Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Stryker Earnings Conference Call. My name is Derek, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to read the forward-looking statement. Certain statements made in this presentation 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 the 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 competitive environment and the company's ability to integrate acquisitions. Additionally, 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. I would now like to turn the call over to Mr. Stephen MacMillan, Chairman, President and Chief Executive Officer. You may proceed.

Thank you, Derek. Good afternoon, everyone, and welcome to Stryker's Second 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. We'll start with a summary of some of the key accomplishments realized in the second quarter. With sales coming in at over $2 billion, we delivered a 16% increase with a 6% gain, excluding the impact of currency and acquisitions, representing a solid 2-point acceleration in our underlying organic growth from Q1. And with double-digit constant currency growth for both our U.S. and International businesses, the top line performance was geographically balanced. Two, our Reconstructive businesses, including Hips, Knees and Trauma, achieved stronger top line growth sequentially. Three, meanwhile, our MedSurg franchises once again helped drive our double-digit top line with Medical the clear standout at 39% growth, and our Neurotechnology business continued to build on the momentum achieved in Q1 due in large part to the ongoing rollout of the Neurovascular product offering, while our Spine franchise also saw sequential improvement as well. Four, our solid sales growth contributed to a 13% increase in adjusted diluted net earnings per share to $0.90. Five, we also continue to strengthen our core product offering and utilize our cash flow with the announcement of 2 acquisitions during the quarter, Orthovita and Memometal, both of which have since closed. We are excited about the opportunity to leverage each company's unique product offering through our considerable sales force to drive stronger top line growth. As always, given the considerable breadth and size of our myriad businesses, each quarter presents…

Thanks, Steve. Similar to prior quarters, my comments today will focus on acquisitions, elective procedure trends and implant pricing. First, on the acquisition front, we continue to execute on our stated strategy of leveraging our balance sheet and cash flow to pursue M&A. As you are aware, we completed the acquisition of Neurovascular in the first quarter and continue to be pleased with the market's reception to the new product offering that includes both the next generation coil as well as detachment system. Turning to Q2, we announced 2 more acquisitions that are focused on strengthening our core product offering and leveraging our broad distribution channel and selling capabilities, a key aspect of our M&A strategy. Specifically in late June, we closed on the acquisition of Orthovita, which competes in the $5 billion orthobiologics markets and is a global leader in synthetic bone grafts with its Vitoss product offering and also competes in vertebral augmentation with its CORTOSS product offering. In addition, the company's biosurgery business manufactures hemostasis product such as the Vitagel, which are designed to control interoperative and postoperative bleeding. We believe the collective talent of our sizable sales forces across multiple franchises positions us to build on Orthovita's success and accelerate sales growth. In early July, we closed on the acquisition of privately held Memometal, which manufactures and markets products for extremity indication based on its proprietary methods for preparing and manufacturing a shape memory metal alloy. Memometal is rapidly establishing its differentiated technology in the global extremity device market with a broad range of products for the foot and ankle as well as the hand and ribs. With sales in 2010 of roughly $30 million, Memometal's comprehensive and proprietary product portfolio allows us to gain broader access into the fast-growing extremities market. We're excited about the prospects for both of these most recent acquisitions, and similar to prior BD deals, we look for them to help drive our long-term organic growth. Shifting to elective procedures, the macro backdrop and current challenges remains similar to that what we've experienced in recent quarters. As most of you are aware, the ongoing economic softness has been contributing to a slowdown in many elective procedures, including hip and knee replacement. However, despite the current pressures on procedures, we are pleased with the momentum we are seeing from both our new product offering particularly with hips as a combination of ADM, and more recently, MDM, is helping drive accelerating sales growth. Although our knee performance strengthened sequentially, there's clearly room for improvement and we expect that Q2 510(k) clearance of our customized cutting guide to help drive share gains in the second half of 2011. Lastly, on the implant pricing front, the trends are similar to prior quarters, with continued but stable pricing pressure partly offset by mix, particularly as it relates to Hips given the new product launches. And with that, I'll turn the call over to Curt.

