Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2010 Stryker Earnings Conference Call. My name is Melanie, and I'll be your coordinator today. [Operator Instructions]. Before we proceed, the company would like to remind you that certain statements made in today's conference call may contain information that includes or is based on forward-looking statements within the meaning of the federal securities law that are subject to various risks and uncertainties that could cause the company's actual results to differ materially from those expressed or implied in such statements. Such factors include, but are not limited to, weakening of economic conditions that could adversely affect the level of demand for the company's products; pricing pressures, generally, including cost containment measures that could adversely affect the price of or demand for the company's products; changes in foreign exchange markets; legislative and regulatory actions; unanticipated issues arising in connection with clinical studies and otherwise that affect U.S. Food and Drug Administration approval of new products; changes in reimbursement levels from third-party payers; a significant increase in product liability claims; unfavorable resolution of tax audits; changes in financial markets, changes in the competitive environment; and the company's ability to integrate acquisitions. Additional information concerning these and other factors are contained in the company's filings with the U.S. Securities and Exchange Commission, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q. And now, I would like to turn the call over to Mr. Stephen McMillan, Chairman, President and CEO. Please precede, sir.

Thank you, Melanie. Good afternoon, everyone, and welcome to Stryker's Fourth Quarter 2010 Earnings Report. With me today are Curt Hartman, our Vice President and Chief Financial Officer; and Katherine Owen, Vice President of Strategy and Investor Relations. Before delving into the quarterly specifics, we'd like to highlight the major strategic milestones achieved in 2010 that have helped transform our company in ways that we think will be critical, not only in navigating through the current environment, but also positioning ourselves well for the future. I'll then pass the call over to Katherine and Curt to go into the specifics regarding our Q4 results before we open the call up to your questions. 2010 was a pivotal year for our company with a number of key accomplishments that in total underscore our unique competitive strengths and that we believe will allow us to deliver top-tier results in both the short and long term. First, we continued to make major investments in our quality and compliance systems, entering year three of the initial program that is driving myriad benefits to our company and our customers. In 2010, investors were able to see the tangible results of these considerable investments with resolution of the remaining three FDA warning letters. This achievement represented an important milestone for our organization and signaled to us that the path that we've been on is focused and resourced appropriately, recognizing there remains room for improvement and will continue to have quality as a top priority within our organization. Simply put, we've used the challenges we faced to ensure that quality and compliance become embedded in our cultural DNA, and that the focus we've put in place over the last few years does not waver. We also continue to optimize our capital allocation. With us now generating over…

Thanks, Steve. My comments today will focus on several areas, including acquisitions, elective procedure trends and implant pricing and, finally, MedSurg trends. On the acquisition front, we completed four deals in 2010, including three core deals with the instrument acquisition of the SONOPET aspirator, our CMF group acquiring Porex Surgical and the medical acquisition of Gaymar Industries. All three deals further broadened the relevant franchise product offering and allow us to leverage our existing sales forces. As we've discussed previously, our M&A strategy is focused on both leveraging our core businesses, while also moving into key adjacent markets. The early January closing of the Boston Neurovascular division is clearly an example of the latter, and we're excited about the long-term growth prospects that this market-leading franchise offers. Just prior to our announcement of the definitive agreement to acquire the business, Boston Neurovascular received a long-awaited FDA 510(k) clearance of its next-generation target coil, a key milestone; given coils represent roughly 50% of the $1 billion worldwide neurovascular market. This was followed in late December with 510(k) clearance of the next-generation coil detachment system that allows for coil detachment in less than 10 seconds, representing a demonstrable improvement over the prior system that required upwards of one minute to detach each coil. Throughout our due diligence, we consistently heard from customers that the length of time required for coil detachment was the key competitive disadvantage for Neurovascular system, and as such, we're extremely excited about this launch. Although still early, we are highly encouraged by the customer feedback and believe these product introductions will help drive accelerating sales growth over time. Turning to elective procedure trends and implant pricing, at this point, it's fairly well-understood that the combination of the global economic contraction, continued rise in healthcare plan deductibles, the expiration…

