Good day, ladies and gentlemen, and welcome to the First Quarter 2011 Stryker Earnings Conference Call. My name is Jonathan, and I will be your operator for today. [Operator Instructions] Now 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 market; 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. Additionally, information concerning these 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. At this time, I would like to hand the call off to Mr. Stephen MacMillan, Chairman, President and Chief Executive Officer. You may proceed, sir.

Thank you, Jonathan, and good afternoon, everyone, and welcome to Stryker's first quarter 2011 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. Consistent with prior calls, I will make some summary comments regarding our quarterly results before passing the call over to Katherine and Curt to provide more specifics. As most of you have seen by now, we have provided a reclassification of our revenue in order to better convey the major sales drivers, including MedSurg, Reconstructive and Neurotechnology and Spine. This was prompted in part by our recent Neurovascular acquisition, which broadened our existing presence in the neurosurgery space. With the reclassification, you can now see the totality of our Neurotechnology sales, which includes both Neurovascular and Neurosurgery revenue and topped $178 million in Q1 on top of $320 million of annual sales in 2010. And for the total company, sales exceeded $2 billion in the quarter for the first time ever. Our Q1 results reinforced many of the key themes that we expressed at the start of the year, including: one, the strength of our balanced diversified revenue model; two, the leverage provided by our capital allocation strategy, which includes acquisitions, buybacks and dividends; three, our commitment to driving internal innovation as evidenced by the strong 23% increase in R&D on top of a 17% increase for full year 2010.; four, against all of this, there remains our continued focus on driving quality first through our ongoing investments in quality and compliance. As many of you on the call are aware, we are highly committed to the business model that had fueled our company's growth from the start, which is leveraging our core offering and expanding into select adjacent markets. This…

Thanks, Steve. My comments today will focus on acquisitions, as well as elected procedure trends and implant pricing. As Steve mentioned in his comments, we are pleased with the performance for Stryker Neurovascular in the first quarter as part of our company. And although we don't typically provide quarterly updates regarding specific acquisitions, given the relatively larger size of this deal, we thought we'd offer some additional context. Recall that just prior to announcement of the definitive agreement to acquire the business, 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 billion-dollar worldwide Neurovascular market. This was followed in late December with 510(k) clearance of the next generation coil detachment system that allows the coil detachment in less than 10 seconds, which is the demonstrable improvement of the prior system that required upwards of one minute to detach the 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 the Neurovascular system, and we believe that's been addressed with these launches, which helped drive positive growth in the U.S. sales in Q1. In addition to the positive trends in the Neurovascular business, we are also pleased with the early performance for both Gaymar Industries within our Medical franchise and the MEDPOR assets of Porex Surgical, which is part of our CMF division. Both acquisitions are examples of transactions focused on strengthening our core product offering, and the teams are off to a solid start integrating these businesses. With respect to elective procedures and implant pricing, many of the trends that developed during 2010 still remained headwinds at this point in 2011. Although the market improved modestly in Q4, as we noted…

Thanks, Katherine. I'll start my comments by first pointing to our press release and highlighting the information in our supplemental sales reporting. We have made some notable changes to include new reporting segments, as well as the addition of selected segment revenue disclosures. We believe this reporting will aid investors in further understanding the reach of the Stryker business and the range of our products and services offering. Looking at the first quarter, total company sales increased 12% on a reported basis and 10.2% on a constant currency basis. Strong, core MedSurg product growth, coupled with the acquisitions principally reflected in our new Neurotechnology segment, paced our growth. On a GAAP basis, diluted net earnings per share were $0.78, a decrease of 2.5% versus Q1 of 2010. We have noted the Neurovascular inventory step-up, other acquisition and integration-related charges totaling $46 million net of tax as a non-GAAP adjusting item in our earnings release. Excluding the charge, increases are reported U.S. GAAP diluted earnings per share of $0.78 to $0.90 per share. The U.S. GAAP diluted net earnings per share declined up 3% then becomes growth of 13% when excluding the identified non-GAAP items. In addition to revenue and earnings performance, additional highlights include steady cash generation and the repurchase of 4 million shares totaling $250 million during the quarter. Finally, the integration activities for the MEDPOR, Gaymar and Neurovascular acquisitions remain largely on track through the first quarter. In reviewing the quarter in more detail, I will start with a discussion of the components of our revenue growth. In the first quarter, volume and mix contributed 6% to the top line. Acquisitions added 6%, and currency contributed to an increase in top line sales by approximately $32 million and improved the company's overall reported sales growth by 2%. Finally,…

Thanks, Curt. In closing, our Q1 results put us on track to deliver on the commitments we outlined at the start of the year. Moreover, the balance provided by our portfolio continues to reinforce the strength of our strategic focus on strengthening our core and broadening in the key adjacent markets. We remain focused on maximizing shareholder return through a multi-pronged cash strategy that leverages our balance sheet as evidenced by our ongoing pursuit of acquisitions, dividends and share repurchases. 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 that, we'll now open it up for Q&A, Jonathan.