Thanks, Katherine. I'll start by saying that at the halfway point, our results and the corresponding financial performance are largely on track with goals we've stated at the beginning of the year. Jumping into the second quarter, company sales increased 16.3% on a reported basis and 11.9% on a constant currency basis. The underlying core business growth, excluding currency and acquisition impact, improved 5.7% versus the 4% in the first quarter. On a GAAP basis, diluted net earnings per share were $0.79, a decrease of 1.3% versus Q2 of 2010. Excluding acquisition-related charges, increases are reported U.S. GAAP diluted net earnings per share of $0.79 to $0.90 per share. The U.S. GAAP diluted net earnings per share decline of 1% then becomes growth of 12.5% when excluding the identified non-GAAP items. Overall, strong results from MedSurg and the Neurotechnology and Spine segments, coupled with the improving results in Reconstructive, supported top line growth. In general, we're pleased with the momentum we're seeing. Further, our acquisitions continue to perform as expected and our integration efforts remain largely on track. With that said, and as we discussed previously, our investments and acquisition integration and the normal cycle of business have resulted in some variation in the presentation of the P&L, which I will discuss in further detail. In reviewing the quarter, I'll start with the discussion of the components of our revenue growth. In the second quarter, volume and mix contributed 7.2% to the top line, while company-wide selling prices declined 1.5%, improving from the first quarter's 2% decline, but fundamentally in line with recent trends. Acquisitions added 6.2%, and currency contributed to an increase in top line sales by approximately $78 million and improve the company's overall reported sales growth by 4.4%. Looking at our external reporting segments, I'll start with…

Thanks, Curt. In closing, we're pleased with our performance through the first 6 months of 2011, which reinforces our conviction and our ability to deliver on both the top and bottom line targets we set out at the start of the year. Importantly, our top line momentum accelerated in Q2 with all Reconstructive businesses achieving stronger sequential sales growth globally, while our MedSurg franchises remained a solid contributor to our top line growth targets and collectively delivered double-digit revenue gains. Our newest franchise, Neurotechnology, is benefiting from key new product launches. Combined, these performances drove both the year-over-year and sequential uptick in our U.S., international and global sales growth. And we are making significant investments in R&D as evidenced by the 22% increase year-to-date on top of the 17% uptick in 2010, resulting in a steady stream of new product launches across all our franchises, many of which we highlighted at our recent May Analyst Meeting. We are leveraging our balance sheet to augment our organic growth through selective acquisitions that strengthen our core and allow us to maximize the strength of our diverse sales footprint with its considerable distribution capabilities. Along with buybacks and dividends, we will continue to follow a 3-pronged cash strategy in order to maximize shareholder return. With that, we'll now open it up for Q&A. Back to you, Derek.

[Operator Instructions] And our first question is coming from the line of Mike Weinstein from JPMorgan. Michael Weinstein - JP Morgan Chase & Co: Let me ask couple of questions, maybe Curt can start off. The gross margin line is probably going to get the most attention coming out of the quarter because it was lower than people thought, and you're adjusting your gross margin commentary for the year. I guess the part that we'd like to spend more of the time on is just the FX impact because the dollar -- if we look at where the dollar was versus euro and yen, at the time of your first quarter call to where it is now, hasn't moved that much to maybe change how we would be thinking about the impact over the balance of the year. So I was hoping you could spend a minute on that. And then second, maybe you can just talk about the impact of mix, particularly the strength in the beds business with this quarter and how that might have impacted your mix?