Thanks, Katherine. We're obviously pleased with our fourth quarter results and the full year performance, as they are indicative of both the growth potential and underlying earnings strength of the company. We exceeded our original expectations, while still addressing the challenge of a slowdown in elective procedures and price pressure in hips, knees and spine, while simultaneously making concentrated investments in R&D and M&A to position our company for continued top and bottom line growth. Moving to the fourth quarter results, sales increased 8.8% on a reported basis and 8.6%, excluding currency. Acquisitions added 3.1% with the Ascent acquisition contributing 2% to our reported growth rate. For the full year, Ascent has contributed 2.2% to our 8.9% reported growth. On the earnings side, our revenue growth and solid gross margin allowed us to generate adjusted diluted net earnings per share of $0.93, an increase of 13.4% over Q4 of 2009. On a GAAP basis, diluted net earnings per share were $0.74, a decrease of 2.6% versus Q4 of 2009. Our reported GAAP earnings included $123.5 million impairment charge associated with our decision to divest the Biotech Bone business, while 2009 included the credit associated with the favorable patent litigation outcome and costs associated with the repatriation of foreign earnings. Turning to some specifics in the quarter, I will begin with currency, which was effectively immaterial to top line sales. For the year, currency increased reported sales by approximately $70 million or 1%. As noted in our January 10 press release, currency in the first quarter of 2011 moves to a modest tailwind, and if rates hold near quarter-end levels, we would expect the first quarter sales impact to be approximately flat to up 1% when compared to 2010. Using quarter-end rates, the full-year currency impact on top line sales would…

Thanks, Curt. In closing, we're pleased that we reestablished strong growth in 2010, while also making significant progress on our quality and compliance initiatives. We believe we are well-poised entering 2011 to both face the challenges that will invariably exist, while also continuing to capitalize on emerging opportunities. We look forward to executing on our financial goals and delivering strong results that will continue to define Stryker as a leading player in the medical technology market. With think that, we'll now open it up for Q&A.

[Operator Instructions] And our first question comes from the line of David Lewis with Morgan Stanley.

Steve, I wonder if you could talk a little bit on metal-on-metal implants and the impact you're seeing in the marketplace and specifically your business? And clearly, what some of your competitors are reporting, it's having an impact certainly on their hip franchises mostly on internationally but somewhat in the U.S. as well. I wonder if you see this as a share opportunity for Stryker in your business or sort of the elimination of a historical headwind? And if you are gaining share based on metal-on-metal, do you find opportunities to both gain Hip share and then obviously, levers that over to the Knee business as well?

It certainly really at minimum, it eliminates the headwind. As many of you know, we've lagged the hip market for five years running, largely because of our decision to stay out of metal-on-metal. We feel good about that decision now. We would certainly hope that it will create not just the loss of a headwind but also the opportunities to start the gain on some Hip market share and where possible, certainly, we will always seek to leverage that over to a very strong Knee franchise. So we'll certainly see how it plays out, but I think we really do like our position right now with some new product launches in the Hip space and given the market dynamics.

And then Curt, just thinking about the comments you made about Neurovascular, making the acquisition, I think you guided or assuming in your wandering integration period, you'd see rather flattish growth for this year, but kind of considering early traction with some of the new products and the fact that the prior asset had not generated new product pipeline growth in quite some time, is that flat expectation for growth reflect some conservatism or just some contra sales synergies we should be thinking about to how with significant new products, we still kind of see kind of flattish outlook here for '11?

David, I think there's a couple of items in there that we would point to: one is the integration of an acquisition of this scale especially on a global basis; and two, would be the timing and the ability to ramp up production as well as the training and rollout of the new product. So we're very excited about the target coil approval. We're very excited about the detachment system approval. There is certainly a long, long pathway to product rollout on a global basis, as well as bringing an education of both the selling organization as well as the customer base and keeping in mind that roughly 2/3 of this business is OUS. You're going through many country registrations with the new products as well. So we're trying to factor in all of those various factors into our expectations for this year. And so, I think that's when we get to the neutral to slightly accretive on EPS as well as very muted expectations for top line growth this year.

Our next question comes from the line of Rick Wise with Leerink Swann.

We've got some mixed signals early on here on the economy pricing utilization. I'd be curious to get your perspective. We heard from J&J today, it seems like a pretty somber message on utilization pushback on pricing pressure, et cetera. But your numbers again seemed to suggest that, at least, a little more optimistic, but your perspective generally?

Clearly, there's more pressures, but ultimately, we still love the businesses we're in. And I think as Katherine pointed out, for all of the perfect storm against the reconstructive implants last year, they still grew every quarter. Fundamentally, the demographics are on our side. We continue to believe that if we're offering good products and these procedures are not indefinitely deferrable, I think we still feel pretty good about the market dynamics, and most importantly, I'd say we feel really good about our position within the marketplace right now.

