<HTML> <BODY> <B><FONT SIZE=5><P ALIGN="CENTER"></P> <P ALIGN="CENTER"> </P> <P ALIGN="CENTER">UNITED STATES</P> <P ALIGN="CENTER">SECURITIES AND EXCHANGE COMMISSION</P> </B></FONT><P ALIGN="CENTER"></P> <P ALIGN="CENTER">Washington, D.C. 20549</P> <P ALIGN="CENTER">___________________________</P> <P ALIGN="CENTER"></P> <B><FONT SIZE=5><P ALIGN="CENTER">FORM 10-Q</P> </B></FONT><P ALIGN="CENTER"></P> <P ALIGN="CENTER"> </P><DIR> <DIR> <B><P>QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934</P> </B><P ALIGN="CENTER"></P></DIR> </DIR> <B><P ALIGN="CENTER">For the quarterly period ended September 30, 1999</P> </B><P ALIGN="CENTER"></P> <P ALIGN="CENTER"> </P> <P ALIGN="CENTER">Commission file number: 0-9165</P> <P ALIGN="CENTER"></P> <P ALIGN="CENTER">___________________________</P> <P ALIGN="CENTER"></P> <B><FONT SIZE=5><P ALIGN="CENTER">STRYKER CORPORATION</P> </B></FONT><P ALIGN="CENTER">(Exact name of registrant as specified in its charter)</P> <P ALIGN="CENTER"></P> <B><P> </P></B> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=636> <TR><TD WIDTH="50%" VALIGN="TOP"> <B><P>Michigan</B></TD> <TD WIDTH="10%" VALIGN="TOP"> </TD> <TD WIDTH="40%" VALIGN="TOP"> <B><P>38-1239739</B></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP"> <P>(State or other jurisdiction of</TD> <TD WIDTH="10%" VALIGN="TOP"> </TD> <TD WIDTH="40%" VALIGN="TOP"> <P>(I.R.S. Employer Identification No.)</TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP"> <P>incorporation or organization)</TD> <TD WIDTH="10%" VALIGN="TOP"> </TD> <TD WIDTH="40%" VALIGN="TOP"> </TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP"> </TD> <TD WIDTH="10%" VALIGN="TOP"> </TD> <TD WIDTH="40%" VALIGN="TOP"> </TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP"> </TD> <TD WIDTH="10%" VALIGN="TOP"> </TD> <TD WIDTH="40%" VALIGN="TOP"> </TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP"> <B><P>P.O. Box 4085, Kalamazoo, Michigan</B></TD> <TD WIDTH="10%" VALIGN="TOP"> </TD> <TD WIDTH="40%" VALIGN="TOP"> <B><P>49003-4085</B></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP"> <P>(Address of principal executive offices)</TD> <TD WIDTH="10%" VALIGN="TOP"> </TD> <TD WIDTH="40%" VALIGN="TOP"> <P>(Zip Code)</TD> </TR> </TABLE> <B> </B><P ALIGN="CENTER">Registrant's telephone number, including area code: <B>(616) 385-2600</P> </B><P ALIGN="CENTER"></P> <P ALIGN="CENTER">___________________________</P> <P> </P> <P>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.</P> <P ALIGN="CENTER">YES [X] NO [ ]</P> <P>	Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:</P> <P>96,979,532 shares of Common Stock, $.10 par value, as of November 12, 1999.</P> <P ALIGN="CENTER"></P> <B><P ALIGN="CENTER">PART I. - FINANCIAL INFORMATION</P> </B> <P>Item I.	Financial Statements</P> <B><P ALIGN="CENTER">STRYKER CORPORATION AND SUBSIDIARIES</P> <P ALIGN="CENTER">Condensed Consolidated Balance Sheets</P> <P ALIGN="CENTER"></P> <P ALIGN="CENTER">(Amounts in millions, except per share amounts)</P> <P ALIGN="CENTER"></P> <P ALIGN="CENTER">(Unaudited)</P> <P ALIGN="CENTER"></P></B> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=680> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">September 30</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">December 31</FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> 1999 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> 1998 </U></FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <B><FONT SIZE=2><P>ASSETS</B></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Current assets</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Cash and cash equivalents</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$91.1 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$124.9 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Marketable debt securities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">11.4 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">17.3 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Accounts receivable, less allowance of $20.6 million ($1998 - $21.6)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">447.5 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">425.6 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Inventories (A)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">430.9 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">591.0 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Deferred income taxes</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">170.8 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">139.1 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Prepaid expenses and other current assets</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 41.9 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 51.0 </U></FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Total current assets</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">1,193.6 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">1,348.9 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Property, plant and equipment, less allowance for depreciation of $213.5 (1998 - $167.7)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">397.2 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">429.5 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Other assets</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Goodwill, less accumulated amortization of $18.9 (1998 - $8.7)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">490.2 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">475.5 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Other intangibles, less accumulated amortization of $29.9 (1998 - $15.6)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">399.4 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">422.5 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Deferred charges, less accumulated amortization of $93.2 (1998 - $52.2)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">115.5 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">131.8 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Other</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 106.3 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 77.7 </U></FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P>TOTAL ASSETS</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT"> $2,702.2 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT"> $2,885.9 </U></FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <B><FONT SIZE=2><P>LIABILITIES AND STOCKHOLDERS' EQUITY</B></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Current liabilities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Accounts payable</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$117.8 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$162.4 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Accrued compensation</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">104.0 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">89.7 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Acquisition-related reorganization reserves and liabilities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">181.3 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">206.9 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Income taxes</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">40.3 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">49.1 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Accrued expenses and other liabilities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">154.7 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">176.4 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Current maturities of long-term debt</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 76.4 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 15.0 </U></FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Total current liabilities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">674.5 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">699.5 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Long-term debt, excluding current maturities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">1,347.6 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">1,488.0 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Other liabilities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">54.5 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">46.3 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Stockholders' equity</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Common stock, $.10 par value:</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Authorized - 150.0 shares</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Outstanding - 96.9 shares (1998 - 96.5)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">9.7 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">9.7 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Additional paid-in capital</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">25.7 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">10.5 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Retained earnings</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">616.5 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">640.9 </FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Accumulated other comprehensive loss</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> (26.3)</U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> (9.0)</U></FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Total stockholders' equity</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 625.6 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 652.1 </U></FONT></TD> </TR> <TR><TD WIDTH="74%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P>TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT"> $2,702.2 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT"> $2,885.9 </U></FONT></TD> </TR> </TABLE> <B><P ALIGN="CENTER"></P> </B><FONT SIZE=2><P> </P> <OL TYPE="A"> <LI>Inventories include a step-up of $25.8 million as of September 30, 1999 and $213.1 million as of December 31, 1998 to fair value in connection with the acquisition of Howmedica.