So 2 responses there, Mike. First of all, it's really the currency movements from both the fourth quarter and the first quarter relative to the second quarter because it takes time for the inventory to move through our system, especially when you look at the Reconstructive line, which has most of its manufacturing in the European market, euro-based and that has slower turns generally in a 7 to 9-month timeframe. When you look at mix, given that the Medical segment did have strong growth, certainly, that will contribute a little bit. But I will tell you on a relative dollar basis, the Medical segment, as a percentage of total sales, is probably not big enough to meaningfully move the gross margins on a full year basis. Michael Weinstein - JP Morgan Chase & Co: Let me just follow up with one additional question, and that's on MedSurg because people are going to look at the first quarter performance and this quarter's performance and see a fair amount of volatility between the different divisions within MedSurg. So can you just talk about really all 3 and the way we sort of look at the instruments, endo and beds? Beds had a phenomenal quarter this quarter, but people always been nervous about that. And then instruments and endo had great first quarters, but slower this quarter, so what do you think is a steady state growth profile of those 3 businesses?

I don't think we're going to offer forward-looking comment on the growth profiles. I think, if you think about Stryker Medical, I tried to include in my commentary that the replacement market is where we're seeing the biggest influence from a growth standpoint, and that market feels pretty robust as evident by the trends we saw in the first half of the year. I don't think we see anything that's going to meaningfully slow that down from a market standpoint. Certainly, our business has to execute on that front. To your point, the endoscopy and instruments segments did slow down second quarter versus first, but I think we feel pretty good about both of those as we look through the second half of the year given product lineups, given the introduction of new products into those businesses across multiple areas. All of that said, there are still capital businesses. There are purchase cycles that we're working through. And if you look specifically at MedSurg and the instrument segment, the third quarter is their toughest comparable, so that makes slowly year-over-year comparables just a little bit. I think the fundamentals there are still pretty respectable, and we feel good about MedSurg as a category in whole as we look at this year.

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

Just following up on the topic you were just talking about MedSurg. Curt or Steve, if you could expand a little bit on -- you talk about replacements being the driver there. How much of this is the ability for you to purchase market differently now that you have Gaymar on board? Is that having an impact? Or if you can maybe step back and give us a sense of -- if you're growing 27% x acquisitions and currency, what do you think the market's growing?

The market there is a tough one to predict until our other friends report. But having said that, I think we do -- we thought the Gaymar acquisition was a great acquisition right in our wheelhouse. It does help us probably more on the margin, Matt. I would say probably the overall market is just a little more robust right now.

And any sense that this Q2 result is sort of -- are we pulling anything? You mentioned tougher comps in Q3, but are we pulling anything out of Q3? Is there any concern?

No, absolutely not.

That's helpful. And then one follow-up on Spine, just not -- 4% constant currency worldwide isn't, I guess, historically, a phenomenal number, but it's certainly better than we were expecting. Just if you could talk about what's been working in Spine. You gave us a sense of what some of the new products are that are coming, maybe talk about what some of the drivers were in the quarter.

I think you characterized it well, Matt. I think we're seeing stability to gradual improvement. So some of the trends that have turned negative very quickly 12, 18 months ago have been stable, and we've been retooling and refocusing that organization, certainly not ready to jump up and say "We're back to where we want to be", but just modest sequential improvement driven by some of the new products and just learning how to better navigate through the current market challenges. So not out of the woods yet, but we do feel that we're clearly at a point of stability to a slightly improving backdrop. And certainly, the Orthovita acquisition will be a nice focus for that group, given it's also very much in their core.

The next question comes from the line of Derrick Sung from Sanford and Bernstein (sic) [Sanford Bernstein]. Derrick Sung - Sanford C. Bernstein & Co., Inc.: I wanted to go back to guidance here. So you talked -- you touched on gross margins. It looks like, though, the tax rate that you sort of put forth is an improvement over -- so your thinking at the beginning of the year, and then also constant currency -- also the currency benefited up. So is the right way to think of this that the gross margin offsets the benefits that you're getting from both currency and the lower tax rate as we move forward?