[Operator Instructions] Your first question is from the line of Mr. Rick Wise with Leerink Swann.

Maybe we can talk a little bit about -- start off with Recon talk with the market a little bit. As you indicated, it still sounds like market growth is challenged. Can you talk on the Knee side a little bit, Steve, about OtisMed and where you stand in terms of getting the products you need? And maybe talk a little bit more, flesh out your comments about the rollout of the new Hip products? And when -- I mean clearly it seems like you've outperformed, but when do you expect that slow-moving train to pick up a little more steam?

Sure, Rick. On OtisMed, it is back with the FDA. We got a 510(k) with them going through the review process. I think just given where things are with FDA these days, we're just leery of committing to when that might be. We would certainly hope it will be before the end of the year, but that one has clearly turned out to be a little more complicated for us than our initial expectations. On the Hip business, I think while the hip market looks soft, we really like where we are and I think the rollout of MDM, which is we launched kind of the academy and it's just in the early innings of getting the rollout, we should start to see some pickup on that here in the second quarter, but continuing to build through the year. And we think that MDM, all the surgeon feedback that I've picked up, MDM ought to be a much bigger addition to our portfolio than the ADM was last year and it's a great build on that. So I think we're a lot more excited about where that's going.

And just the follow-up maybe on earnings. Clearly, you've kept your guidance range stable but you are talking about lower tax rates and following first quarter results might should be a little bit more comfortable at the mid to upper end of that range given the way the acquisitions are performing, et cetera?

Rick, I think what we wanted or what we tried to call out on the tax rate discussion is, while we're adjusting that range a little bit lower, keep in mind there's a comparable offset up in SG&A as it directly relates to the Puerto Rico excise tax credit that we're able to take and that the IRS is opined upon. And that's really where the tax rate adjustment comes into play. So it's not necessarily an enhancement to earnings. Overall, we have one quarter under our belt. We feel good about the results. I think it would be premature to make a comment where we feel we're going to fall within the current range of $3.65 to $3.73.

Your next question is from the line of Matt Miksic with Piper Jaffray.

So, a question first on just the Knee side of the business. Katherine, you called out sort of there's much of the conditions in the market that have been with us for several quarters remained intact. Knee, so far, even though it's kind of early in the reporting season, the season is shaping up to be a little on the weak side. Do you look at this as, is it -- do you believe that it's a market softness in the first quarter? Is it comps? Or should we be concerned that there's any transfer of share [ph] here the first quarter? And then I have one follow-up.

I don't think we lost share, Matt. I think it's more of a softness in the market and it feels like to us the Knees have been a little bit more susceptible to the economic downturn. Some of the patients tend to be a little younger as you know, and probably have been slightly more deferred. I Actually am very encouraged, I think we're encouraged, while we don't like the numbers, the fact that we're probably the only company without a ShapeMatch technology out there, I think speaks to the strength of Triathlon, that when the dust settles here for the quarter, we think our Knee numbers won't be that bad. We probably did not lose share in the quarter.

Okay, then one follow-up on Neurovascular. Just from your comments, it's hard to see, given your new reporting lines, but relative to where you started the year, we're one quarter in, I mean, is it off to a slightly stronger start than you hoped for? Is it right in-line with your expectations? Any color on just how you think Neurovascular is tracking at this point?

If I understood the scope of the question, through one quarter we feel good about Neurovascular, and there's two sides to that statement. There's the integration and ongoing integration efforts. Those are largely on track with our expectations. On the commercial side of the business, where I suspect the majority of your question is focused, we're encouraged by the early results of the Target coil introduction, which was principally focused in the U.S. market and in select international markets, we're very early there on the Target coil launch. And so far, so good; keeping in mind in both cases, it's still only 90 days into the program underneath Stryker and with the new product. So I would say quarter one is about in line with our expectations as we built our models, and we're hopeful that we can continue on that path.

Your next question is from the line of Joanne Wuensch with BMO Capital Markets.

I actually have two. One, your 37% plus or minus SG&A rate is sort of where you've been looking at for the last couple of quarters, is this sort of a new go-forward rate that we should think about?

