UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 Or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1998 Commission file number 0-9165 STRYKER CORPORATION (Exact name of registrant as specified in its charter) Michigan 38-1239739 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 4085, Kalamazoo, Michigan 49003-4085 (Address of principal executive offices) (Zip Code) (616) 385-2600 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 96,433,309 shares of Common Stock, $.10 par value, as of October 29, 1998. PART I. - FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS STRYKER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in thousands, except per share amounts) <TABLE> September 30 December 31 1998 1997 ----------- ----------- ASSETS Current Assets <S> <C> <C> Cash and cash equivalents $ 223,069 $ 154,027 Marketable debt securities 135,731 197,041 Accounts receivable, less allowance of $10,200 (1997 - $11,700) 191,173 176,214 Inventories 165,971 136,246 Deferred income taxes 86,140 78,896 Prepaid expenses and other current assets 16,666 14,184 --------- --------- Total Current Assets 818,750 756,608 Property, Plant and Equipment, less allowance for depreciation of $156,852 (1997 - $136,582) 182,998 163,867 Other Assets 69,927 64,600 --------- --------- TOTAL ASSETS $1,071,675 $ 985,075 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 51,662 $ 55,034 Accrued compensation 45,373 43,927 Income taxes 50,599 36,971 Accrued expenses and other liabilities 65,427 93,452 Current maturities of long-term debt 71,280 73,627 --------- --------- Total Current Liabilities 284,341 303,011 Long Term Debt, excluding current maturities 3,874 4,449 Other Liabilities 28,455 29,168 Minority Interest 29,235 35,672 Stockholders' Equity Common stock, $.10 par value: Authorized - 150,000 shares Outstanding - 96,418 shares (1997 - 96,059) 9,642 9,606 Additional paid-in capital 8,433 18 Retained earnings 718,949 612,939 Accumulated other comprehensive loss (11,254) (9,788) --------- --------- Total Stockholders' Equity 725,770 612,775 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,071,675 $ 985,075 ========= ========= See accompanying notes to condensed consolidated financial statements. </TABLE> STRYKER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Amounts in thousands, except per share amounts) <TABLE> Three Months Ended Nine Months Ended September 30 September 30 1998 1997 1998 1997 -------- -------- -------- -------- <S> <C> <C> <C> <C> Net sales $260,965 $238,143 $781,826 $725,715 Cost of sales 111,810 97,805 324,680 296,022 -------- -------- -------- -------- Gross profit 149,155 140,338 457,146 429,693 Operating expenses: Research, development and engineering 12,978 14,253 41,428 42,312 Selling, general and administrative 87,129 82,590 263,451 254,691 -------- -------- -------- -------- 100,107 96,843 304,879 297,003 -------- -------- -------- -------- Operating income 49,048 43,495 152,267 132,690 Other income 4,412 2,290 10,823 7,633 -------- -------- -------- -------- Earnings before income taxes 53,460 45,785 163,090 140,323 Income taxes 18,710 16,815 57,080 51,953 -------- -------- -------- -------- Net earnings $ 34,750 $ 28,970 $106,010 $ 88,370 ======== ======== ======== ======== Net earnings per share of common stock: Basic $.36 $.30 $1.10 $.92 ==== ==== ==== ==== Diluted $.35 $.30 $1.08 $.90 ==== ==== ==== ==== Average outstanding shares for the period: Basic 96,362 96,038 96,253 96,298 Diluted 98,039 98,175 98,040 98,149 See accompanying notes to condensed consolidated financial statements. </TABLE> STRYKER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited) (Amounts in thousands, except per share amounts) <TABLE> Accumulated Additional Other Common Paid-In Retained Comprehensive Stock Capital Earnings Loss Total ------- ---------- -------- ---------- -------- Balance at <S> <C> <C> <C> <C> <C> January 1, 1998 $9,606 $18 $612,939 ($9,788) $612,775 -------- Comprehensive income: Net earnings 106,010 106,010 Net unrealized losses on securities (203) (203) Foreign currency translation adjustments (1,263) (1,263) -------- Comprehensive income 104,544 -------- Sales of 357 shares of common stock under stock option and benefit plans, including $4,504 income tax benefit 36 8,415 8,451 ------- ---------- -------- --------- -------- Balance at September 30, 1998 $9,642 $8,433 $718,949 ($11,254) $725,770 ======= ========== ======== ========= ======== See accompanying notes to condensed consolidated financial statements. </TABLE> In 1997 the Company declared a cash dividend of eleven cents per share to shareholders of record on December 31, 1997, payable on January 30, 1998. No cash dividends have been declared during 1998. STRYKER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands) <TABLE> Nine Months Ended September 30 1998 1997 -------- -------- OPERATING ACTIVITIES <S> <C> <C> Net earnings $ 106,010 $ 88,370 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 20,086 19,480 Amortization 4,029 5,765 Minority interest (1,361) 89 Changes in operating assets and liabilities, net of effects of business acquisitions: Increase in accounts receivable (14,030) (14,127) Increase in inventories (23,651) (15,123) Decrease in accounts payable (5,069) (10,456) Increase (decrease) in