I think, clearly, when we -- if we go back to the beginning of the year and we put out some general guidance on where we thought various elements of the P&L would be through 6 months, gross margins a little bit lower, which obviously is a negative impact. But conversely, the tax rate, we believe, has downward bias. And that's probably driven by the mix of where products are manufactured and the geographic tax rate should apply in those markets. I think what we've tried to imply over time on currency is that it's not as easy as looking at the top line currency influence as a straight one for one drop-through there, just many elements in the P&L for the currency and the top line, and you also lose it when you convert those currencies into U.S. dollars and look at the costs some of our U.S. divisions take because of that currency conversion. So I think I would just try to keep gross margin and tax rate as perhaps, one offsetting the other to keep it as simple as possible. Derrick Sung - Sanford C. Bernstein & Co., Inc.: Okay, Curt. And on pricing, your overall pricing pressure with the company that the total was down 50 basis points as you pointed out. You said that sort of the general trend still remain the same, but I was wondering if you could give a little color as to where, at least on a sequential basis, we're seeing that improvement in pricing? And if your commentary implies that you think this is sort of a one-time issue or just any additional color on that pricing that you put out would be helpful.

I think you characterized it correctly. It improved 50 basis points, although still down 1.5% in the second quarter, which we would characterize within the normal realm. So I wouldn't point out and say we've seen some big reversal. Hip and Knee pricing remains negative, maybe modestly better sequentially and offset partly by mix with a little bit bigger on the mix side on the Hips, given some of the launches. But overall, none of these trends we would call out as outside what we've been seeing. So certainly better than it getting worse, but within the norm that we have been modeling.

Your next question comes from the line of David Lewis from Morgan Stanley.

Curt, not to have a whole run on MedSurg here this afternoon, but going back to this issue of sustainability of that growth, you're talking about the fundamentals and taking sort of the cap cycle recoveries out of the mix for a second, I wonder if you could talk about specific emerging market trends impacting MedSurg? Or is this replacement cycle that you're seeing? Is this a frame cycle or is this a surface cycle? Because I'm wondering if perhaps, actions to reduce hospital-acquired infections are driving an increase in demand for services and perhaps that is the way that we're seeing right now. So maybe any other granularity you can provide on either surfaces versus frames or an emerging markets will be helpful.

Well I would -- probably I'm not going to get to quite to the level of detail you want me to go to, David. But I would certainly hope that any members of our selling organization that are listening would be willing to step up and say we're selling both surfaces and frames given the Gaymar acquisition. In discussion, in review of our business with the folks in our medical entity, the replacement cycle they view as a function of two things: Number one, selling organization focus on both the patient handling and patient transport, but as well as on the pure bed side. We've got selling organizations now very focused on those, and I think you couple it with exactly what you said, which is there are some drivers from a reimbursement standpoint that talk about never events, be it hospital-acquired infection, be it false, that our technology facilitates very well the elimination of those never events. So I think it's part of clinical story, but it's also part of focus story. And then certainly, the fundamentals of the market are probably better today and have improved every quarter since the bottom in 2009. So I think it's a combination of right product, right selling organization and certainly, some right market dynamics that are helping out here.

Okay. And then, Curt, just one quick question on Knees. Just in the interest of setting expectations sort of appropriately as it relates to custom needs coming back in the back half of the year. Hips kind of performed as many would have expected this quarter, Knees did not. How important is getting customer in the back half going to be to performance? What I'm trying to drive it is, which is challenging, trying to separate out the external factors versus the internal factors, and how we should be thinking about sizing the relative improvement with the new products on the market?

David, it's Steve here. I would -- I tell you I think the shape fitting is a big deal to us. Having said that, in terms of its ramp, the ramp will be a little slower obviously, but we are rolling out OtisMed right now. Cases are being held. The sales force have been trained on proper labeling and all of that kind of stuff. But I think it was starting to hurt us by not having a custom fit option. And we were probably on the verge of frankly, truthfully, we were starting to lose some surgeons where they love to Triathlon, but frankly, just got finally tired of waiting for us. And we were probably right at that breaking point here in the first and second quarter after the academy when we didn't have it. A few docs, I think, have held on long enough and kind of say, "Okay, enough is enough. I'm going to go use somebody else's product." So now it's a question of getting those back. We feel good that we will. But as you know, in this business, the docs don't come back to you day one, but I think we will. I would suspect we were going to be starting to see an uptick here in the third quarter absolutely, but it'll be, again, probably a little bit more that freight train getting back in gear.