</LI></OL> </FONT> <I><FONT SIZE=2><P ALIGN="CENTER">See accompanying Notes to Condensed Consolidated Financial Statements.</P> </I></FONT><B><P ALIGN="CENTER"></P> <P ALIGN="CENTER"> </P> <P ALIGN="CENTER">Stryker Corporation and Subsidiaries</P> <P ALIGN="CENTER">Condensed Consolidated Statements of Earnings</P> <P ALIGN="CENTER"></P> <P ALIGN="CENTER">(Amounts in millions, except per share amounts)</P> <P ALIGN="CENTER"></P> <P ALIGN="CENTER">(Unaudited)</P> <P ALIGN="CENTER"></P></B> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=593> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="27%" VALIGN="TOP" COLSPAN=2 HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">Three Months Ended</FONT></TD> <TD WIDTH="27%" VALIGN="TOP" COLSPAN=2 HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">Nine Months Ended</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="27%" VALIGN="TOP" COLSPAN=2 HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">September 30</FONT></TD> <TD WIDTH="27%" VALIGN="TOP" COLSPAN=2 HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">September 30</FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 1999 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 1998 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 1999 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 1998 </U></FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Net sales</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">$498.9 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">$261.0 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">$1,544.6 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">$781.9 </FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Cost of sales (A)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 243.0 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 111.2 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 772.7 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 322.8 </U></FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Gross profit</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">255.9 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">149.8 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">771.9 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">459.1 </FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Research, development and engineering</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">26.9 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">12.9 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">78.4 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">41.4 </FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Selling, general and administrative</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">191.1 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">86.5 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">595.0 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">261.5 </FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Restructuring charge</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 19.7 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> </U></FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">218.0 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">99.4 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">693.1 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">302.9 </FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Other expense (income):</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Interest expense</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">29.4 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">0.6 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">93.3 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">2.4 </FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Intangibles amortization</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">8.4 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">1.3 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">25.4 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">3.9 </FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Other income</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (0.1)</U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (5.0)</U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (2.4)</U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (13.2)</U></FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 37.7 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 3.1)</U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 116.3 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (6.9)</U></FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Earnings (loss) before income taxes</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">0.2 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">53.5 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(37.5)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">163.1 </FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Income taxes (credit)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 0.1 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 18.8 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (13.1)</U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 57.1 </U></FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=20> <FONT SIZE=3><P>Net earnings (loss)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT"> $0.1 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT"> $34.7 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT"> ($24.4)</U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT"> $106.0 </U></FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Net earnings (loss) per share of </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>common stock:</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=20> <FONT SIZE=3><P>Basic</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT">$0.00 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT">$0.36 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT">($0.25)</U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT">$1.10 </U></FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=20> <FONT SIZE=3><P>Diluted</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT">$0.00 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT">$0.35 </U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT">($0.25)</U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT">$1.08 </U></FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Average outstanding shares for the period:</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Basic</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">96.9 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">96.4 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">96.9 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">96.3 </FONT></TD> </TR> <TR><TD WIDTH="47%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Diluted</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">99.4 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">98.0 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">99.2 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">98.0 </FONT></TD> </TR> </TABLE> <B><P ALIGN="CENTER"></P> <P ALIGN="CENTER"> </P> <OL TYPE="A"> </B><FONT SIZE=2><LI>Includes $57.3 million for the three months ended September 30, 1999 and $185.2 million for the nine months ended September 30, 1999, of additional cost of sales for inventory stepped-up to fair value in connection with the Howmedica acquisition.</LI></OL> </FONT> <I><FONT SIZE=2><P ALIGN="CENTER">See accompanying Notes to Condensed Consolidated Financial Statements.</P> </I></FONT> <P> </P> <P> </P> <P> </P> <P> </P> <B><P ALIGN="CENTER"> </P> <P ALIGN="CENTER">Stryker Corporation and Subsidiaries</P> <P ALIGN="CENTER">Condensed Consolidated Statement of Stockholders' Equity</P> <P ALIGN="CENTER"></P> <P ALIGN="CENTER">(Amounts in millions, except per share amounts)</P> <P ALIGN="CENTER"></P> <P ALIGN="CENTER">(Unaudited)</P> </B> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=727> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">Accumulated</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">Additional</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">Other</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">Common</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">Paid-In</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">Retained</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">Comprehensive</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> Stock </U></FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> Capital </U></FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> Earnings </U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> Gain (Loss) </U></FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> Total </U></FONT></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Balances at January 1, 1999</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">$9.7 </FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">$10.5 </FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">$640.9 </FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">($9.0)</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">$652.1 </FONT></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Comprehensive gain (loss):</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Net loss</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(24.4)</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(24.4)</FONT></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Net unrealized losses on