accrued expenses (9,076) 3,688 Increase (decrease) in income taxes 4,892 (21,045) Other (5,653) (5,839) --------- -------- Net cash provided by operating activities 76,177 50,802 INVESTING AND FINANCING ACTIVITIES Purchases of property, plant and equipment (35,814) (25,995) Sales of marketable securities 61,310 12,955 Business acquisitions (27,166) (28,338) Payments on borrowings (1,261) (5,413) Dividends paid (10,580) (9,679) Proceeds from exercise of stock options 6,943 4,054 Repurchases of common stock 0 (25,576) Other 581 6,441 -------- -------- Net cash used in investing and financing activities (5,987) (71,551) Effect of exchange rate changes on cash and cash equivalents (1,148) (1,193) -------- -------- Increase (decrease) in cash and cash equivalents $ 69,042 ($21,942) ======== ======== See accompanying notes to condensed consolidated financial statements. </TABLE> STRYKER CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1998 (Unaudited) Note 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, which the Company considers necessary for a fair presentation of the results of operations for the periods shown. The financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of consolidated financial position, results of operations and cash flows in conformity with generally accepted accounting principles. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1997. As of January 1, 1998 the Company adopted Financial Accounting Standards Board (FASB) Statement No. 130, "Reporting Comprehensive Income". Statement No. 130 establishes rules for the reporting of comprehensive income and its components; however, the adoption of this statement had no impact on the Company's net earnings or stockholders' equity. Statement No. 130 requires unrealized gains or losses on the Company's available-for-sale securities and foreign currency translation adjustments, which, prior to adoption, were reported separately in stockholders' equity, to be aggregated and disclosed as accumulated other comprehensive income (loss), a component of stockholders' equity. Management has elected to disclose total comprehensive income as a subtotal in the Condensed Consolidated Statement of Stockholders' Equity. Prior year financial statements have been reclassified to conform to the requirements of Statement No. 130. Other comprehensive income for the nine months ended September 30, 1997 was $80,528. Other comprehensive income for the three months ended September 30, 1998 and 1997 was $45,775 and $28,284, respectively. Note 2. INVENTORIES <TABLE> Inventories are as follows (in thousands): September 30 December 31 1998 1997 --------- --------- <S> <C> <C> Finished goods $ 129,103 $ 103,744 Work-in-process 15,674 10,661 Raw material 28,913 29,560 --------- --------- FIFO Cost 173,690 143,965 Less LIFO reserve 7,719 7,719 --------- --------- $ 165,971 $ 136,246 ========= ========= FIFO cost approximates replacement cost. </TABLE> Note 3. BUSINESS ACQUISITIONS During the first nine months of 1998, the Company's subsidiary, Physiotherapy Associates, Inc., purchased certain physical therapy clinic operations at an aggregate cost of $2.1 million. In addition, the Company purchased two domestic distributors of its orthopaedic implants at a cost of $15.0 million and a Canadian manufacturer of hospital beds, at a cost of $8.1 million. The Company also purchased an additional 2% of the outstanding common stock of Matsumoto Medical Instruments, Inc. at a cost of $2.0 million, thereby increasing its direct ownership of Matsumoto to 77%. All of the above acquisitions were accounted for by the purchase method. Any intangible assets acquired in the above acquisitions are being amortized over periods ranging from five to fifteen years. Pro forma consolidated operating results including the acquisitions would not differ significantly from reported results. Note 4. SUBSEQUENT EVENTS On August 14, 1998, the Company announced it had entered into a definitive agreement to acquire Howmedica, the orthopaedic division of Pfizer, Inc., for $1.9 billion in cash. On October 22, 1998, the Company reached an agreement with Pfizer to reduce the purchase price for Howmedica to $1.65 billion in cash as a result of changes in the financial markets. The transaction, which will be accounted for as a purchase, is expected to be financed with a combination of cash and debt, and is expected to be completed in the fourth quarter of 1998 subject to regulatory approvals. On October 16, 1998, the Company announced that it entered into a definitive agreement to acquire the manufacturing rights and facilities for its OP-1 bone growth device from Creative BioMolecules, Inc., for approximately $20 million plus future increases in royalty payments. The transaction will be accounted for as a purchase and is expected to close in the fourth quarter of 1998. Note 5. DERIVATIVE FINANCIAL INSTRUMENTS In the third quarter, the Company entered into an interest rate swap agreement which fixed the base rate, or 90 day LIBOR, at a weighted average rate of 5.8% on $700 million of the $1.65 billion floating rate debt facility associated with the purchase of Howmedica (see Note 4). The interest rate swap has been designated as a hedge of an anticipated transaction, with any changes in fair value being deferred. If for any reason the Howmedica acquisition does not close, the Company will be required to close out its hedge positions and will recognize a corresponding gain or loss in the statement of earnings. