 5,369 882 ------- ------- $95,276 $31,282 ======= =======
The bank loans represent two separate borrowings made to finance the acquisition of the Company's 51% interest in Matsumoto Medical Instruments, Inc. (see Note 4). Both loans are Japanese Yen denominated, are unsecured and mature in August 1998. The first loan is from the Chicago branch of The Sanwa Bank, Limited, has a principal balance of $34,442,000 ($30,736,000 at December 31, 1993) and bears interest at a fixed annual rate of 4.76%. The
second loan is a floating rate loan from the Chicago branches of The Bank of Tokyo, Ltd., The Mitsubishi Bank Limited and The Sanwa Bank, Limited and has a principal balance of $52,174,000. The Company has fixed the effective annual interest rate of this debt at 4.17% using an interest rate swap with a notional amount and term equal to that of the related loan.
Maturities of debt for the four years succeeding 1995 are: 1996 - $3,152,000; 1997 - $52,000; 1998 - $86,673,000 and 1999 - $5,070,000.
The carrying amounts of the Company's long-term debt and interest rate swap approximate their fair values based on the Company's current borrowing rates for similar types of borrowing agreements and quoted market rates, respectively.
Total interest expense, which is included in other income and approximates interest paid, was $3,677,000 in 1994, $1,067,000 in 1993 and $411,000 in 1992.
6. CAPITAL STOCK
The Company has key employee and director Stock Option Plans under which options are granted at a price not less than fair market value at date of grant. The options are granted for periods of up to ten years and become exercisable in varying installments. A summary of stock option activity follows:
Option Shares Price Per Share --------- --------------- Options outstanding at January 1, 1993 1,275,925 $3.20 - $38.75 Granted 867,500 22.38 - 25.50 Canceled (411,300) 6.75 - 38.75 Exercised (75,600) 3.20 - 14.63 --------- -------------- Options outstanding at December 31, 1993 1,656,525 3.20 - 34.25 Granted 37,500 25.88 - 28.00 Canceled (58,000) 6.75 - 34.25 Exercised (88,040) 3.20 - 25.50 --------- -------------- Options outstanding at December 31, 1994 1,547,985 $3.20 - $34.25 ========= ==============
At December 31, 1994, options for 750,085 shares were exercisable and 1,133,600 shares were reserved for future grants.
The Company has 500,000 authorized shares of $1 par value preferred stock, none of which are outstanding.
7. RETIREMENT PLANS
Substantially all employees of the Company are covered by retirement plans. The majority of employees are covered by profit sharing or defined contribution retirement plans.
The Company's 51% owned subsidiary, Matsumoto Medical Instruments, Inc., has a noncontributory defined benefit plan covering all employees who are generally entitled, upon termination, to lump-sum or annuity payments of amounts determined by reference to the current level of salary, length of service, and the conditions under which the termination occurs. Matsumoto's funding policy for the plan is to contribute actuarially determined amounts on a monthly basis. In addition, certain officers of Matsumoto are customarily entitled to lump-sum payments under an unfunded retirement plan. An accrual has been provided for the expected cost of these benefits earned to date, although such payments
are subject to the approval of Matsumoto's stockholders. Amounts accrued for both Matsumoto retirement plans, which provide for substantially all unfunded obligations under the plans, totaled $16,235,000 at December 31, 1994 and are recorded as other noncurrent liabilities in the consolidated balance sheet.
Retirement plan expense under all of the Company's retirement plans totaled $6,753,000 in 1994, $5,302,000 in 1993 and $4,715,000 in 1992.
8. INCOME TAXES
Effective January 1, 1993, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes", which requires the use of the liability method of accounting for income taxes (see Note 1). As permitted by Statement 109, the Company has elected not to restate the financial statements of any prior years. The cumulative effect of the change in the method of accounting on net earnings was not material.