securities</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(0.2)</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(0.2)</FONT></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Foreign currency translation adjustments</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(17.1)</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (17.1)</U></FONT></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Comprehensive loss for the nine</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>months ended September 30, 1999</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (41.7)</U></FONT></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Common stock issued in business acquisition</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">9.7 </FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">9.7 </FONT></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Sales of 0.2 shares of common stock under stock option</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P> and benefit plans, including $1.7 income tax benefit</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> </U></FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 5.5 </U></FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> </U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> </U></FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 5.5 </U></FONT></TD> </TR> <TR><TD WIDTH="49%" VALIGN="TOP" HEIGHT=20> <FONT SIZE=3><P>Balances at September 30, 1999</FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT"> $9.7 </U></FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT"> $25.7 </U></FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT"> $616.5 </U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT"> ($26.3)</U></FONT></TD> <TD WIDTH="9%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT"> $625.6 </U></FONT></TD> </TR> </TABLE> <I><FONT SIZE=2><P ALIGN="CENTER"> </P> <P ALIGN="CENTER">See accompanying Notes to Condensed Consolidated Financial Statements.</P> </I></FONT> <P>	In 1998 the Company declared a cash dividend of twelve cents per share to shareholders of record on December 31, 1998, payable on January 30, 1999. No cash dividends have been declared during 1999.</P> <P> </P> <P> </P> <P ALIGN="CENTER"> </P> <B><P ALIGN="CENTER">Stryker Corporation and Subsidiaries</P> <P ALIGN="CENTER">Condensed Consolidated Statements of Cash Flows</P> </B><FONT SIZE=2> </FONT><B><P ALIGN="CENTER">(Amounts in millions)</P> </B><FONT SIZE=2> </FONT><B><P ALIGN="CENTER">(Unaudited)</P> <P ALIGN="CENTER"></P></B> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=536> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="24%" VALIGN="TOP" COLSPAN=2 HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">Nine Months Ended</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="24%" VALIGN="TOP" COLSPAN=2 HEIGHT=19> <FONT SIZE=3><P ALIGN="CENTER">September 30</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 1999 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 1998 </U></FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>OPERATING ACTIVITIES</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Net earnings (loss)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">($24.4)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">$106.0 </FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Adjustments to reconcile net earnings (loss)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>to net cash provided by operating activities:</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Depreciation</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">49.8 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">20.1 </FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Amortization</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">68.6 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">14.4 </FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Sales of inventory stepped-up to fair value at acquisition</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">185.2 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Restructuring charge</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">19.7 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Payments of restructuring and acquisition-related liabilities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(20.6)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Other</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">3.9 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(1.4)</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Changes in operating assets and liabilities,</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>net of effects of business acquisitions:</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Accounts receivable</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(36.1)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(14.0)</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Inventories</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(11.7)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(18.5)</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Deferred charges</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(45.4)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(15.5)</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Accounts payable</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(21.2)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(5.1)</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Payments of acquisition purchase liabilities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(67.8)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Accrued expenses</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">12.8 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(9.1)</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Income taxes</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(41.0)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">4.9 </FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Other</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 31.7 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (5.6)</U></FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Net cash provided by operating activities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">103.5 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">76.2 </FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=7><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=7><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=7><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>INVESTING ACTIVITIES</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Purchases of property, plant and equipment</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(44.2)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(35.8)</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Purchases of marketable securities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(2.5)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(219.8)</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Sales and maturities of marketable securities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">8.4 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">281.1 </FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Business acquisitions, net of cash acquired</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (12.6)</U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (27.2)</U></FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Net cash used in investing activities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(50.9)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(1.7)</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>FINANCING ACTIVITIES</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Proceeds from borrowings</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">72.0 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19><P></P></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Payments on borrowings</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(144.8)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(1.3)</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Dividends paid</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(11.6)</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">(10.6)</FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Proceeds from exercise of stock options</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">5.5 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P ALIGN="RIGHT">6.9 </FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Other</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (3.8)</U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> 0.6 </U></FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Net cash used in financing activities</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (82.7)</U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (4.4)</U></FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=19> <FONT SIZE=3><P>Effect of exchange rate changes on cash and cash equivalents</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (3.7)</U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=19> <U><FONT SIZE=3><P ALIGN="RIGHT"> (1.1)</U></FONT></TD> </TR> <TR><TD WIDTH="76%" VALIGN="TOP" HEIGHT=20> <FONT SIZE=3><P>Increase (decrease) in cash and cash equivalents</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT"> ($33.8)</U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <U><FONT SIZE=3><P ALIGN="RIGHT"> $69.0 </U></FONT></TD> </TR> </TABLE> <I><FONT SIZE=2><P ALIGN="CENTER"></P> <P ALIGN="CENTER">See accompanying Notes to Condensed Consolidated Financial Statements.</P> </I></FONT><P ALIGN="CENTER"></P> <P ALIGN="CENTER"> </P> <B><P ALIGN="CENTER">Stryker Corporation and Subsidiaries</P> <P ALIGN="CENTER">Notes to Condensed Consolidated Financial Statements</P> <P ALIGN="CENTER"></P> <P ALIGN="CENTER">September 30, 1999</P> <P ALIGN="CENTER"></P> <P ALIGN="CENTER">(Amounts in Millions, Except Share and Per Share Amounts)</P> <P ALIGN="CENTER"></P> <P ALIGN="CENTER">(Unaudited)</P> <P ALIGN="CENTER"></P> <P>Note 1.	