And maybe turning to the international part of Hips and Knees, which did grow a little slower particularly on the Knee side, can you give us a little perspective on just maybe your feelings about the economic outlook and is that a concern for this year? And maybe extending that, I know you've been through some product transition and some distributor transitions. Are we through all that? And how do we think about that for 2011?

Sure, thanks, Rick. I think internationally, certainly, our Knee business had suffered particularly in Europe from the distributor changes we've made and also a lot of the products that we have obsoleted during the year, as well as frankly some slowness in rolling out instrumentation for our Scorpio Knee line, which was really a hangover from a lot of our quality and compliance initiatives. I think we feel better exiting the year and coming into 2011 than we did in 2010, and we'd probably hope for a modest pickup there. And having said that, I think Europe, with the overall market dynamics, may still be soft here for the first half of the year and maybe for the full year. But again, I think we feel great about how we're positioned and globally, probably, it would be a little bit better next year in 2011 rather than 2010.

Our next question comes from the line of Matt Miksic with Piper Jaffray.

I wanted to follow up on a question on acquisitions. First, just in terms of the trends of Gaymar and Ascent, you've had Ascent here for coming up on a year and Gaymar for a quarter or so. As you think about trends for 2011, similar to your point on Neurovascular, what kind of consideration do we need to give to integration, this sort of new product registration? Are there sort of sideways growing with your market? Or is there a transition period where we might be kind of flat or down for a couple of quarters? Any color you could provide, then I have a follow-up.

Sure, Matt, I think we feel pretty good about our ability to integrate those and keep those growing, and particularly given product flow and everything else, and Gaymar coming right into our Medical business. That integration looks to be going fine. And Ascent is still on a very nice space. Obviously, a little bit of growing pains here and there, but overall, we continue to really like the outlook and trajectory for that business.

And then just your comments on pricing, Steve, following up on Rick's question. I guess specifically on Spine, not that there's plenty of things to learn about in the Spine space but one of the things that came out of the meeting this morning with J&J, it was kind of like sequential easing of pricing pressure. It's pretty consistent pricing in Orthpedics, as you've talked about at Spine, maybe its comps; maybe the low-hanging fruit has been picked. But I'm curious to get your outlook on whether you think that's stable, that negative mid-single digits, which is what the industry seems to be talking about for a while before, actually, it may seem easing of that pressure over the next several quarters?

Maybe I'll jump in and take that. We don't break out price specifically by franchise, although we've alluded to in Q4. We're in similar in that. We've been seeing ongoing pricing pressure in the Spine business, similar to what the market is seeing. I think it's too early to say that we've turned the corner. We think there's a stabilization trend, how much pricing does or doesn't improve as we go into 2011, I think it's just probably too early to say. And a lot of that is going to be driven by new product introductions and innovations that come into the market. But overall, it's still a challenging market, but one that doesn't feel like it's worsening.

Our next question comes from the line of Mike Weinstein with JPMorgan. Christopher Pasquale - JP Morgan Chase & Co: This is Chris Pasquale here for Mike. Just to follow up on the question about pricing. We've seen the impact on your business overall increase pretty steadily for the past six quarters or so. What does your initial 2011 revenue guidance assume for a pricing headwind for the year?

It's an interesting question because it is basically an assumption and it's probably consistent with what we saw this year. We don't, right now, see any things that would point us to worsening pricing trends in Hips and Knees. Katherine's already commented on Spine. And overall, on a global basis, we feel pretty good about what we're seeing in the rest of our business. Again, keeping in mind that most of the focus on pricing in these discussions have been around Hips, Knees and Spine, and Stryker's portfolio of business allows us to absorb a lot of that through other opportunities for innovation and the other products we offer. So I would say our assumptions should be modeled similar to what you saw through the course of this year. Christopher Pasquale - JP Morgan Chase & Co: And then you signaled coming into 2010 that you expected to be active on the M&A front and it did end up being a pretty busy year for the company. As you look at 2011, you talked about some of the integration efforts you have to do with the deals you've already done. Are you still in a position to be aggressive looking at opportunities? Or do you have your hands full with the deals you did over the past few months? And if deals aren't the first call in cash, did that change how you think about the speed of share buybacks?