Earnings before income taxes and minority interest consist of the following (in thousands):
1994 1993 1992 -------- ------- ------- United States operations $100,996 $88,181 $66,552 Foreign operations 26,579 7,884 10,388 -------- ------- ------- $127,575 $96,065 $76,940 ======== ======= =======
The components of the provision for income taxes follow (in thousands):
1994 1993 1992 -------- ------- ------- Current: Federal $31,932 $26,114 $20,827 State, including Puerto Rico 5,133 10,372 7,973 Foreign 17,523 2,291 4,611 ------- ------- ------- 54,588 38,777 33,411 Deferred tax expense (credit) (3,818) (2,917) (4,171) ------- ------- ------- $50,770 $35,860 $29,240 ======= ======= =======
A reconciliation of the statutory federal income tax rate to the Company's effective tax rate follows:
1994 1993 1992 ----- ----- ----- U.S. statutory income tax rate 35.0% 35.0% 34.0% Add (deduct): State taxes, less effect of federal deduction 2.3 6.3 5.9 Foreign income taxes at rates different from the U.S. statutory rate 5.4 (.8) 1.0 Tax benefit relating to operations in Puerto Rico (2.0) (1.8) (1.9) U.S. research and development tax credit (.6) (1.4) (.9) Earnings of Foreign Sales Corporation (1.4) (1.4) (.8) Other 1.1 1.4 .7 ----- ----- ----- 39.8% 37.3% 38.0% ===== ===== =====
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effect of significant temporary differences which comprise the Company's deferred tax assets and liabilities are as follows (in thousands):
December 31 ----------------- 1994 1993 ------- ------- Deferred tax assets: Inventories $34,475 $4,712 Accounts receivable and other assets 2,048 2,874 Other accrued expenses 18,165 6,662 State taxes 3,127 1,297 Other 2,226 920 ------- ------- Total deferred tax assets 60,041 16,465
Deferred tax liabilities: Depreciation (1,681) (792) Other (2,244) (895) ------- ------- Total deferred tax liabilities (3,925) (1,687) ------- ------- Total net deferred tax assets $56,116 $14,778 ======= =======
Deferred tax assets and liabilities are included in the consolidated balance sheet as follows (in thousands):
December 31 ----------------- 1994 1993 ------- -------
Current assets -- Deferred income taxes $54,333 $15,829 Noncurrent assets -- Other assets 4,438 Noncurrent liabilities -- Other liabilities (2,655) (1,051) ------- ------- Net deferred tax assets $56,116 $14,778 ======= =======
No provision has been made for U.S. federal and state income taxes or foreign taxes that may result from future remittances of the undistributed earnings ($152,619,000 at December 31, 1994) of foreign subsidiaries because it is expected that such earnings will be reinvested overseas indefinitely. Determination of the amount of any unrecognized deferred income tax liability on these unremitted earnings is not practicable.
Total income taxes paid were $51,898,000 in 1994, $27,641,000 in 1993 and $25,133,000 in 1992.
9. GEOGRAPHIC DATA
Geographic area information follows (in thousands):
1994 1993 1992 -------- -------- -------- NET SALES United States operations: Domestic $405,549 $378,255 $330,782 Export 117,669 115,977 81,513 Foreign operations: Pacific 130,223 33,651 33,660 Europe 70,366 63,366 58,010 Other 12,094 11,987 9,522 Eliminations (53,981) (45,901) (36,433) -------- -------- -------- Net Sales $681,920 $557,335 $477,054 ======== ======== ========
OPERATING INCOME United States operations $109,429 $90,726 $68,759 Foreign operations: Pacific 12,560 1,465 4,264 Europe 6,554 6,571 6,998 Other 1,686 1,660 213 -------- ------- ------- Total foreign operations 20,800 9,696 11,475
Corporate expenses (9,753) (8,480) (6,533) -------- ------- -------
Total Operating Income $120,476 $91,942 $73,701 ======== ======= =======
1994 1993 1992 -------- -------- -------- ASSETS United States operations $248,883 $225,587 $199,188 Foreign operations: Pacific 281,259 12,053 12,384 Europe 50,111 39,313 42,580 Other 9,801 4,067 2,741 Corporate 177,917 173,184 83,379 -------- -------- -------- Total Assets $767,971 $454,204 $340,272 ======== ======== ========
Intercompany sales between geographic areas are included in export and foreign operations sales at agreed upon prices which include a profit element.
For the year ended December 31, 1993, sales to Matsumoto Medical Instruments, Inc. were $64,300,000 or 12% of total net sales. No customer accounted for 10% or more of the Company's sales in 1994 or 1992.