It's a great question. I've always tried to qualify that with a final statement saying we are comfortable with variations here, because those are the areas where we elect to make investments in selling organizations, marketing programs, and we want to retain that flexibility and certainly we think that our P&L allows us to retain that flexibility. As of right now, that flexibility has been deployed into R&D as evidenced by the last, say, three or four quarters increase in R&D. As a matter of routine, I think we said that in 2011, we thought that, that broad SG&A category would be in that 37% to 38% range, and after one quarter, we think we are on track with that, always reserving the right to make select investments in various marketing or sales programs.

And then as a second question, what surprised you, positive or negative, now that you've owned the Neuro division for 90 days?

I heard you say the positive. The real positive of that business is the team. We absolutely love the leadership team and the quality of the team that came over. I think to build on it from there, Joanne, we probably are very cautiously optimistic about the initial rollout of the Target coil, particularly in the U.S., and we just don't want to get ahead of ourselves here, but it's off to a nice start.

Your next question is from the line of Mike Weinstein with JPMorgan. Michael Weinstein - JP Morgan Chase & Co: A couple of questions. Let me just start with kind of this big picture from the first quarter, the Ortho business, as you traditionally reported it, doesn't grow this quarter in constant currency and MedSurg has had a very, very strong quarter. Does seeing this three months into the year change how you're budgeting for the year and your spending across various businesses?

Not dramatically, Mike. We've always got a little bit of swings and roundabouts, and I think the funny part, as you well know, over a number of years here, our MedSurg business is probably consistently more on the upside, and Recon's been a little slower. I think you more than even some others had been predicting the first quarter was still going to be a challenging one in Ortho and I think your hypothesis there was accurate and I think it's all within our realm and it just speaks broadly to our broader strategy, which is we're much more than a hip and a knee company. We love our hip and knee franchises, but like the overall piece and have enough flexibility in there to continue to deliver very good results even in a soft recon market, much as we did for much of last year. Michael Weinstein - JP Morgan Chase & Co: Curt, can you just chime in on FX? I think most people view Stryker's having some natural hedges in place but not having an active synthetic strategy for translational risk and so the fact that you've had this incremental tailwind develop over the last three months to the top line, people would like to get some view on the bottom line benefit over the balance of the year and why you didn't reflect that in your updated guidance?

I think, number one, your opening statement is correct. We don't have -- we view ourselves as having more natural hedges than we do any form of synthetic hedge; that's an accurate statement. The top line and what we try to guide people to over the last couple of years is that it's not simply a straight drop through any top line impact of FX to the bottom line that was really I think reflected last year as you looked at the swings in the multi-currency payors from our manufacturing network to our distribution network and how that moved across the gross margins. And therefore, when we look at the FX potential impact that we've modeled, based on current rates, the drop-through that we're seeing right now is not meaningful from an EPS impact and therefore, would not yield us to move the overall outlook. And again, probably be updating currency rates in 30, 60, 90 days depending on how faster or how volatile the global economy is. If we go back to 2010, it seem like about once a month we are trying to make an adjustment on currency.

Your next question is from the line of Raj Denhoy from Jefferies & Company. Raj Denhoy - Jefferies & Company, Inc.: Wonder if I could ask a little about -- you mentioned the MedSurg division continues to kind of defy some of the skeptics out there and again, you put up a very strong quarter, particularly it looks like in the international markets. I was curious if you could comment just on what you're seeing on the demand side there. There's obviously some concern about what might happen in Europe with some of the budgetary concerns there, but maybe just option thoughts around the outlook.

I think the big issue that we would say with our MedSurg business is first and foremost, we had said throughout 2010, we didn't think there's it was one-hit wonder '09 comps that was really more a little bit back to return it to historically strong business results. The other piece that we said is relates particularly the international business is for both Instruments and Endoscopy. They've been relatively underdeveloped outside the United States. So we have seen even in a slow market the ability to gain market share for those franchises, and I think that's what we're really seeing and we continue to feel great about those businesses. Raj Denhoy - Jefferies & Company, Inc.: And just on Japan, and I don't think you mentioned in your prepared remarks. Have you seen any impact and you're expecting to see any sort of lingering impacts of the events in Japan?

We saw truthfully very little. I mean, it was marginal. Certainly some hospitals, some franchises experienced it. I think the bigger concern for us frankly and it again and everything is manageable when you have multi-franchises. Our Endoscopy division in the second and third quarters might experience some shipment delays from some of the products that we source out of Japan, but again, it'll be de minimis, so nothing that we're particularly worried about.