We've really continued to reiterate a very consistent strategy, as it relates to our utilization of cash, and it is being three-pronged. We think, given our pretty significant ability to generate cash, it really does give us the flexibility to employ a three-pronged strategy. It's going to include M&A. It's going to include buybacks and dividends, which you saw another healthy year-over-year increase in dividend. There's no change to that strategy. We're fairly large in terms of the number of franchises. So, for example, the integration of Gaymar into Medical really has no impact on anything outside of that division. So the nature of BD, it's impossible to predict how much volume comes through, but there's been no change to their overall strategy. We still think there's a lot of opportunities to leverage our core with Gaymar, Porex, SONOPET, being examples of that, as well as opportunistically look at adjacent acquisition strategies like Neurovascular. And there's no change to that overall guiding principle.

And Chris, I would just pile on here and remind you, I think we feel really good about the underlying strength of our business, which allows us to be disciplined acquirers, and we want to continue to pride ourselves on being very disciplined acquirers. And I think the ability to have a strong base business puts us in that position, and we expect to continue to do the same.

Our next question comes from the line of Vivian Cervantes with Maxim Group.

I just wanted to follow up a little bit on the new Hip products that are being rolled out. Given the performance in the U.S., can you just give us a sense for where we are with the launch? I think at one point we thought this could be a two-year process? Is it still a two-year process or did we accelerate, given the weak macro?

We've always described ourselves with Recon launches, being a little bit of a freight train, Vivian. It takes us a little, while to get going, and I think that's exactly what we're seeing. I do think we were starting to accelerate our trend in the final quarter of the year and feel pretty good about where it should go this year. But I don't think -- we're not fully ramped up yet but certainly on track.

And just another follow-up, also on the Neurovascular business and the new coil and detachable that was recently approved. Can we sort of say that maybe these two approvals will protect current market share primarily? And how does that compare with competing products out there from a market share gain standpoint?

I think there's a couple of answers to that question. Number one, the organization has been waiting for these new products. So it's a great confidence-builder in the organization. The customer base who's been using the Neurovascular products for many years is thrilled to see this organization bringing them new solutions on the innovative front. So our expectation is it will both stabilize any market share erosion that may have occurred over the last couple of years. I think when we went back and did the math in the last five years, there were approximately 20 new products launched into that space, while this business had none. So the competitive attack in the last five years has been significant. So the ability to give this organization a new product, address customer issues, stabilize their customer base. And then ideally, as we continue to roll out a pipeline of other items throughout the year and into the following years, get the organization back on offense would be the expectation.

Our next question comes from Bob Hopkins with Bank of America.

So the negative 2.1% price mix that you talked about this quarter, that, I think it's a little bit worse than what you're talking about in the third quarter. And I know you're saying for 2011 that you think that it will be about the same as what you saw in 2010. So, I'm just wondering if you could help us try to give some confidence in your statements that things won't get worse in 2011 from a price mix perspective? I'm just curious what are the kinds of things you're seeing out in the marketplace that give you that confidence at this point?

I think, first of all, that negative 2% price, that's pure price. So there's going to be an offset as we've been seeing throughout the year, an offset to that comes from mix. But when we're reporting price, we're talking about just the pure price impact. And overall, in terms of the outlook for 2011, a lot of it comes from the cadence of new products that we expect to be launching, the mix benefit that we are seeing to help offset that and just overall trends we're seeing with respect to the market that don't indicate a significant worsening in the overall pricing trends. It's going to bounce around from quarter-to-quarter, as we saw in 2011. But overall, we don't think you're going to see a demonstrable step-down.

So just to be clear, within that 5% to 7% top line growth, there's an assumption that price mix combined is down 1% to 2%? I just wanted to make sure we've got it.

That's price, Bob.

Just price, so that's not net of mix. And then I wanted to ask a question about gross margin. Are you assuming some gross margin benefit in 2011? And then you've talked previously about how you've undergone, obviously, this quality of journey over the last two and a half years. And now you've put the head of the quality initiatives also in charge of manufacturing. And you've implied that on this call, you see some longer-term gross margin benefits to come from that. I'm wondering why those are so long term, as you've kind of been on the quality mission for two and a half years. Shouldn't we see more of that in 2011? And just if you wouldn't mind talking about gross margin, that will be helpful.