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results Of Operations _____________________ The table below sets forth domestic/international and product line sales information: Three Months Ended Nine Months Ended September 30 % September 30 % 1998 1997 Chg 1998 1997 Chg -------- -------- --- -------- -------- --- Domestic/International Sales Domestic $180,204 $157,965 14 $530,980 $464,632 14 International 80,761 80,178 1 250,846 261,083 (4) -------- -------- -------- -------- Total net sales $260,965 $238,143 10 $781,826 $725,715 8 ======== ======== ======== ======== Product Line Sales Stryker Surgical $192,626 $178,845 8 $587,393 $545,806 8 Stryker Medical 61,806 51,487 20 171,561 155,013 11 Distributed Products 6,533 7,811 (16) 22,872 24,896 (8) -------- -------- -------- -------- Total net sales $260,965 $238,143 10 $781,826 $725,715 8 ======== ======== ======== ======== For the nine months ended September 30, 1998, Stryker Corporation's net sales increased 8% compared to the same period in 1997. Increased unit volume generated an 8% sales increase. Net sales also increased 3% from business acquisitions and 1% from the acquisition of certain portions of the Osteonics' domestic distribution network and the resulting direct sales. These increases were partially offset by a 3% decrease in sales from unfavorable foreign currency comparisons and a combined 1% decrease from a decline in selling prices and divested businesses. For the third quarter, net sales increased 10% when compared to the third quarter of 1997. Increased unit volume generated an 11% sales increase. Net sales also increased 3% from business acquisitions and 1% from the acquisition of certain portions of the Osteonics' domestic distribution network and the resulting direct sales. These increases were partially offset by a 3% decrease in sales from unfavorable foreign currency comparisons and a 2% decrease from a decline in selling prices. The Company's domestic sales increased 14% in the third quarter and the first nine months of 1998 compared to 1997. The domestic sales increase results from strong shipments of endoscopic equipment, powered surgical instruments and orthopaedic implants, increased revenue from physical therapy services and higher shipments of hospital beds and stretchers. International sales increased 1% in the third quarter and declined 4% in the first nine months of 1998 when compared to 1997 as unfavorable foreign currency comparisons and lower shipments in Japan generally offset higher shipments in Europe, the Pacific Rim and other international markets. Unfavorable foreign currency comparisons lowered the dollar value of international sales by $6.9 million, or 9%, for the third quarter and $19.1 million, or 7%, for the first nine months. Worldwide sales of Stryker Surgical products (principally orthopaedic products) increased 8% in the third quarter and the first nine months. The sales gains resulted from higher shipments of endoscopic equipment, powered surgical instruments and orthopaedic implants, partially offset by the lower dollar translation of foreign currency sales. Worldwide sales of Stryker Medical products (principally stretchers/beds and physical therapy services) increased 20% in the third quarter and 11% in the first nine months resulting from increased physical therapy revenues and higher shipments of hospital beds and stretchers. Sales of distributed products, which are sourced from other companies principally for sale in Japan, decreased 16% in the third quarter and declined 8% in the first nine months. Cost of sales for the first nine months of 1998 represented 41.5% of sales compared to 40.8% in the same period of 1997. In the third quarter, the cost of sales percentage increased to 42.8% from 41.1% in the third quarter of 1997. The higher cost of sales rate resulted from changes in sales mix and the general weakness in foreign currencies which has increased the cost of U.S. dollar based inventory purchases for the Company's international operations. Research, development and engineering (R,D&E) expense decreased 2.1% for the first nine months of 1998, and represented 5.3% of sales in 1998 compared to 5.8% in the same period of 1997. In the third quarter, these expenses decreased 8.9%, and were 5.0% of sales in 1998 compared to 6.0% in 1997. R,D&E expense decreased in the third quarter due to cost reductions at Stryker Biotech in anticipation of the acquisition of the manufacturing rights and facilities from Creative BioMolecules. The Company's R,D&E spending represents the continued development of the OP-1 bone growth device at Stryker Biotech and the Company-wide focus on new product development. The Company's commitment to product development has resulted in several new product introductions in the first nine months of 1998 including the Quantum 5000 lightsource, the TPS Reciprocating Saw, the InterPulse System, System 4, the next generation battery powered instrument system, Scorpio CR Knee implant and the international introduction of the Scorpio Knee system. Selling, general and