Your next question is from the line of Michael Matson with Mizuho Securities.

Given the speculation out there about potential acquisition of Synthes by J&J, I was just wondering if you have any perspective on how that could potentially impact your Spine and Trauma businesses. It seems like there might be an opportunity to pick up some market share there. I was just wondering if you would agree with that.

Yes, I think at this point given there's nothing been publicly announced, we typically wouldn't comment. I think as people seen in any acquisition, particularly sizable ones, there can be disruption and opportunities and challenges for the acquiring company, but beyond that, we wouldn't make any specific comments since it would truly be very speculative at this time.

Okay, and then second question on the Spine business, can you just remind us where you're at with your CerviCore cervical disc approval?

Right now the status is we continue to work on the product in preparation for submission. That's probably about the extent of information we would discuss on that.

Your next question is from the line of Jason Wittes with Caris & Company. Jason Wittes - Caris & Company: First a follow-up from Raj's question about OUS growth. As you guys may know, I've been off the sale side for a little while and just came back, but if I look back three years ago, I remember that OUS was a pretty big opportunity in terms of under-penetration for you guys, but as I come back and look at the numbers, it's still not as present as I would have expected. But now you're saying that you're starting to gain share. Is there a change in strategy that's occurring right now?

Yes, it's a little more of a focus for our international division, particularly on Instruments and Endoscopy, but candidly, we have not made the progress we'd like, partially, because, particularly our MedSurg business has continued to grow pretty well in the U.S. And so to balance it much differently, it just hasn't really made a huge headway. We still see bigger opportunities going forward, Jason.

I think also, Jason, if you look over those last three years that you referenced, a couple of those recovered by the economic contraction and like all companies, we had to pull back on some of our investments, and some of those new expansions were the subject to some of those reductions during that period of time. Jason Wittes - Caris & Company: Okay, just one more, if I look at what you're saying, you're basically saying that price is pretty stable in terms of all your businesses. Mix, you sort of have -- I imagine you have some visibility on the volumes, especially in the Orthopaedic business are not something you have a lot of visibility on. Is that a fair characterization of the way things are right now? I mean, obviously, everything looks pretty stable, but if I look at the three components, the volume piece is sort of what you're waiting for and you don't really have, sort of beyond, maybe a quarter visibility.

Let's say on the Reconstructive Implant business, where we've clearly seen a softening as the overall market seen that deferral of procedures. It doesn't seem to be getting markedly worse, but clearly, there hasn't been a rebound and we would say that's probably tied more to visibility around just an overall improvement in the economic environment. Jason Wittes - Caris & Company: So basically, you're looking to the economy as the driver there in terms -- as opposed to checks from your sales people and doctors in terms of what they're saying, in terms of patient backlog, et cetera.

No, what we're saying is, we think the input overseas from the various channels and market intelligence we do via talking to patients or doctors or our sales force or hospital administrators, et cetera. The input we received from that probably won't materially change as it relates to elective procedures until we see some improvement in the economic environment since there's a very clear tie into unemployment, particularly as the average age of the implant recipient has been coming down and its been compounded by some of the extra pressures tied to increasing deductibles, et cetera. And I would acknowledge clearly Q1 is the hardest comp quarter, and as the year unfolds, we should see easing comps as well as the benefit from the uptake on MDMs, specifically on the Hip side as well as the rollout of OtisMed, ADM and MDM internationally.

Your next question is from the line of Mr. David Lewis with Morgan Stanley.

Steve, what is clear over the last few quarters and specifically this quarter is, MedSurg is clearly accelerating. I know you've tried to talk us away from thinking about your year-over-year comps, but it does look like accelerating. What's less clear to us is the pieces that are accelerating, the pieces that are doing well. There's actually a fair amount of sort of inorganic stuff in there now between Ascent as well as Gaymar. Can you help us kind of draw a picture between the core Stryker and Endoscopy and beds, and the more recent Stryker, which is some of the new acquisitions?

Yes, take this really simply, David. Our Endoscopy and Instruments businesses, both of which grew at double-digit rates in the U.S. and outside the U.S., and therefore globally, is virtually entirely organic, if not completely organic growth. The Medical business has Gaymar dropped in there, which was worth a little bit of -- certainly some growth for them, and then Ascent is caught in the total MedSurg, and is growing. But clearly, the double-digit growth by Endo and Instruments is just very strong executional growth with product growth, sales growth and a lot of the singles that we talk about all the time. But make no mistake, that's very clearly organic growth.