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

Two questions. One, can you talk about the Trauma and Extremities market? It looks like you had a nice little pickup there in your sales. And then second of all, if my memory serves right, you have a 3-year compliance program that's rolling off at the end of this year. What is your current thinking about that?

In Trauma, we did see a little bit of a pickup. I think it's part organizational focus and probably part organizational enthusiasm around the Extremities acquisition. I don't think any of us are jumping up and down about our second quarter Trauma results. We think there's better days ahead given the acquisition emphasis here on the Extremities piece and more work that's being done from an innovation standpoint. So a nice, a decent respectable quarter, but we think there's more to do there. Relative to the compliance and it really relates to the 3-year investment that we've laid out. That starts rolling off in the second half of this year or the project, the focus, the journey, whatever you want to call it, formally comes to an end. But the reality is when you look at the acquisition track we have been on and the facilities that, that brings, there's plenty of acquisition, integration from a quality compliance system standpoint to keep us very busy. And there's the one-time events in the quality journey that probably come and gone. But there is a new level of base spend that is in our cost structure. And really what we hope to see in the years ahead is the benefit of that quality infrastructure starting to play out in terms of lower scrap rates, lower labor variants, lower warranty return rates. It's far too soon to see any of that showing up in the P&L right now.

Your next question comes from the line of Jason Wittes from Caris & Company. Jason Wittes - Caris & Company: So just some follow-up question. First off, in terms of OtisMed, you're obviously implying that this has become a lot more important in the last, say, 6 months since the market has sort of gotten used to the contest with some of your competitors out there. I guess I want to know your opinion in terms of what percentage of the market is really going to think to use it right now. And I think what's the ultimate potential because the way you're talking it sounds like the majority of doctors are thinking about converting over to this type of approach?

Jason, I'll take the first question. It's tough to know, obviously, ultimately, how much penetration shape matching will have. Some of the data we've seen is maybe around 10% of Knees. We think it has the potential to go higher, but a lot of that will be longer-term multiyear in nature as there's more clinical data produced that validates many of the benefits that clinicians believe they're seeing: Shorter procedure time, better consistency, improved outcomes. But that there is not yet a pool of data to support definitively. And that's probably what will be needed over the next few years to really drive the broader market acceptance. So we think the trend is going to continue upwards, over what time frame and to what magnitude, probably it's too speculative to call out, but we do think there's a nice opportunity for clinical data to help drive some of that adoption. Jason Wittes - Caris & Company: Okay. And similarly, if I look at your Hip number, you did provide some color, but I'm curious is most of the growth that we saw mix-related? Or do you think you're winning back competitive accounts this quarter?

A little tough to know until we see everybody's new numbers come in. But we do feel that having a product that -- the combined offering ADM and MDM in the large head segment in the market is -- it's a nice alternative, and it obviously gets us into a segment of the market that we weren't in previously. So obviously, the hope would be we gain market share. That's the expectation with the product launches, but really couldn't say definitively until we see everybody's numbers coming in.

The next question comes from the line of Bob Hopkins from Bank of America.

Just 2 quick ones. First, on the OtisMed side, other companies have suggested that their products of a similar look are able to gather maybe $1,000 to $1,500 price tag per procedure. And I was just wondering is there any reason why pricing of your shape fitting technology would be materially different from what we're seeing in the marketplace from other competitors?

I don't think so.

Okay. And then on the bed side, I'm having a hard time wrapping my head around a 27% growth rate for that business, x FX and M&A. And I know you're in the sweet spot of a lot of nice trends here. But just from a big picture perspective, are you guys confident that this is a cycle with real legs here? Is this something that you think can continue for a while? I just would love some big picture thoughts on that division. I know we've talked about it a lot already, but just want some big picture thoughts.