BASIS OF PRESENTATION</P> </B> <P>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 fl <P>	Certain prior period amounts have been reclassified to conform with the presentation used in 1999.</P> <P>	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. Other comprehensive gain for the nine months ended September 30, 1998 was $104.5 million.</P> <P>	In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement will require the Company to record all derivatives on the balance sheet at fair value. Changes in the fair value of derivatives that do not meet the criteria to be treated as a hedge under the Statement will be included in earnings. If derivatives meet the hedge criteria, changes in the fair value of the derivatives will offset changes in the fair value of the items being <B><P>Note 2.	INVENTORIES</P> </B> <P>Inventories are summarized as follows:</P> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=298> <TR><TD WIDTH="39%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="31%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">September 30</FONT></TD> <TD WIDTH="30%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">December 31</FONT></TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="31%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 1999 </U></FONT></TD> <TD WIDTH="30%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 1998 </U></FONT></TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Finished goods</FONT></TD> <TD WIDTH="31%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$325.7 </FONT></TD> <TD WIDTH="30%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$488.9 </FONT></TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Work-in-process</FONT></TD> <TD WIDTH="31%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">60.3 </FONT></TD> <TD WIDTH="30%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">49.8 </FONT></TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Raw material</FONT></TD> <TD WIDTH="31%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 52.4 </U></FONT></TD> <TD WIDTH="30%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 59.8 </U></FONT></TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>FIFO Cost</FONT></TD> <TD WIDTH="31%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">438.4 </FONT></TD> <TD WIDTH="30%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">598.5 </FONT></TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Less LIFO reserve</FONT></TD> <TD WIDTH="31%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 7.5 </U></FONT></TD> <TD WIDTH="30%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 7.5 </U></FONT></TD> </TR> <TR><TD WIDTH="39%" VALIGN="TOP" HEIGHT=17><P></P></TD> <TD WIDTH="31%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT"> $430.9 </U></FONT></TD> <TD WIDTH="30%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT"> $591.0 </U></FONT></TD> </TR> </TABLE> <P> </P> <P>	Inventories reflect a step-up of $25.8 million as of September 30, 1999 and $213.1 million as of December 31, 1998 to fair value in connection with the acquisition of Howmedica. This step-up is charged off as additional nonrecurring cost of sales as the acquired inventory is sold. Cost of sales for the periods ended September 30, 1999 were increased as a result of the step-up, reducing pre-tax earnings by $57.3 million ($37.3 million net of tax) for the three months ended September 30, 1999 and $18 <P> </P> <B><P>Note 3.	HOWMEDICA ACQUISITION</P> </B> <P>On December 4, 1998, the Company acquired Howmedica, the orthopaedic division of Pfizer Inc., for $1,650.0 million in cash. Howmedica develops, manufactures and markets a wide range of specialty medical products utilized in the treatment of musculoskeletal disorders. Howmedica products include hip and knee implants for primary and revision surgery, bone cement, trauma systems used in bone repair, craniomaxillofacial fixation devices and specialty surgical equipment used in neurosurgery. The acquisitio <P>Immediately after the acquisition was consummated, management of the Company began to implement an integration plan to combine Stryker and Howmedica. In conjunction with the integration plan, the Company recorded additional purchase liabilities of approximately $111.2 million at December 4, 1998. The Company also incurred certain costs and charges related to the acquisition that were charged to operations during the fourth quarter of 1998, including $52.7 million related to the reorganization of Stryke <P> </P> <P>The additional purchase liabilities recorded at the date of acquisition reflect estimated liabilities relating to anticipated integration activities and are being adjusted as the restructuring is implemented during 1999. The increases or decreases in these additional purchase liabilities result in corresponding changes to goodwill associated with the acquisition of Howmedica.</P> <P>The additional purchase liabilities include liabilities for severance and related costs for Howmedica employees, for the cost to convert Howmedica's distribution network to direct sales and for the cost associated with Howmedica facility closures and contractual obligations. The severance and related costs are provided for planned workforce reductions covering approximately 1,300 Howmedica employees in the areas of general management, marketing, research and development, general administration and produ warehousing and distribution for Howmedica's craniomaxillofacial business in the United States and leased facilities supporting administration, marketing, research and development and a portion of the United States warehousing and distribution for Howmedica's orthopaedic implant business. The contractual obligations represent noncancelable commitments for third party research and development related to projects which were not continued after the acquisition and purchase commitments for inventory related to <P>	Many of the activities for which additional purchase liabilities are recorded have been completed during 1999. The conversion of Howmedica's distribution network to direct sales is complete. Planned workforce reductions covering approximately 900 Howmedica employees have been completed. The remaining workforce reductions are expected to be completed by the third quarter of 2000. Payments of distributor conversion obligations and severance and related costs are expected to be completed in the firs <P>The following table provides a quarterly rollforward from December 31, 1998 to September 30, 1999 of the additional purchase liabilities recorded in connection with the acquisition of Howmedica (in millions):</P> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=510> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="CENTER">Facility</TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <P ALIGN="CENTER">Severance</TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="CENTER">Closures &</TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <P ALIGN="CENTER">& Related</TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="CENTER">Distributor</TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="CENTER">Contractual</TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="CENTER"> Costs </U></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <U><P>Conversions</U></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="CENTER">Obligations</U></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Balances at December 31, 1998</TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">$68.8 </TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">$27.8 </TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">$12.8 </TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Additions </TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">1.2 </TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Payments</TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">(15.3)</TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">(6.9)</TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Foreign currency translation effects</TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> (1.3)</U></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> (0.1)</U></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> (0.3)</U></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=12><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Balances at March 31, 1999</TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">53.4 </TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">20.8 </TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">12.5 </TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Additions </TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">0.2 </TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Payments</TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">(15.7)</TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">(4.2)</TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">(0.8)</TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Foreign currency translation effects</TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> (0.2)</U></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> </U></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> (0.1)</U></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=12><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Balances at June 30, 1999</TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">37.7 </TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">16.6 </TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">11.6 </TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Additions</TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">10.3 </TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">3.5 </TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Payments</TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">(16.3)</TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">(7.3)</TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">(1.3)</TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=20> <P>Foreign currency translation effects</TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> </U></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 0.1 </U></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 0.4 </U></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=21> <P>Balances at September 30, 1999</TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT"> $31.7 </U></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT"> $9.4 </U></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT"> $14.2 </U></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=13><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=13><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=13><P></P></TD> <TD WIDTH="17%" VALIGN="TOP" HEIGHT=13><P></P></TD> </TR> </TABLE> <P> </P> <B><P> </P> <P>Note 4.	