Sure, Bob. In my comments, in the scripted section on gross margin where that we did see opportunities for improvement in 2011. I want to be measured in that comment, because some of the pick-up you saw this past year in 2010 was directly attributable to some pretty wild swings in currency, especially when you look at our distribution model and where our manufacturing occurs. To the point of shouldn't the results be sooner rather than later. I think one of your statements hit the nail right on the head. The last two years, two-plus years, had been 100% focus on the quality initiatives. That journey continues on the plan that it's on through at least the first half of this year, and we'll constantly be working on enhancing quality systems. The same individual who's responsible for that, as you noted, is also responsible for our global manufacturing network. And as somebody who's watched Stryker for a long time, you know we have a pretty diverse geographic manufacturing footprint. So corralling all of those processes and focusing on the biggest priorities takes a bit of time, and those are the things that we're working through right now. I would tell you over the long term, I couldn't be more excited about the opportunity, but it does take time. And in a highly compliant environment, we cannot afford to rush and make mistakes because any mistake would simply move us back well, well back into a quality journey that we feel like we're making forward progress on. So we're going to be very measured in our approach here and be very disciplined in our approach here.

Our next question comes from the line of Joanne Wuensch with BMO Capital Markets.

In order to make these numbers work by my calculations, you're looking at sort of gross margins flattish and a step-up in SG&A. I would assume some of that is acquisition integration waiting for you guys to do your own quality control and put your management magic on your acquisitions. Having said all of that, how much can you get back to the wonderful leverage we saw in 2010 as we look into 2012?

We just put out 2011 guidance. I'm probably not going to jump into 2012 just yet. But obviously, when you do an acquisition, especially an acquisition that has the scale of the Neurovascular one, you're going to see the top line benefit, and you're actually going to see the deleveraging in the P&L. Clearly, one of the goals is to work through the integration and get back into leveraging that additional revenue. And you should assume that our goal is to do that as quickly as reasonably possible, while still sticking with the overall design of where we're going with the Neurovascular business along with our other core franchises. So, I'm not going to give any specifics in 2012, but obviously, that is one of the benefits, frankly, of doing the acquisitions, as you get to the top line acceleration and you have to organize around the P&L leverage in the future periods.

Just as a follow-up then, should we assume then as we go throughout the year that leverage is going to become more and more obvious? A simple question but I'm also asking on the gains to the quarters?

It's a simple question, but things, if we know anything about the business; they don't tend to run very linear quarter-over-quarter. They tend to move around quarter-over-quarter. So I would hope that a year from now, you could look back and see our progress. I'm not going to point that each successive quarter is going to materially get better. Certainly, on the integration side, you would expect a lot of those charges to be earlier in the year as we work through some of the big items, but they all take time. And there's always other investments that seem to somehow materialize.

Our next question comes from the line of Adam Feinstein with Barclays Capital.

This is Matt [ph] for Adam. Two questions. So one is where everybody's been focused. I just want to make sure I'm hearing your message correctly. So in the Hips and Knees this quarter, there was some improvement, but I guess what you're saying is really the market's not improving much, but Stryker's doing a little better. It's a combination of product launches, lapping some issues and maybe some competitive disruptions. Is that sort of a fair characterization?

Yes, I think that's a fair comment, recognizing we haven't seen everybody report yet. But that's probably the way it looks right now.

And then one area where people haven't really focused on this call is Trauma, where you had pretty good results, and that strung together a few good quarters there. I'm just wondering what your expectations are for your business and for the market going forward? That's something that we haven't talked about in a while.

We don't give guidance by individual franchise. We are pleased with how our Trauma business is doing. Part of that are moves that we did, going back a number of years, when we do have a hybrid sales model. And we think that allows us to execute adding products into the bag. So we've got great sales force focused at expanding products offering. Overall, those markets continue to be well. They do move around. If you look at the overall, over the years, quarterly trends that can be impacted by economic fluctuations or weather, et cetera, but overall, we feel good about that business. It's an upper single-digit growth market, we believe, and we feel well-positioned to continue to deliver good results in 2011.

Our next question comes from the line of Glenn Navarro of RBC Capital Markets.

A question on Spine. It looks like this was a quarter where you've lost market share in Spine. And I recall a year ago at this time, we were highlighting the new cervical plate as a way for Stryker to kind of recapture share and start growing the business aggressively again. So as we look out to 2011, understanding the market is under pressure, what is the strategy for Stryker to recapture its share and get back to market growth or better than market growth? That's question one. And then I also remember last year being at AAOS, and you're highlighting your kyphoplasty balloon. Any update on that product as well?