administrative (S,G&A) expenses increased 3.4% in the first nine months and 5.5% in the third quarter of 1998 compared to the same periods of 1997. These costs decreased to 33.7% of sales in the first nine months of 1998 compared to 35.1% of sales in the same period of 1997. In the third quarter, S,G&A costs represented 33.4% of sales compared to 34.7% in the same period of 1997. The increase in S,G,&A costs is principally a result of increased selling expenses from larger sales forces and an increase in sales. Other income increased $3.2 million, or 41.8%, for the first nine months and $2.1 million, or 92.7%, in the third quarter of 1998 compared to the same periods of 1997. The increase in other income in the first nine months and third quarter is due to increased interest income attributable to higher levels of invested cash and lower interest expense on the Company's yen denominated debt partially offset by foreign currency transaction losses. The effective tax rate decreased to 35.0% for the first nine months of 1998 compared to 37.0% in the same period of 1997 and to 35.0% in the third quarter of 1998 compared to 36.7% in 1997 as a result of a more favorable mix of operating results among tax jurisdictions and tax-free interest on short- term investments. For the first nine months of 1998, earnings before income taxes increased 16.2% and net earnings increased 20.0% compared to the first nine months of 1997. Earnings before income taxes increased 16.8% and net earnings increased 20.0% in the third quarter of 1998 when compared to 1997. Liquidity and Capital Resources _______________________________ Stryker's financial position at September 30, 1998 remained strong with cash and marketable securities of $358.8 million and working capital of $534.4 million. Accounts receivable at September 30, 1998 increased 8% from December 31, 1997 as a result of increased sales and a 4-day increase in days sales outstanding from 62 days at December 31, 1997 to 66 days at September 30, 1998. Inventories at September 30, 1998 increased 22% from December 31, 1997 and days in inventory increased 13 days to 140 days from 127 days at December 31, 1997 partially as a result of inventories purchased in acquiring portions of the Osteonics' domestic distribution network. The Company generated $76.2 million of cash from operations in the first nine months of 1998 compared to $50.8 million in the same period of 1997. The lower level of cash provided by operations in 1997 is primarily due to first quarter payments in 1997 of attorney fees and taxes totaling $37.9 million relating to the gain on patent judgement received in the fourth quarter of 1996. Excluding those payments, cash provided from operations in the first nine months of 1997 would have been $88.7 million. The decrease in cash from operations from the adjusted 1997 amount is due principally to higher inventory levels and decreases in accrued expenses. In the first nine months of 1998, $27.2 million of cash was used for acquisitions, $15.0 million of which related to the purchase of two domestic implant distributors. In addition to cash and marketable securities of $358.8 million, the Company has unsecured lines of credit with banks totaling $53.3 million, none of which was utilized at September 30, 1998. On August 14, 1998, the Company announced it had entered into a definitive agreement to acquire Howmedica, the orthopaedic division of Pfizer, Inc., for $1.9 billion in cash. On October 22, 1998, the Company reached an agreement with Pfizer to reduce the purchase price for Howmedica to $1.65 billion in cash as a result of changes in the financial markets. The transaction is expected to be financed with a combination of cash and debt, and is expected to be completed in the fourth quarter of 1998. The Company is currently seeking bank financing to complete the acquisition of Howmedica. The credit facilities being sought would provide up to $1.65 billion of financing to complete the acquisition and provide a revolving credit line to meet the working capital needs of the combined companies. On October 16, 1998, the Company announced that it entered into a definitive agreement to acquire the manufacturing rights and facilities for its OP-1 bone growth device from Creative BioMolecules, Inc., for approximately $20 million in cash plus future increases in royalty payments. The transaction is expected to close in the fourth quarter of 1998. Other Matters _____________ The Company has in place a comprehensive plan to prepare for the Year 2000 (Y2K) so that its computer and other systems will function properly with respect to dates in the year 2000 and beyond. The scope of the Company's Y2K plan includes replacement or upgrades of information technology such as software or hardware, non information technology systems that may include embedded chips such as microcontrollers contained in manufacturing equipment and in Company products and the readiness of key third parties such as suppliers, customers and financial institutions. If needed conversions or modifications are not made or completed, the Y2K issue could have a material impact on the operations of the Company. The Company expects that it will be Y2K compliant by September 1999. The majority of the Company's products that contain