BUSINESS ACQUISITIONS</P> </B> <P>In January 1999, the Company acquired the remaining outstanding common stock of Matsumoto Medical Instruments, Inc., its Japanese distributor, thereby increasing its direct ownership to 100% (83% at December 31, 1998) for cash of $1.0 million and 180,605 shares of Stryker common stock ($9.7 million value). The use of shares of Stryker common stock represents a non-cash investing activity which is not reflected in the Condensed Consolidated Statements of Cash Flows. </P> <P>In April 1999, the Company acquired the Japanese distributor of Leibinger products for cash of approximately $2.7 million. The entire purchase price was allocated to tangible assets acquired.</P> <P>During the first nine months of 1999, the Company's subsidiary, Physiotherapy Associates, Inc., purchased certain physical therapy clinic operations at an aggregate cash cost of $2.0 million.</P> <P>All of the above acquisitions were accounted for by the purchase method and pro forma consolidated results would not differ significantly from reported results.</P> <P> </P> <B><P>Note 5.	RESTRUCTURING AND ACQUISITION-RELATED CHARGES</P> </B> <P>In the first quarter of 1999, the Company recognized a $19.7 million restructuring charge. The charge relates to the reorganization of Stryker's Japanese distribution operation to accommodate the integration with Howmedica and to discontinue the distribution of ophthalmology products in Japan. Approximately $17.6 million of the charge is to cover severance-related costs for approximately 130 terminated employees and $2.1 million relates to costs associated with the discontinuance of the ophthalmology p <P>As described in Note 3 to this report and in Note 5 in the Company's Annual Report on Form 10-K for the year ended December 31, 1998, the Company incurred certain costs and charges related to the Howmedica acquisition that were charged to operations during the fourth quarter of 1998. Activities related to the conversion of Stryker distribution channels are expected to be completed in 2001. In addition, the Company has not utilized $2.7 million of reserves related to distributor reorganizations which we <P> </P> <P>The following table provides a quarterly rollforward from December 31, 1998 to September 30, 1999 of remaining liabilities associated with acquisition-related, restructuring and special pre-tax charges recorded by the Company in 1996 and 1998 (in millions):</P> <P> </P> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=604> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <P ALIGN="CENTER">Distributor</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <P ALIGN="CENTER">Severance &</TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20> <P ALIGN="CENTER">Discontinuance</TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="CENTER">Conversions</U></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="CENTER">Related Costs</U></TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="CENTER">of Product Line</U></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20> <P>Balances at December 31, 1998</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">$48.8 </TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20> <P>Additions recognized as charges </TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20> <P>in the Consolidated Statements of Earnings</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">$17.6 </TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">$2.1 </TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20> <P>Payments</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">(4.7)</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20> <P>Foreign currency translation effects </TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> </U></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> (0.5)</U></TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> (0.1)</U></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=12><P></P></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20> <P>Balances at March 31, 1999</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">44.1 </TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">17.1 </TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">2.0 </TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20> <P>Payments</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> (2.3)</U></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> (6.2)</U></TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> </U></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=12><P></P></TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=12><P></P></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20> <P>Balances at June 30, 1999</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">41.8 </TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">10.9 </TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">2.0 </TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20> <P>Payments</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">(2.0)</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">(3.3)</TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=20> <P>Foreign currency translation effects </TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> </U></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 1.4 </U></TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 0.3 </U></TD> </TR> <TR><TD WIDTH="50%" VALIGN="TOP" HEIGHT=21> <P>Balances at September 30, 1999</TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT"> $39.8 </U></TD> <TD WIDTH="16%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT"> $9.0 </U></TD> <TD WIDTH="18%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT"> $2.3 </U></TD> </TR> </TABLE> <B><P> </P> <P>Note 6.	EARNINGS PER SHARE COMPUTATION</P> </B><FONT SIZE=2> </FONT><P>	The following table sets forth the computation of basic and diluted net earnings (loss) per share:</P> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=646> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="24%" VALIGN="TOP" COLSPAN=2 HEIGHT=20> <U><P ALIGN="CENTER">Three Months Ended</U></TD> <TD WIDTH="24%" VALIGN="TOP" COLSPAN=2 HEIGHT=20> <U><P ALIGN="CENTER">Nine Months Ended</U></TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="24%" VALIGN="TOP" COLSPAN=2 HEIGHT=20> <P ALIGN="CENTER">September 30</TD> <TD WIDTH="24%" VALIGN="TOP" COLSPAN=2 HEIGHT=20> <P ALIGN="CENTER">September 30</TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 1999 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 1998 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 1999 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 1998 </U></TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=21> <P>Net earnings (loss)</TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT"> $0.1 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT">$34.7 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT">($24.4)</U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT">$106.0 </U></TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=20> <P>Weighted-average shares outstanding</TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=20> <P>for basic net earnings (loss) per share</TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">96.9 </TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">96.4 </TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">96.9 </TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <P ALIGN="RIGHT">96.3 </TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=20> <P>Effect of dilutive employee stock options</TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 2.5 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 1.6 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 2.3 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20> <U><P ALIGN="RIGHT"> 1.7 </U></TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=20> <P>Adjusted weighted-average shares outstanding</TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=21> <P>for diluted net earnings per share</TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT"> 99.4 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT"> 98.0 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT"> 99.2 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT"> 98.0 </U></TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=21><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21><P></P></TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=21> <P>Basic net earnings (loss) per share</TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT">$0.00 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT">$0.36 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT">($0.25)</U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT">$1.10 </U></TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=21> <P>Diluted net earnings (loss) per share</TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT">$0.00 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT">$0.35 </U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT">($0.25)</U></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=21> <U><P ALIGN="RIGHT">$1.08 </U></TD> </TR> <TR><TD WIDTH="51%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=20><P></P></TD> </TR> <TR><TD VALIGN="TOP" COLSPAN=5 HEIGHT=20> <FONT SIZE=2><P>The effect of dilutive employee stock options is not included in computing the diluted net loss </FONT></TD> </TR> <TR><TD VALIGN="TOP" COLSPAN=5 HEIGHT=20> <FONT SIZE=2><P>per share for the nine months ended September 30, 1999 because the effect is anti-dilutive.