And then maybe another question on sort of organic trends, R&D elevated this quarter. I think it's the second straight quarter you've talked about this increasing R&D investment. Obviously, there's a step-up year-on-year because of Neurovasc. But when you think about the organic R&D being spent on the old Stryker, could you help us understand what that is growing at and give us a sense of where that's being spent because, obviously, it seems to be either accelerating or in excess of your peers?

Let me go back to last year, which is a very clean year with 17% increase for the year and if you particularly saw it, you saw a heavy increase in the second, third and fourth quarters. So I would say, David, as we made progress on our quality and compliance initiatives, where we really had re-diverted so many of our R&D resources for the previous few years, as we've gotten our new systems in place, we've gone back to starting to invest a little bit more in R&D, and it's across the board, it's every division. And again, as you know, our product line is deep and broad. Not a lot of home runs in it. It's spread across the board, each division continuing to see opportunities for innovation and opportunities for new niches and new product upgrades, and then we continued, as Curt mentioned, with double-digit increases even on the base business here in the first quarter. So, I think it's speaking to frankly as we look around, we still think there's a great opportunity for innovation in every category that we're in.

Your next question comes from the line of Derrick Sung with Sanford and Bernstein. Derrick Sung - Sanford C. Bernstein & Co., Inc.: On your Hip business, while it looks like you may have grown in line this quarter -- last quarter you had a very strong above market growth rate that you put up in Hips. So, from a sequential basis, it looks like there's kind of a substantial step-down. Can you help us explain that? Was there something unique that happened last quarter that you're not seeing this quarter? Or what would you explain that sequential decrease?

Derrick, I'll take this. What we tried to comment on in the fourth quarter and be fairly consistent on is, it's very difficult to draw any major trends on a single quarter's results, and particularly in the hip and knee market where share shifts fairly slowly reinforced by the fact that the rest of the market is a sizable chunk that hasn't yet reported, so it's kind of hard to know where our numbers are going to shake out from a market share basis. But you really need to look at rolling fourth quarter trends to get a sense of who's gaining and who's losing share and who's staying stable. At this point, although nobody is pleased from a macro standpoint with a relatively softness in the hip and knee market, we feel very good, particularly our products roll out on MDM and over the course of this year and the international rollout of those products from a competitive position that we're in very good shape. I wouldn't point out anything that would say sequentially from Q4 to Q1 that there's a disconnect. Q4 tends to be a seasonally stronger quarter, and I think that's probably what partly drove a relatively stronger overall market in Q4, which is again why we've tried to be cautious because it's very difficult to draw any conclusions from just a sequential quarter comparison. Derrick Sung - Sanford C. Bernstein & Co., Inc.: Okay, In your Endoscopy business, you saw very strong double-digit growth in the U.S. How much of that is kind of a -- how much of that is from timing of shipments or sales that were pushed off from the prior quarter, because I remember you mentioned that, that was an issue for some of the weakness that you saw last quarter. And how much of it is sort of organic? And can we expect it to see moving forward for the rest of the year?

Derrick, this is Curt. If I'm understanding your question, you're looking at our first quarter U.S. shipments for Endoscopy and questioning how much of that came from delayed shipments in the fourth quarter? Derrick Sung - Sanford C. Bernstein & Co., Inc.: That's exactly right, Curt.

Certainly, a little bit of that happens over every year end as customers tend to get the end of their spending cycle, and they put a whole bunch of orders in. And then from a capacity standpoint, our ability to ship all those gets stretched. I don't think we're going to break that out as a percentage or a dollar basis. It's part of the normal year end process anytime you have capital equipment involved. So I think what you probably want to just look at is how those things have occurred year-over-year for a number of years, perhaps absent 2009. But certainly a little bit of that is influenced in the first quarter, but it doesn't materially change the results. Endoscopy had a good first quarter I think is the sound statement to make.

Your next question is from Doug Schenkel with Cowen and Company.

My first question is on the Recon side. From a share standpoint, about 60%, actually a little bit more of that of the hip and knee market has reported at this point. Clearly, volumes seem to be tracking below the expectation of some others who have been a bit more bullish on the Recon recovery. Just to be clear, have you heard anything that would suggest there was an impact on volumes during the quarter, whether it was weather or flu or COBRA roll-offs? Or was Q1 really just a continuation of what we've seen over the last few quarters with some modest improvement in Q4?

I think we'd agree with your latter comment. A lot of the macro trends that we saw starting to emerge in Q2 last remain in effect, but nothing different that we would call out.