Sure, Bob. To get your head around the number, you just have to meet our sales force. Come to one of our sales meetings, so that wouldn't quite work, but that would give you the confidence as to how they're doing it. Having said that, this number, we have to tell you, it shocked us too. Let's be honest, we don't have quarters like this very often, but we do think a sustainable rate -- right now medical's in a pretty good cycle. Is it going to be another 27%, 37% kind of quarter? We don't -- can't possibly forecast anything like that. But the order's trends have been pretty good right now. And I think we feel over the course of this year, medical's going to be one of those businesses that delivers more revenue in 2011 than we expected at the start of the year to offset some of the others that won't. But we'll have to kind of continue to see where it goes. But we still feel good about the long-term fundamentals of that business.

Your next question comes from the line of Glenn Novarro from RBC Capital Markets.

Two questions. First on the revenue guidance. You maintained organic constant currency of 5% to 7%, but you actually had a better-than-expected underlying quarter, and we're now adding Orthovita and Memometal into the numbers. So I'm curious why you didn't take that number up a little bit? Is it just conservatism? Or is there's something other than the macro that you're concerned about? And that's question one. And then, Curt, just one question on the gross margin. We've talked about it on the call, but down 100 basis points. Can you quantify or elaborate what part of that down 100 basis points relative to consensus was FX?

I'll take the first part of the question. A couple of points. I think most of you on the call know us well enough, we tend to outline commitments that we're fully committed to hitting on at the start of the year. We are midway through the year. It's still some markets are challenging, and although those acquisitions obviously are additive, they'll have a 6-month contribution, also keep in size to the relative side. So it's still is consistent with the addition of those into our total targeted range. To be fair, it does, obviously, increase our conviction in the higher end to the degree that those are additive. But overall, the range -- it doesn't materially impact that range.

Glenn, on the second question, probably I'm not going to get into the minutia there and break down the decrease relative to people's model. Suffice it to say, it's a combination of pricing, currency that all influenced the ultimate gross margin, and they all contributed in the quarter. So hopefully, what we've tried to do here is restate our outlook for the second half to get people a sense of where we think things are going to finish as we look at what's in front of us.

Your next question comes from the line of Michael Matson from Mizuho Securities USA.

I was just wondering with regard to Orthovita, where that revenue will be recorded. Is it going to be split kind of between Spine and I guess, Instruments for the vertebroplasty portion? And are you maintaining their sales force that they had?

So a couple of questions there. The revenue will be split. You'll have the Vitoss product, which is carried principally by our Spine-selling organization. You have the Vitagel product, which will be carried by a combination of selling organizations, both part of our Reconstructive group and part of our MedSurg Group, and then the CORTOSS item will be carried by our Interventional Spine group, which as a reminder, is now reported publicly in the Spine and Neurotech segment. So if you divide all that up, you'll see the biggest segment of it in the Spine and Neurotech public reporting and then a smaller slice in both MedSurg and Reconstructive. And obviously, we're just 2 days remaining in the second quarter, we closed a transaction. We're in the process of integrating that organization, and that's inclusive of their U.S. selling effort.

Okay. And then, I just have a second question. In your Hip business, I remember maybe it was a year or 2 ago, you launched a modular stem, I believe it's called Rejuvenate. I haven't heard you all talk a lot about that really recently. Is modular net stem still an opportunity for you guys? And how is that particular product doing?

I would say it's part of that portfolio of Hip products. I wouldn't call it out specifically as having a major impact, but then again, as you know, that's generally true for the entirety of our portfolio, more kind of in net singles and doubles. So it's just a part of the product offering to be able to have a comprehensive portfolio for those doctors that want a modular offering. But beyond that, I wouldn't get into any specifics about how that individual product was faring.