</FONT></TD> </TR> </TABLE> <P> </P> <B><P>Note 7.	SEGMENT INFORMATION</P> </B> <P>	Effective in the fourth quarter of 1998, the Company adopted FASB Statement No. 131 "Disclosures About Segments of an Enterprise and Related Information". Statement No. 131 establishes standards for the way that public business enterprises report information about operating segments in interim and annual financial reports.</P> <P> </P> <P>	The Company segregates its operations into two reportable segments: Orthopaedic Implants and Medical and Surgical Equipment. The Orthopaedic Implants segment sells orthopaedic reconstructive products such as hip, knee, shoulder and spinal implants, and trauma related products. The Medical and Surgical Equipment segment sells powered surgical instruments, endoscopic systems, medical video imaging equipment, patient care, and handling systems. Other includes Physical Therapy Services and corporate a <P>	The Company's reportable segments are business units that offer different products and services and are managed separately because each business requires different manufacturing, technology and marketing strategies. </P> <P>The segment data shown below reflects segment net profit (loss) before and after nonrecurring charges. Nonrecurring charges include $10.3 million (net of tax) for the Japan restructuring charge recognized in the first quarter ended March 31, 1999 and the additional cost of sales for inventory stepped-up to fair value in connection with the Howmedica acquisition of $37.3 million (net of tax) for the three months ended September 30, 1999 and $122.9 million (net of tax) for the nine months ended September 3 <P>	Sales and net profit (loss) by business segment follows:</P> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=623> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">Medical and</FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">Orthopaedic</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">Surgical</FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER">Implants</U></FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER">Equipment</U></FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER">Other</U></FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER">Total</U></FONT></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P>Three Months Ended September 30, 1999</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Net sales</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$288.9 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$178.6 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$31.4 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$498.9 </FONT></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Segment net profit (loss) before nonrecurring charges</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">33.6 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">20.9 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">(17.1)</FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">37.4 </FONT></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Segment net profit (loss) after nonrecurring charges</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">1.1 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">16.1 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">(17.1)</FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">0.1 </FONT></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P>Three Months Ended September 30, 1998</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Net sales</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$89.6 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$141.1 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$30.3 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$261.0 </FONT></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Segment net profit</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">16.4 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">17.5 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">0.8 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">34.7 </FONT></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P>Nine Months Ended September 30, 1999</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Net sales</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$912.0 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$537.7 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$94.9 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$1,544.6 </FONT></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Segment net profit (loss) before nonrecurring charges</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">103.7 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">61.6 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">(56.5)</FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">108.8 </FONT></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Segment net profit (loss) after nonrecurring charges</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">(8.2)</FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">40.3 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">(56.5)</FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">(24.4)</FONT></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P>Nine Months Ended September 30, 1998</U></FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Net sales</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$282.1 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$414.6 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$85.2 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$781.9 </FONT></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Segment net profit</FONT></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">52.7 </FONT></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">50.4 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">2.9 </FONT></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">106.0 </FONT></TD> </TR> <TR><TD WIDTH="52%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="11%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> </TABLE> <P> </P> <FONT SIZE=2><P> </P> </FONT><B><P> </P> </B><P> </P><DIR> <DIR> <DIR> <P>Item 2. 	Management's Discussion and Analysis of Financial Condition and Results of Operations</P> <P> </P></DIR> </DIR> </DIR> <B><P ALIGN="CENTER">Results of Operations</P> </B> <P>The table below sets forth domestic/international and product line sales information (in millions):</P> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=2 WIDTH=541> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="62%" VALIGN="TOP" COLSPAN=5 HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> Three Months Ended September 30 </U></FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="25%" VALIGN="TOP" COLSPAN=2 HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">% Change</FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">Pro Forma</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">99/Pro</FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> 1999 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> 1998 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> 1998 (1) </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> 99/98 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER">Forma 98</U></FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Domestic/international sales</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Domestic</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$302.7 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$180.2 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$274.7 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">68 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">10 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>International</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 196.2 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 80.8 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 179.2 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">143 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">9 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P>Total net sales</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$498.9 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$261.0 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$453.9 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P ALIGN="RIGHT">91 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P ALIGN="RIGHT">10 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Product line sales</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Orthopaedic Implants</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$288.9 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$89.6 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$255.4 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">222 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">13 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>MedSurg Equipment</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">178.6 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">141.1 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">168.2 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">27 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">6 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Physical