Sure, on the Spine market, I would tell you, I think we, for a number of years, have been very good at rolling out innovations and sales force expansion. The dynamics of the Spine market last year we probably slowed down our sales expansion. And while we have the cervical plate, we didn't have enough other things to really keep the franchise going. And I think we've been retooling some of the R&D efforts there to get back to a little bit better cadence of product flow. In terms of the iVAS balloon that we launched, it's off to a nice start, a steady start. And again, we point that out as one of those things. We have launched a lot of singles every year, not doubles and triples and home runs that two, three, four or five years out become meaningful businesses. This one is another one of those where nothing meaningful right now, but we like the trajectory.

So just one follow-up, Steve, on Spine. So, can you give us a sense of what are the products that may help you reenergize this business? Or should we just be assuming that your Spine franchise grows below market growth in 2011?

We haven't gone into details on new products. As you know, we don't... highlight some of the key products that we're introducing at the upcoming academy meeting across major businesses, as well as our flowing that out at our analyst meeting. I think right now we're pretty tempered regarding growth prospects expectations, both for the market and candidly for our Spine business, and as we look to improve the trends we saw in 2010.

Our next question comes from the line of Doug Schenkel with Cowen and Company.

My first question relates to, I guess, really the diversity of your business. As you've noted recently in public presentations, you've been diversifying for the better part of, I think, three decades at this point. But clearly, your M&A activity's picked up over the last year or so. So, I guess what I'm wondering is what opportunities exists for you to drive growth by picking up shares specific to a broader product offering in the aggregate? And would you expect this to pick up momentum, given recent activity as well as I guess the need for the global healthcare system to control costs?

Doug, I think we feel really good about our position in every market we're in, in terms of being in sufficient scale to compete very well, and that's where we just looked for the little tuck-in acquisitions here and there, but we feel very well poised. And we always said during the '08, '09 time period, we thought there would be buying opportunities from the economic downturn and that we have positioned ourselves to capitalize on them. Right now, we've got a great set of businesses, all of which are of meaningful scale to compete and certainly don't need anything in terms of getting bigger.

But I guess the crux of the question is, really, is there a very concerted effort to maybe get broader take to go after this? I know fumbling's not the right word or the word that we want to use, but is there the ability to actually broaden the portfolio and actually gain share that way by being a sole-source supplier?

We still believe more deeply in just going deeply within each product line and then looking for the leverage opportunities across. So, we're not going to diversify for diversification's sake. We're diversifying as we've done for three decades, as we see new business opportunities that are close into our core to keep expanding out.

Our next question comes from the line of David Roman with Goldman Sachs.

I wanted to ask one question on patient mix and then a follow-up on strategic direction. In at least our conversations in orthopedic surgeons, what we've heard is that generally speaking, they have not seen a tremendous slowdown in operating activity but over the course of the year. We saw the Medicare patient population make up a greater percentage of their patient volumes, which to some extent may explain some of the negative mix or dollars slowdown that we've seen in the industry. I was hoping to get your perspective on that and where we sort of are in Medicare, non-Medicare in the Hip and Knee market and whether you think that, at all, has had an impact on reported dollar growth in 2010?

Yes, I think there's been some element of that, David, certainly with people unemployed and younger people not having as much insurance. Again, given the breadth of our portfolio, not making a huge difference probably.

And then in terms of M&A, one thing that you've talked about in the past is that given the quality initiatives you've undertaken, that part of the evaluation of a target will be either to what extent they are at the same level of quality systems that you are or the costs associated with bringing them up to par. Can you just maybe highlight how that impacts the due diligence process of potentially the pacing at which you do transactions?

I think this is reflective of another one of the key focus areas in the due diligence process. We've obviously learned a tremendous amount to our own quality efforts and applying those learnings to acquisitions that it just adds to the list of areas that we focused on.

I will tell you the Boston Scientific business, they had made tremendous progress, and I would bet that we valued where their new quality systems are, perhaps, more than other people, because they have done a great job. And we feel great about that one.

Our next question comes from the line of Matthew O'Brien with William Blair. Matthew O'Brien - William Blair & Company L.L.C.: Just curious on the Hip side of the market, given your good performance in the quarter compared to some of your competitors. Any sense for how much of that was more shares shipped within a specific surgeon base, be it that they shifted from their metal-on-metal product over the your metal on product versus new shares that you're taking in terms of new accounts?

I think it's too early to really have that level of granularity. It's just one quarter, and its one quarter where everybody hasn't reported yet. So, I think we're clearly seeing a lit bit of movement in metal-on-metal, but I don't think we can get that granular at this point. Matthew O'Brien - William Blair & Company L.L.C.: So you don't see it kind of from AAOS of last year through this point?