Okay, and then just moving to the P&L, there's been some focus on the fact that the environment is becoming a bit more inflationary, oil prices are up, some other component prices seem to be rising. Anything that we should be focused on specific to Stryker as we model out the rest of the year, specifically at the gross margin line?

Nothing that would be of a material nature that we would discuss.

Your next question is from Adam Feinstein with Barclays Capital.

Just wanted to just ask you guys about the components of your revenue guidance here. And then certainly, I know you don't give specific targets but just it seems like relative to most of the Street models and in the quarter, Ortho was weak and MedSurg was stronger than expected, so, I mean as you guys think about it relative to what you were thinking for the quarter, is that the right way to look at it?

Was the question in reference to the first quarter or our outlook?

Well, I guess both. But I guess should we think about once getting -- I know you guys didn't give specific guidance by segment, but just relative to most of the models, it seems like the MedSurg was stronger than expected and Ortho being weaker. So, I guess, as you guys were thinking about coming into the quarter, maybe that was the way you guys were thinking about it and the Street models were up. But just curious or are you guys even though you're keeping your revenue guidance the same, should we think about the growth drivers as being different?

Yes, I think it's a very good observation. I'd say a lot of ways it probably paralleled last year as well. If you look at your original budget for 2010, we would have forecasted better Recon and generally Orthopaedic Implant growth and lesser MedSurg, and at the end of the year, I think it speaks to the fact that how strong our total company is. As you well know, we exceeded our original guidance for last year, even in a year when the Recon market did things that none of us anticipated. I think certainly our Recon business was softer this quarter than we would've fully budgeted. I would also tell you we're very much almost exactly on plan with what we planned for the year. And every year, we get there in different ways. So I think you're spot on.

Great, and just a quick follow-up. Just with the M&A environment heating up in recent days, obviously you guys just closed on a big deal, but what is your appetite in terms of doing additional deals? And how are you thinking about utilizing your cash?

I would say really no change to what we've been articulating and probably people are familiar with it. It's a three-pronged cash strategy, it's M&A, it's dividend and it's buybacks. In M&A, we're going to be primarily focused on transactions in our core like the Gaymar, like Porex, as well as key adjacent markets like Neurovascular and that is the game plan and that's going to continue going forward.

Your next question is from the line of Bob Hopkins with Bank of America Merrill Lynch.

So first question is on organic constant currency revenue growth. I think you guys reported a little over 10% constant currency growth and then about 6% growth from deals which gets you to about 4% constant currency organic growth in the quarter, which; one, is my math right? And two, if it is right, that's a little bit below the 5% to 7% you forecast for the year. So what do you expect to accelerate as we go forward here?

Bob, number one, your math is right. Number two, and I hate to use comparables as the excuse, but Q1 2010 is our toughest comparable when you look broadly at all the totality of the Stryker franchises. So as we look forward, we still think the 5% to 7% range is the right range based on what's being projected based on how we see the markets unfolding.

Anything product-related though, sorry to follow up on that.

New product wise that will drive?

Yes, any major new product launches in the back three quarters that would drive acceleration?

Well, I think part of it is on the Reconstructive side, the expectation of how MDM would be embraced by the market coming on the heels of ADM, and the timing that it takes to roll sets out, do surgeon training. Some of that groundwork was laid with ADM, so our expectation is that MDM will pick up. We've got other franchises have what Steve refers to as singles and doubles that continue to rollout, and those tend to build month-over-month as the year progresses. So I wouldn't call out any one item. I would just say it's a bunch of singles and doubles right now in the core business.

And then just follow up on the Knee side. Everyone that's reported Knee numbers so far has reported sequential deceleration. Everyone is reporting negative growth, and I understand comps are a little bit tougher this quarter, but do you really feel that the knee market is stable here? Everyone keeps using this word stable, but it doesn't really seem to be that way when you just look at the numbers. J&J tried to point us to sequential growth trends. So I was just wondering if I can get your comments on the knee market? Do you really think it's stable here and this is just tough comps in the quarter or has there been a little bit of a sequential deceleration in your view?

I think stable is a fair characterization, yes. Clearly, in the second quarter last year things changed. I think it's hit a new period, but I don't think it's falling much further at this point.

Your next question is from the line of Rajeev Jashnani with UBS.

With respect to gross margin going forward, I was just wondering if you could comment on, with the mix of businesses, how you see gross margin unfolding really not so much over the year but longer term.