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

Curt, I was hoping you could just clarify from your prepared remarks, you mentioned that there was the moving parts with respect to where certain items were accounted for in the P&L. Can you just remind us of what those were? And also, can you quantify the impact of some of the charges that increased G&A in the quarter?

So, David, the first thing I'd probably do is correct the statement. There is no question in my mind whatsoever. We have accounted for everything in our P&L exactly the way it should be accounted for. What my comments were is that in the presentation of the second quarter P&L, I think it's a fair statement to say it probably doesn't line up with any of the models that anybody created. And that starts at the gross margin level and probably goes all the way down to the tax rate inclusive of G&A being higher than people probably model because of the IP legal settlement that we settled in the quarter. And then, you had some tax controversy that settled and part of the settlement of tax controversy is you unwind accruals and all the interest that built up on those accruals can come back through the interest expense line. And that's where you saw interest expense actually be a positive this quarter versus the traditional negative that interest expense is. So I think the way I would summarize is we had lower gross margin, really attributable to some of the manufacturing and how currency moves through there. We had higher G&A associated with an IP settlement. We had better than probably modeled interest and other income because of that reversal of tax interest. And then, we had a lower tax rate, which is really driven by the mix of products and where they're geographically manufactured. So that's how I would package all of that.

Okay, that's helpful. And then, Steve, maybe a follow-up on your comment regarding the OtisMed rollout. And obviously, we understand that there's a training element with surgeons, and I think other products that peers have launched have taken anywhere from 6 to 12 months before you started to see a material impact. Have you seen accounts where custom cutting blocks have been adopted? Have you lost just certain business in those accounts? Or there -- have you lost full accounts? And this is really an effort to regain those lost accounts or is this more gaining back parts of accounts that you might have lost certain pieces of business in?

In most cases, it's gaining back parts. So it's a doctor might have been using both hips and knees and got tired and wanted to use somebody else's knee. And I would say that was really just starting to happen in the second quarter. So it'll be more, I think, bringing -- turbocharging a lot of our existing surgeons, and then inching away and getting some competitive ones along the way.

Your next question comes from the line of Matt Taylor from Barclays Capital.

I just wanted to tick and tie a couple of smaller points here. If you can comment a little bit on the Ascent acquisition, how that's trending. I don't think we've talked about that yet.

Second quarter, Stryker Sustainability Solutions business had a better quarter than the first quarter. I think we commented after the first quarter or some competitive markets responses, not surprisingly. But directionally, we feel good about the trend that we saw in the second quarter relative to the first quarter. And I think, overall, we remain very high in our conviction that this is the right business for Stryker and for the market and that longer term, we see very favorable trends here. Further, you think about these smaller businesses that are acquired, there is a period of integration and every time you go through integration, there are stumbles or challenges that perhaps disrupt the business model. And we've got to work our way to the other side and we feel good about the progress we're making there. So directionally, better second quarter than we saw in the first quarter. Back kind of got the nose of the plane pointed up and going in the right direction at this point, and it was a positive contributor, so we feel good about it.

Okay. And then, I guess, looking for a similar update on the Neurovascular acquisition, you had stated previously a goal to get to market growth. You're probably still a little bit below that, but new products could help. Can you give us an update there?

We feel very good about where the Neurovascular business is at the halfway mark. We commented in the first quarter that we saw positive growth in the U.S. market. That remains true in the second quarter and through the first half of the year. And sequentially, it built on the first quarter and then in my prepared comments, I noted that in the international markets based on the strength of the target rollout, that we had recorded a positive quarter. So all in, the business, on a global basis, was positive. We like where the new products are taking us. We like the stickiness with customers who have used the products. All of that said, there are some market challenges in the Neurovascular space today, given things like Brazil and reimbursement cut that I mentioned in the first quarter. That's still to be sorted out, hopefully some time in the second half of this year. So like any business, it has its headwind, but generally on track with the direction and pleased with it through the first 6 months.