Therapy Services</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 31.4 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 30.3 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 30.3 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">4 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">4 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P>Total net sales</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$498.9 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$261.0 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$453.9 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P ALIGN="RIGHT">91 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P ALIGN="RIGHT">10 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="62%" VALIGN="TOP" COLSPAN=5 HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> Nine Months Ended September 30 </U></FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="25%" VALIGN="TOP" COLSPAN=2 HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">% Change</FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">Pro Forma</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="CENTER">99/Pro</FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> 1999 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> 1998 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> 1998 (1) </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER"> 99/98 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="CENTER">Forma 98</U></FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Domestic/international sales</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Domestic</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$906.1 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$531.0 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$821.1 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">71 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">10 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>International</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 638.5 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 250.9 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 570.9 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">154 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">12 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P>Total net sales</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$1,544.6 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$781.9 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$1,392.0 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P ALIGN="RIGHT">98 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P ALIGN="RIGHT">11 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Product line sales</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16><P></P></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Orthopaedic Implants</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$912.0 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$282.1 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">$816.1 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">223 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">12 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>MedSurg Equipment</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">537.7 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">414.6 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">490.7 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">30 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">10 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P>Physical Therapy Services</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 94.9 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 85.2 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <U><FONT SIZE=2><P ALIGN="RIGHT"> 85.2 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">11 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=16> <FONT SIZE=2><P ALIGN="RIGHT">11 </FONT></TD> </TR> <TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P>Total net sales</FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$1,544.6 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$781.9 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <U><FONT SIZE=2><P ALIGN="RIGHT">$1,392.0 </U></FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P ALIGN="RIGHT">98 </FONT></TD> <TD WIDTH="12%" VALIGN="TOP" HEIGHT=17> <FONT SIZE=2><P ALIGN="RIGHT">11 </FONT></TD> </TR> </TABLE> <FONT SIZE=2> <P> </P> <OL> <LI>The pro forma sales information includes Howmedica's sales for a comparable period but does not necessarily reflect the consolidated sales that would have occurred had Stryker and Howmedica operated as a combined entity during that period.</LI></OL> <P> </P> </FONT><P>Stryker Corporation's net sales increased 98% in the first nine months of 1999 to $1,544.6 million from $781.9 million in 1998. Net sales increased $659.5 million, or 84%, as a result of the Howmedica acquisition. Net sales also grew by 8% as a result of increased unit volume; 3% as a result of other acquired businesses; 2% due to changes in foreign currency exchange rates, and 1% related to higher selling prices from the conversion of distributors to direct sales. For the third quarter, net sales <P> </P> <P>Net sales on a pro forma basis increased 11% in the first nine months of 1999 compared to 1998. Increased unit volume generated an 8% sales increase. Net sales also increased 1% from business acquisitions; 1% from the conversion of certain portions of the Company's distribution network to direct sales, and 1% from favorable foreign currency comparisons. In the third quarter of 1999 pro forma net sales increased 10% when compared to the third quarter of 1998. Increased unit volume generated a 7% sales i <P>The Company's domestic sales increased 68% (10% on a pro forma basis) in the third quarter and 71% (10% on a pro forma basis) in the first nine months of 1999 compared to 1998. The domestic sales increase is a result of the Howmedica acquisition and higher shipments of orthopaedic implants, powered surgical instruments and endoscopic equipment and increased revenue from physical therapy services. U.S. sales of Howmedica products for the third quarter and the first nine months of 1999 were $100.5 millio ds. Foreign currency comparisons were favorable in the third quarter adding $5.4 million ($7.2 million on a pro forma basis), or 7% (4% on a pro forma basis), to the dollar value of international sales. For the first nine months of 1999, foreign currency comparisons were also favorable adding $11.7 million ($16.7 million on a pro forma basis), or 5% (3% on a pro forma basis), to the dollar value of international sales.</P> <P>Worldwide sales of Orthopaedic Implants were $288.9 million for the third quarter and $912.0 million for the first nine months of 1999 representing increases of 222% and 223%, respectively, (13% and 12%, respectively, on a pro forma basis) as a result of the Howmedica acquisition and higher shipments of reconstructive, trauma and spinal implants. Stryker's Osteonics and Dimso implants increased 17% in the third quarter and 15% in the first nine months of 1999, while Howmedica's implant lines increased 11 <P>Cost of sales in the first nine months of 1999 represented 50.0% of sales compared to 41.3% in the same period of 1998. In the third quarter, the cost of sales percentage increased to 48.7% from 42.6% in the third quarter of 1998. The higher cost of sales percentages in 1999 resulted from $185.2 million in the first nine months of 1999 and $57.3 million in the third quarter of additional nonrecurring cost of sales for inventory sold in 1999 that was stepped-up to fair value in connection with the acqui <P>42.6% in the third quarter of 1998. The decline for both periods is primarily the result of a higher mix of orthopaedic implant sales as a result of the acquisition of Howmedica. </P> <P>Research, development and engineering expense increased 89% for the first nine months of 1999, and represented 5.1% of sales in 1999 compared to 5.3% in the same period of 1998. In the third quarter, these expenses increased 109%, and were 5.4% of sales in 1999 compared to 4.9% in 1998. The increase in research, development and engineering spending in 1999 results from the acquisition of Howmedica and from the November 1998 purchase of the manufacturing rights and facilities for OP-1 from Creative BioM <P>Selling, general, and administrative expenses increased 128% in the first nine months and 121% in the third quarter of 1999 compared to the same periods of 1998. These costs increased to 38.5% of sales in the first nine months of 1999 compared to 33.4% of sales in the same period of 1998. In the third quarter, selling, general and administrative costs represented 38.3% of sales compared to 33.1% in the same period of 1998. The increase in selling, general and administrative expenses for both periods i <P>The Company recognized a $19.7 million restructuring charge in the first quarter of 1999. The charge relates to the reorganization of Stryker's Japanese distribution operation to accommodate the integration with Howmedica and to discontinue the distribution of ophthalmology products in Japan. Approximately $17.6 million of the charge was to cover severance-related costs and $2.1 million relates to costs associated with the discontinuation of the ophthalmology product line.