Clearly, we've tried over the last 18 to 24 months to take some steps organizationally to provide additional focus at the gross margin line, the first being the appointment of an executive over our global quality and manufacturing. Coming from a highly decentralized org structure, we believe there are opportunities within our manufacturing network for things as simple as synergies across spend categories, core competency manufacturing. However, each one of those initiatives is predicated on first making no dramatic change that impacts the hard work that many people in the company have done on the quality front. So we've tried to signal that longer term, we see opportunity in gross margin, recognizing that it will be tempered a little bit with the first focus on quality, and number two, tempered in a fashion such that we may need every one of those gross margin dollars to offset other challenges that come into the business, be they declines in price or commodity price changes, labor rate changes in various markets. So we think there's opportunity, but it's not going to materialize three, six, nine, 12 months. It's going to materialize over time.

Your next question is from the line of Kristen Stewart with Deutsche Bank.

Katherine, I was wondering in the beginning of your remarks you had commented on pricing mix trends. For the Recon business, in the U.S., was pricing and mix still negative? I recognize Hips is probably doing better with the rollouts, but can you just maybe help us understanding in aggregate if it's still negative and maybe give us an update on what's going on in Europe? If I look at the businesses, it looks like Europe is still obviously a bit of a problem spot. It looks like Trauma and extremities was a bit soft this quarter. So just any broad comments on Europe and when we might expect a recovery specific to the Recon business?

All right, on the pricing, pricing as we try to kind of give some qualitative directionality around it, if pricing in Hips and Knees is still negative, it was marginally better sequentially, and it is partly offset by mix with a little bit better contribution on the Hip side, which you would probably expect given ADM and MDM. But I wouldn't call it materially different, but marginally better from a Q4 to Q1 basis. And with respect to Europe, there is nothing significant that we'd point out as a departure from prior trends. We are working through some of the fallout as we talked about from the move we made over a year ago to discontinue certain products and terminate certain distributors, which did upset certain customers and there's work to do to build those relationships back up. On the positive side, we are rolling out OtisMed internationally, ADM and the MDM as well. So there's some nice components coming on the new product side, which will certainly help and in particularly as we get to the back half of the year because as you know with the Recon products, it does take a little bit of time to get traction there.

Okay, great. And then on Ascent, if I look at kind of the numbers reported, it looks like that business was up only about 6%. Can you just comment on trends there and can we expect, I know this is being greedy, but any historical restatements to help us kind of rebuilt models in the new reporting style?

I'll take the second question first. The restatement we've provided some detail that goes back through 2010 in the press release by the new reporting segments. Your question relative to Ascent probably back into some rough estimates on how that business did in the first quarter. As with any business that disrupts markets, challenges competitors, there's likely to be quarter-over-quarter disruptions, but I think the broad story on Ascent is we feel very good about the direction of that business. We think we're on the right side of the cost question as it relates to hospital supply and over the long term, the thesis that we went into the Ascent acquisition with remains very much in place. And we think over the long term, this is going to be one of the great franchises for Stryker. We're not too wrapped up in this sort of quarter-over-quarter variations right now.

But you are not going to give out like Hip numbers, Knee numbers and that? I see that it's just about major divisions historically?

This is the top segment. You're correct. We're not going to go back into the Hip, Knee and restate that.

Your next question is from the line of Matthew O'Brien with William Blair. Matthew O'Brien - William Blair & Company L.L.C.: Just a follow-up on Kristen's question a little bit. On the mix side of things, compared to historical levels, are you still able to get the same type of pricing premium on new products that you're introducing? Or is that narrowing slightly on this environment?

I think right now without getting into specifics, we feel good about the ability of new technology to drive a price premium. I think the question -- and I think we've talked about this a little bit on the last call was that, that perhaps the tail on that price premium was a little bit shorter than it had historically been. And that's probably direct outcome of better pricing transparency as comes about with better healthcare's IT systems and/or consultant groups out there that sell services around pricing. But in general, across the portfolio of Stryker products, new innovation is still able to command a price premium. Matthew O'Brien - William Blair & Company L.L.C.: Okay, and then one quick follow-up. As far as you made some comments on Interventional Spine being pretty strong, and it looks like it was primarily internationally. Can you just provide a little more color on what's driving that growth?

The Interventional Spine business has a number of product platforms in it. What I would probably point to as the segment or the franchise there is an item we introduced about a year ago called the iVAS balloon technology for vertebral compression fractures. And as our selling organizations, both in the U.S. and globally, have been able to introduce that technology to customers and show the totality of our portfolio, we're the sole company who can do both vertebroplasty and khypoplasty approaches, inclusive of not only the devices, but also the cements. We've had a wonderful customer reception with that and it's simply going through the training, education and distribution pathways, and we like the direction that, that business is headed. Matthew O'Brien - William Blair & Company L.L.C.: Just a real quick follow-up on that. Are you seeing -- I know you're a smaller player there, but are volumes improving? Or are they just strictly a share-taking event for you?