Gains (losses) on foreign currency transactions, which are included in other income, totaled $586,000, $(256,000) and $188,000 in 1994, 1993 and 1992, respectively.
Corporate assets consist primarily of domestic cash and cash equivalents and marketable securities and, in 1993, the investment in affiliate.
10. LEASES
The Company leases various manufacturing and office facilities and equipment under operating leases. Future minimum lease commitments under these leases are as follows (in thousands):
1995 $10,076 1996 8,320 1997 5,625 1998 3,605 1999 1,823 Thereafter 1,766 ------- $31,215 =======
Rent expense totaled $14,644,000 in 1994, $10,950,000 in 1993 and $8,792,000 in 1992.
11. CONTINGENCIES
The Company is involved in various claims and legal actions arising in the normal course of business. The Company does not anticipate material losses as a result of these actions.
SALES ANALYSIS, QUARTERLY DATA (dollars in thousands, except per share data)
PRODUCT LINE SALES (Unaudited) 1994 1993 1992 -------------- -------------- -------------- SURGICAL Orthopaedic Implants, Endoscopic Systems, Powered Surgical Instruments and Other Operating Room Devices $544,049 80% $447,042 80% $394,111 83%
MEDICAL Patient Care and Patient Handling Equipment and Physical Therapy Services 137,871 20 110,293 20 82,943 17 -------- --- -------- --- -------- --- $681,920 100% $557,335 100% $477,054 100% ======== === ======== === ======== ===
DOMESTIC/INTERNATIONAL SALES (Unaudited) 1994 1993 1992 -------------- -------------- -------------- Domestic $405,549 59% $378,255 68% $330,782 69% International 276,371 41 179,080 32 146,272 31 -------- --- -------- --- -------- --- $681,920 100% $557,335 100% $477,054 100% ======== === ======== === ======== ===
REPORT OF INDEPENDENT AUDITORS
Board of Directors Stryker Corporation
We have audited the accompanying consolidated balance sheet of Stryker Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Stryker Corporation and subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP Ernst & Young LLP
Kalamazoo, Michigan January 31, 1995 EXHIBIT (21)
List of Subsidiaries
State or Country of Name of Subsidiary Incorporation ---------------------------------------------------------------- Dimso Iberica S.A. France Dimso SA France Osteonics Corp. New Jersey Physiotherapy Associates, Inc. Michigan Stryker Australia Pty. Ltd. Australia Stryker B.V. The Netherlands Stryker (Barbados) Foreign Sales Corporation Barbados Stryker Canada Inc. Canada Stryker China Limited Hong Kong Stryker Corporation (Malaysia) SDN BHD Malaysia Stryker Deutschland GmbH Germany Stryker Far East, Inc. Delaware Stryker Foreign Sales Corporation U.S. Virgin Islands Stryker France SA France Stryker Italia SRL Italy Stryker Korea Ltd. Korea Stryker Mexico, S.A. de C.V. Mexico Stryker Pacific Limited Hong Kong Stryker Puerto Rico, Inc. Delaware Stryker SA Switzerland Stryker Sales Corporation Michigan Stryker Singapore Private Limited Singapore
Stryker Corporation is the immediate parent and owns 100% of the outstanding voting securities of each of the above-named subsidiaries.
Stryker is a 51% investor in: Matsumoto Medical Instruments, Inc. Japan
Stryker effectively controls: Stryker India Medical Equipment Private Limited India
EXHIBIT 23--CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K) of Stryker Corporation and subsidiaries of our report dated January 31, 1995, included in the 1994 Annual Report to Stockholders of Stryker Corporation and subsidiaries.
Our audits also included the financial statement schedule of Stryker Corporation and subsidiaries listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement Number 33-55662 on Form S-8 dated December 11, 1992, Registration Statement Number 2-96467 on Form S-8 dated April 4, 1985, and Registration Statement Number 33-32240 on Form S-8 dated November 20, 1989 and to the related prospectus for each of the registration statements, of our report dated January 31, 1995, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of Stryker Corporation.
ERNST & YOUNG LLP
Kalamazoo, Michigan March 17, 1995 [ARTICLE] 5