</P> <P> </P> <P>Interest expense increased to $93.3 million in the first nine months of 1999 from $2.4 million in 1998 and increased to $29.4 million in the third quarter of 1999 from $0.6 million in the prior year due to the borrowing of approximately $1,500.0 million to fund the Howmedica acquisition. The increase in intangibles amortization to $25.4 million from $3.9 million in the first nine months of 1999 and to $8.4 million in the third quarter of 1999 from $1.3 million in 1998 relates to the Howmedica acquisition <P>The effective tax rate for the first nine months of 1999 and 1998 and for the third quarter of 1998 was 35%. The tax rate of 50% for the third quarter of 1999 is not indicative of any trend in the rate and is solely a function of the modest level of earnings on which it was computed. The net loss for the first nine months of 1999 was $24.4 million (basic and diluted net loss per share of $0.25) compared to net earnings of $106.0 million in 1998. Net earnings for the third quarter of 1999 were $0.1 mil <P>	The completion dates of the two significant acquired in-process research projects, which were in development by Howmedica at the time of the acquisition, are progressing according to plan. The estimated future revenues associated with the spinal project have not changed; however, the estimated future revenues of the polyethylene project will be delayed from what was originally estimated. The delay has been caused by the expected leveraging of the technology acquired from Howmedica with the technolo <P> </P> <B><P ALIGN="CENTER">Liquidity and Capital Resources</P> </B> <P>The Company's liquidity and financial position has remained relatively stable since December 31, 1998. Working capital at September 30, 1999 decreased $130.3 million to $519.1 million from $649.4 million at December 31, 1998. The working capital decrease is due to the use of cash to reduce total outstanding debt by $72.8 million. Accounts receivable days sales outstanding at the end of the third quarter of 1999 increased ten days to 80 days from 70 days at December 31, 1998. The higher days sales out 99 is the result of the higher mix of international sales, which typically have longer accounts receivable terms. Days sales in inventory, net of purchase accounting step-up, increased to 200 days at September 30, 1999 from 157 days at December 31, 1998. Inventory days are higher because of the greater mix of implant sales, which have higher inventory requirements, and as a result of lower sales volume in the third quarter, which typically has lower levels of orthopaedic implant surgeries. In addition, i <P>The Company generated cash of $103.5 million in operations in the first nine months of 1999, compared to $76.2 million in 1998. The generation of cash in the first nine months of 1999 is the result of strong cash earnings (net loss plus non-cash adjustments) partially offset by the increase in accounts receivable and deferred charges, the payments of $67.8 million of acquisition purchase liabilities and the decrease in accounts payable and income taxes. In 1999 the Company used cash of $44.2 million fo , $11.6 million to pay dividends and $12.6 million for business acquisitions. In addition, the Company borrowed an additional $72.0 million under the existing credit facilities to fund cash flow needs in the first nine months and made repayments against the credit facilities of $144.8 million during the first nine months. </P> <P>On June 4, 1999 the Company's $1,650.0 million credit facility was amended to lower the net borrowing cost by an average of 50 basis points, or approximately $7.0 million per year on current borrowings.</P> <P>The Company had $102.5 million in cash and marketable securities at September 30, 1999. The Company also had outstanding long-term debt totaling $1,424.0 million at that date. Current maturities of long-term debt at September 30, 1999 are $76.4 million and will increase to $89.0 million in 2000 and $130.2 million in 2001. The Company believes its cash and marketable securities on-hand as well as anticipated cash flows from operations will be sufficient to fund future operating capital requirements, pa ital adjustment to the purchase price of the Howmedica acquisition and required debt repayments. Should additional funds be required, the Company has $228.5 million of additional borrowing capacity available under the $1,650.0 million credit facilities at September 30, 1999. </P> <P ALIGN="CENTER"> </P> <B><P ALIGN="CENTER">Other Matters</P> </B> <P>	The Company has certain investments in net assets in international locations that are not hedged that are subject to translation gains and losses due to changes in foreign currencies. In the first nine months of 1999, the weakening of foreign currencies reduced the carrying value of these investments in net assets by $17.1 million. The loss is deferred and is recorded as a component of accumulated other comprehensive gain (loss) in stockholders' equity.</P> <I><P>Year 2000</P> </I> <P>	The information provided below constitutes a "Year 2000 Readiness Disclosure" for purposes of the Year 2000 Information and Readiness Disclosure Act.</P> <P>	The Company is preparing for the Year 2000 (Y2K) so that its computer and other systems will function properly with respect to dates in the Y2K and beyond. The scope of the Company's Y2K response includes replacement or upgrades of information technology, such as software or hardware, as well as non-information-technology systems that may include embedded chips, such as micro-controllers contained in manufacturing equipment and in Company products. The Company has upgraded hardware and software at <P>	In addition to reviewing its own computer systems and applications, the Company has contacted major suppliers and other key third parties with whom it does business to determine their Y2K readiness and the Company's potential exposure to a supply or sales interruption. The Company's Y2K readiness is dependent in part upon the Y2K readiness of third parties including customers, suppliers, utilities, telecommunications providers, financial institutions, governments and others. As such, there can be n 's efforts with respect to Y2K readiness will prevent a material adverse impact on its operations or financial position.</P> <P>	Most of the Company's subsidiaries and divisions have completed necessary computer system upgrades. It is anticipated that several international manufacturing and distribution locations will complete their system upgrade projects during the fourth quarter of 1999. If the needed conversions and modifications to computer and other systems are not made, or are not completed in a timely manner, the Y2K issue could have a material impact on the operations of the Company.</P> <P>	All of the Company's products that contain embedded chips are now believed to be Y2K compliant. The Company will continue testing and documentation efforts throughout the fourth quarter of 1999 and will formulate and finalize any contingency plans that the Company determines are needed during that time. The total estimated 1999 incremental cost for the Y2K project is approximately $8.6 million, of which approximately $7.9 million has been spent to date. All costs will be expensed as incurred and w <I><P>Forward-Looking Statements</P> </I> <P>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: changes in economic conditions that adversely affect the level of demand for the Company's products, changes in foreign exchange markets, changes in financial markets, changes in the <P>ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K</P> <DIR> <DIR> <DIR> <DIR> <DIR> <P>(a) Exhibits </P> <P>The exhibits listed below are submitted as a separate section of this report following the signature page:</P> <DIR> <DIR> <DIR> <DIR> <DIR> <P>Exhibit 10 - 	Resignation Agreement and Release Between Stryker Corporation and Ronald A. Elenbaas</P> <P>Exhibit 27 - 	Financial Data Schedule (included in EDGAR filing only)</P> </DIR> </DIR> </DIR> </DIR> </DIR> <P>(b) Reports on Form 8-K</P> <DIR> <P>No reports on Form 8-K were filed during the quarter for which this report is filed.</P> <P> </P> <P> </P> <P> </P></DIR> </DIR> </DIR> </DIR> </DIR> </DIR> <B><P ALIGN="CENTER">SIGNATURES</P> </B> <P> </P> <P>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.</P> <P> </P> <P> </P> <P> </P> <P> </P> <TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=585> <TR><TD WIDTH="32%" VALIGN="TOP"> </TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> <P>STRYKER CORPORATION</TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> </TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> <P>(Registrant)</TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> </TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> </TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> </TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> </TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> <U><P>November 15, 1999</U></TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> <U><P>/s/ JOHN W. BROWN </U></TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> <P>Date</TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> <P>John W. Brown, Chairman, President</TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> </TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> <P>and Chief Executive Officer</TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> </TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> <P>(Principal Executive Officer)</TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> </TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> </TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> </TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> </TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> <U><P>November 15, 1999</U></TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> <U><P>/s/ DAVID J. SIMPSON </U></TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> <P>Date</TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> <P>David J. Simpson, Vice President, </TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> </TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> <P>Chief Financial Officer and Secretary</TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> </TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> <P>(Principal Financial Officer)</TD> </TR> <TR><TD WIDTH="32%" VALIGN="TOP"> </TD> <TD WIDTH="19%" VALIGN="TOP"> </TD> <TD WIDTH="49%" VALIGN="TOP"> </TD> </TR> </TABLE> <FONT SIZE=2></FONT></BODY> </HTML>