Well, it's probably a little of both. Vertebral compression fractures aren't going away. There is roughly 700,000 new ones a year. There's been some reimbursement pushback based on different market segments, but in studies that have come out, but each of those has been disputed, and you still have patients with pain, and long term, we still like the outlook for the market.

Your next question is from the line of Charles Chon with Stifel Nicolaus. Charles Chon - Stifel, Nicolaus & Co., Inc.: Curt, just a quick follow-up to a question that was asked before. You discussed that even though organic growth came in at 4% for the quarter, the 5% to 7% organic growth guidance is the right range for 2011. Is that to suggest that based on what you're seeing in the second quarter thus far, considering that year-over-year growth comparisons are easing from the first quarter to second quarter that all the businesses are trending better?

We're not going to get into any comments relative to the second quarter. We're not finished reporting the first one. It's to suggest that, number one; the first quarter is a tough year-over-year comparable when we look across our broad franchises; and number two, we still like the product lineup in the core business across all of our franchises and how that plays out in the global markets. Charles Chon - Stifel, Nicolaus & Co., Inc.: Okay, and just the other question on that is just, is it possible that year-over-year seasonality could be -- or I'm sorry, sequential seasonality could be changing in any way, so whereas historically we would see decent growth through most of the year with the exception of the summer months, that now in the post recession environment, procedures are just now being more loaded into the back half of the year?

I think there's certainly been a transition. It's hard to quantify, but I think you've seen volume increases in the fourth quarter. And I think that coincides with higher deductible levels that people are experiencing. And I think it probably has been influenced somewhat by the global environment. So we have seen what we think are different patterns in the fourth quarter as compared to say, years before '07, '08. Charles Chon - Stifel, Nicolaus & Co., Inc.: Right. That's what I was thinking. Just real question on Target coil. Can you give us a status update on where the launch is? At the time of the International Stroke Conference, it seemed that Stryker was conducting a very controlled launch with substantial case support and monitoring. It seems that Neurovascular was selling out of all the Target coils that you were making. Can you give us an idea of where we stand now with that launch?

I think in my opening comments, we said the focus of the Target coil launch had been the U.S. market, and we're starting the introduction of that in the international markets. Obviously, it's a very complex manufacturing process. And we're pleased with the progress on the manufacturing side. And to the extent that supply continues to increase at the rate it has, we'll be able to further expand the selling, marketing effort on a global basis. So first 90 days really focused in the U.S. market and continuing to roll across the various international markets and really trying to be mindful of the customer base here. It's a small tightly knit society, and we want to do our best to get the product in front of all of our clinicians. That's really hard to do on a global basis in addition to working through all the regulatory approvals, but that's the path we're on. We're trying to stay in high touch with all of our customers, communicate with them, clear expectations and we hope that through the second quarter here we're able to continue on that path.

Your next question is from the line of Jeff Johnson with Robert W. Baird. Jeffrey Johnson - Robert W. Baird & Co. Incorporated: Steve, a couple of questions, I guess. Let me start on the Spine business. Any comments you're going to make on your Spine results in the quarter? Any change maybe you're seeing in market dynamics, whether it's pricing in the U.S. or commercial payor approval rates, anything along those lines?

I don't think we saw much change really from second half of last year to be honest. And obviously, it looks like a very weak market right now. I think the three companies that have reported last week have all been minus one in the U.S. and we were right in that line. None of us have that problem [ph]. Jeffrey Johnson - Robert W. Baird & Co. Incorporated: And how would you, Steve, expect that to maybe trend over the next few quarters? Obviously, involved in a legal dispute with one of your bigger competitors there? Should we think of legal expenses going up for that or potentially the Spine growth rate ticking down or is it too small to matter at this point?

Too small to matter. I think we're focused on getting our product flow improved out of that business as we've been talking about for some time. We've got some new leadership in there and feeling good about where to go, but as you well know, any of the Implant businesses take some time to re-accelerate momentum.

I think that was the last call Jonathan?

Yes, sir. That was the last question in queue, sir.

Great. Well, thank you very much for joining us today and hopefully, you'll see again. We continue to deliver the strength of our broad-based model, and our conference call for our second quarter operating results will be held on July 19, 2011. Thank you, everyone.

Ladies and gentlemen, thank you for your participation in today's call. The presentation has now ended. You may now disconnect. Have a good day.