Not beyond what we've seen in the market where there's clearly been some contraction, how significant it's been, it's still relatively early. Surgeons tend to move pretty slowly one way or the other. Matthew O'Brien - William Blair & Company L.L.C.: On R&D, a pretty significant increase in spending 2010 and expected in 2011. Is that really focused on more clinical studies or post-market studies in support of your current products or upcoming products versus new product development?

I would tell you it's mostly new product development. The range of products we offer cover all classes of approval, and to the extent that there are heavier clinicals required, we have experienced with that across our product offering. This is really an initiative to ramp up more effort on pure new product innovation and, particularly, as it relates to coming out of the remediation efforts where a lot of remediation has started with R&D in getting our R&D organizations around the world focused on pure new product initiatives.

Our next question comes from the line of Kristen Stewart with Deutsche Bank.

First, just a clarification on capital. I just want to make sure I heard you right with, you said with U.S. Recon prices down, but it was almost offset by mix. So net-net, price mix is still negative in the quarter?

Partly offset by mix, net-net, still negative. It's very similar to the trend we saw throughout the year with a little bit of the strengthening of mix in the fourth quarter. Jeffrey Johnson - Robert W. Baird & Co. Incorporated: Going back to the pricing as we see the decline about 1% in the first quarter to 2.1% now. Would you guys say that, that trends in price getting more negative is more of a reflection of the overall orthopedic trends? Or are there any worsening in price within MedSurg? And then my second question is can you give a little bit more granularity on the $0.21 to $0.25 related to the Boston Scientific spend? And is there amortization included within there? Or is that included within your adjusted guidance? Just kind of what does that $0.21 to $0.25 make up?

So the first question there was pricing, and just a reminder, Q1 pricing was negative one-point [Audio Gap] 1.3 and then we to negative 1.5 then 1.8 then 2.1. So we have 80-basis-point movement over the course of the year. It's not anything that's going to require his to radically change our offense, especially when you look at the scale of new product rollouts, both in the U.S. and international markets. So nothing dramatically different outside of what we would refer to as normal pricing pressure, especially if you look back over the company's reported price change over the five-year period when we positionally bounced between plus two to minus two. But I don't think we see anything in the pricing that's dramatically challenging outside of a few key segments, which we've highlighted as Spine, being what we felt was the biggest pricing pressure area. And that goes back to Q4 of '09 when we made that comment. On the NV acquisition, those charges that we've called out in our press release are specific integration-related costs. There's a big inventory step-up charge that materializes over time, and there are other integration-related costs that could be in the form of outside services provided to the deal or just other onetime costs associated with transition of that business from one parent to the other.

Our next question comes from the line of Raj Denhoy with Jefferies. Raj Denhoy - Jefferies & Company, Inc.: You mentioned OtisMed is kind of a work in progress. I'm curious if there's been any updates you could provide with what's happening with the FDA? And if nothing there, then perhaps any updates on your expectations for what that product could do to the Knee business?

No change in expectations. Clearly, we would have been hoping for 2010. As many of you know, it's predicting FDA timelines. And it has become more challenging. So we're hopeful for 2011, we still believe this is going to be a nice product. For our Knee growth, we were seeing the benefit of that prior to the acquisition at sometime in 2011, but nothing more specific than that is the current goal. Raj Denhoy - Jefferies & Company, Inc.: So, you're not even narrowing down the first half, second half or anything at this point?

No, not at this point. Raj Denhoy - Jefferies & Company, Inc.: On the Ascent deal, a lot of moving parts on the MedSurg side in the fourth quarter, but if we -- our numbers, and I'm not saying they're correct, but it looks like Ascent may have been flat to slightly down from the third quarter on a dollar basis. Is that correct?

I don't think you would assume that we're going to break out our business to the size of Ascent on a dollar basis. I think you have to recognize it across MedSurg. Things, as I mentioned earlier, don't always flow evenly one quarter over the next, and I would point you back to Steve's comments that, overall, we feel pretty good about where Ascent stands after the first year. And as we head into 2011, we still have growth expectations for that franchise.

Our next question comes from the line of Dave Turkaly with SIG.

I seem to remember some litigation that went on between Trident and Microsys [ph], part of J&J. I'm just curious on that detachment system in the new coil, are you comfortable with the intellectual properties that stands today?