embedded chips are now Y2K compliant. The Company will continue testing throughout 1999 and will formulate and finalize any contingency plans needed during that time. The total estimated incremental cost for the Y2K project is approximately $3.0 million. All costs will be expensed as incurred and will be funded through operating cash flows. The Company is in contact with key third parties, such as suppliers, customers and financial institutions to assure no interruption of its business relationships occur due to Y2K compliance issues. However, if the needed conversions or modifications to computer or other systems are not made, or are not completed timely by these third parties, the Y2K issue could have a material impact on the operations of the Company. The costs and timing of the Y2K project are based on management's best estimates, which were derived utilizing assumptions of future events, including the continued availability of certain resources and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct relevant computer codes, and similar uncertainties. In the third quarter, the Company entered into an interest rate swap agreement which fixed the base rate, or 90 day LIBOR, at a weighted average rate of 5.8% on $700 million of the $1.65 billion floating rate debt facility associated with the purchase of Howmedica. The interest rate swap has been designated as a hedge of an anticipated transaction, with any changes in fair value being deferred. If for any reason the Howmedica acquisition does not close, the Company will be required to close out its hedge positions and will recognize a corresponding gain or loss in the statement of earnings. The information contained in this report includes forward-looking statements within the meaning of the federal securities laws that are subject to risks and uncertainties. Factors that could cause the Company's actual results and financial condition to differ from the Company's expectations include, but are not limited to: a change in economic conditions that adversely affects the level of demand for the Company's products; changes in foreign exchange markets; changes in financial markets; difficulties related to regulatory requirements attendant to consummation of the Howmedica acquisition; and to the factors referred to above regarding Y2K issues. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement. PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION Set forth below is a text of the press release issued by the Company on Thursday, October 22, 1998. Kalamazoo, Michigan, October 22, 1998 -- Stryker Corporation (NYSE: SYK) and Pfizer, Inc. (NYSE: PFE) announced today that, due to changes in the financial markets, they have amended their agreement to change the sale price for the Howmedica unit of Pfizer from the previously announced $1.9 billion in cash to $1.65 billion in cash. Goldman Sachs Credit Partners L.P. and Bank of America have provided a commitment to finance the transaction. All other terms and conditions of the agreement remain substantially the same and the companies continue to expect to complete the transaction during the fourth quarter. Stryker Corporation develops, manufactures and markets specialty surgical and medical products, including orthopaedic implants, powered surgical instruments, endoscopic systems, patient care and handling equipment for the global market and provides outpatient physical therapy services in the United States. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The exhibits listed below are submitted as a separate section of this report following the signature page: Exhibit 11 - Statement Re: Computation of Earnings per Share of Common Stock Exhibit 27 - Financial Data Schedule (included in EDGAR filing only) (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STRYKER CORPORATION (Registrant) November 2, 1998 JOHN W. BROWN _________________ ________________________________________ Date John W. Brown, Chairman, President and Chief Executive Officer (Principal Executive Officer) November 2, 1998 DAVID J. SIMPSON _________________ ________________________________________ Date David J. Simpson, Vice President, Chief Financial Officer and Secretary (Principal Financial Officer) Exhibit 11 STRYKER CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK September 30, 1998 <TABLE> Three Months Ended Nine Months Ended September 30 September 30 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Basic: Average number of shares <S> <C> <C> <C> <C> outstanding 96,362,000 96,038,000 96,253,000 96,298,000 ----------- ----------- ----------- ----------- Net earnings $34,750,000 $28,970,000 $106,010,000 $88,370,000 =========== =========== ============ =========== Basic net earnings per share of common stock $.36 $.30 $1.10 $.92 ==== ==== ==== ==== Diluted: Average number of shares outstanding 96,362,000 96,038,000 96,253,000 96,298,000 Net effect of dilutive stock options, based on the treasury stock method using average market price 1,677,000 2,137,000 1,787,000 1,851,000 ----------- ----------- ----------- ----------- Total diluted shares 98,039,000 98,175,000 98,040,000 98,149,000 =========== =========== =========== =========== Diluted net earnings per share of common stock $.35 $.30 $1.08 $.90 ==== ==== ==== ==== </TABLE>