We're very comfortable with the intellectual property, and obviously, the amount of due diligence around intellectual property was substantial. So I would say that we feel very good. I can't predict the future as it relates to legal. So I never say never as it comes to legal event in today's society, but our due diligence, we feel, is very comprehensive.

Our next question comes from the line of Derrick Sung with Sanford Bernstein.

Maybe if you could give us a little bit more detail and color on what you're seeing in MedSurg? You've been sort of a full year now in terms of recovery from the major impact from the economic downturn. And I'm just wondering, as you look at sort of hospital CapEx spending trends and habits of now versus pre-recession, are you seeing any major changes in terms of the way that the hospitals are approaching their CapEx spending that would lead you to believe that there would be sort of moving forward, a fundamental shift in the way that you view the business?

Derrick, I don't think there's any fundamental shift of how we view the business. I think if there is a change in MedSurg capital spend behavior, it's at the approval levels. It used to probably be a little more close to the action. It probably moved up higher in the organization, perhaps to the C-suite. And in some cases, that has been relinquished back down to high-level materials management or purchasing folks. And in other cases, continues to reside of the C-suite, and if there is a change in behavior, it's probably our selling organizations have had to learn how to sell on a broader basis, as it relates to capital equipment in the hospitals.

And specifically, this quarter in Endoscopy, I know you kind of talked about lumpy quarters, but what specifically drove the weakness there? Was it share loss in your view or just some big accounts for sales that didn't go through or can you kind of give any deep color there?

It's timing. Don't worry about it. It's just timing. It will be fine. We're not going to lose any share.

Similar to what we saw in Medical earlier in one of the quarters. I feel very good about those businesses.

[Operator Instructions] Our next question comes from the line of Michael Matson with Mizuho Securities.

Given your decision to sell the OP-1 business, I was just wondering if you could provide us with an update on your overall strategy in the Biologics area and whether or not you would rule out developing or acquiring any other higher-end biologic products in the future?

I think, Mike, we're not going to get into strategic direction on this call. We'll probably lay some a little bit more of that of at our analyst meeting later in the year. But I think you can suffice to say, we're looking, still, in the biologic area, and we'll talk about kind of where we're headed.

As we commented on the press release, we are still investing in OP-1 outside of the orthopedic bone application.

And then just on MedSurg, can you give us an update on where you're at, driving that business into the international markets and how big of a driver that could really be for MedSurg overall?

It continues to be good. Previous to the last question, I think our International Endo business was up 11% in the quarter. As Curt said, our International Instruments business was up 9%. We continue to feel very good about the trends and opportunities there.

And our final question comes from the line of Steven Lichtman with Oppenheimer. Steven Lichtman - Oppenheimer & Co. Inc.: I was just wondering, just given the uncertainty around OtisMed and the strong product lineup on the Hip side, how are you keeping the sales force focused on the Knee side of the business in 2011, where are we with Triathlon and what should we be focused on, relative to product flow in Knees outside of OtisMed in '11?

We still feel great about Triathlon and its longevity. There was a recent registry data out of the U.K. that shows Triathlon has, by far, the lowest revision rate. And for everything, if people talk about evidence-based medicine and registries and everything else, we feel great about the data that's being generated there that I think will give a little shot in the arm even to our organization. So we'll obviously be continuing to look at little line extensions here and there and other things to keep that business fresh. Steven Lichtman - Oppenheimer & Co. Inc.: Just on the Neurovascular business, obviously, you pointed to the two new products. Is there anything from a sales force perspective that needs to get invested in as well as in terms of getting that in order to get that growth up toward market level over the next 12 to 24 months?

I think, just like any of our other businesses, there are opportunities for sales force expansion in various markets. I'm not going to get real granular there, but as we get into the process of moving the business in the Stryker and all geographies, we'll obviously looking very deeply at what they have or what they don't have, where their presence is adequate and where there may be opportunities to enhance their presence. And we'll get into that as we further ingrain the business and get through some of the basic, what I would call month-one operational issues.

Ladies and gentlemen, that does conclude our Q&A session. I'll turn it over to you, sir, for closing remarks.

Great, thank you, Melanie, and thank you, everybody, for your time tonight. I know it's gone a little long here with a lot of questions. We continue to feel really good about our team and the results we're generating, and our conference call for our first quarter 2011 operating results will be held on April 19, 2011. Thank you, everyone.

Ladies and gentlemen, thank you for your participation in today's conference. That does conclude the presentation. You may disconnect. Have a wonderful day.