Your next question comes from the line of Matthew O'Brien from William Blair. Matthew O'Brien - William Blair & Company L.L.C.: I was just hoping that you could talk a little bit about the Extremities market there with your acquisition of Memometal. What are your plans as far as expanding your sales force there or potentially breaking out and having a focused sales group focus primarily on that segment of the market? And then are there other products that you're planning to bring through, potentially, a new shoulder system to augment your portfolio at this time?

Yes. I guess a couple of comments. Very excited about this product offering because it really gives us access to a specialty customer and with a lot of the podiatric surgeons performing these foot and ankle procedures. You combine that with their proprietary technology and manufacturing know-how. We think it's a very nice fit. We will be able to make investments in the sales force to a much greater degree than they were given just the relative size, and so it will be an area of investment. We think there are opportunities to pull through other products, nothing that we would speak to specifically. Part of what we liked here was what we have on the market, and part of what we liked was the pipeline of products that's generally consistent with what you've seen in our other businesses, singles and doubles, that in totality, really worked to move the needle. So it's an exciting market given the growth potential. And we think this acquisition specifically helped us tap into a customer segment that is really not an area we have historically called on. Matthew O'Brien - William Blair & Company L.L.C.: Okay. And then the second question on the biologic side with the Orthovita acquisition. Can you just talk a little bit about where your utilization was with your biologic portfolio before the Orthovita deal in terms of all the spine cases, spinal fusion cases you were involved with? And then where you think that may go over the next 6 months or a couple of years even with that broad portfolio available to you now?

I would view that the acquisition is very similar in that if we're going to leverage the product offering that we got with the Orthovita deal through our much broader distribution channels in both inpatient and outpatient and across multiple divisions, Instruments, Spine, as was mentioned earlier. I wouldn't view this as leveraging the revenue that we were generating within our biotech specifically. This is where we're rounding out our product portfolio where there was a gap and, again, focusing on our core and leveraging the distribution capability that we have.

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

Just a couple actually, probably short ones. Just looking at the organic growth rate this quarter versus last, it picked up. I'm just interested if there's any differences in selling days this quarter relative to what we saw in 1Q on a year-to-year basis? The pricing dynamics, overall, looked better. How much of that was just anniversarying of Japan? Was that most of the difference if we look at 1Q versus 2Q? And then any additional color just kind of on the incremental acquisition and integration charges, and should we expect those to continue as we just look ahead or will those just be a 2011 phenomenon?

Kristen, on the days, the days were effectively the same as they were in the prior quarter a year ago. On the pricing, do not have anything material coming out of the sunsetting of Japan that influenced the general pricing in the quarter. Certainly, the sunsetting helps a little bit in the Japan market, but total company influence was insignificant there. And your last question, I believe, was on the acquisition charges. We updated -- I tried to update at the end of my prepared comments the full year expectation for acquisition and integration-related charges given the addition of new Orthovita closing here at the last couple days of the second quarter. So I may not be fully understanding that question.

I guess just what -- is it just all inventory step-up charges? And it's a pretty big number, and should we continue to expect that there'll be some residual integration related to all these deals flowing into next year?

Okay. So the first half of the year, the biggest component of the number was Neurovascular inventory step-up charges. That is far and away the lion's share of the number. Other charges related to acquisition and integration are truly those one-time costs, anything from perhaps banker fees to the use of consultants as you're going through the integration from a systems approach, things like that. So if you take what we said the charge would be for the full year, subtract what we've already recorded, that kind of gives you the idea of what's left. As we head into 2012, I would expect the call outs here would be minimal at best.

And then I guess, everyone's kind of been asking in a different way, but can you specifically break out the litigation that was in the SG&A line, just so people can get a -- so we can all understand a little bit better what the ongoing kind of number was and to what degree there was that impact just related to tax and other?

I'm not going to give you a specific number. I would just refer people to look at the prepared comments. The -- I believe I said that in the Other income and expense, that change effectively equalized the IP settlement. And I think if you look at the charges we usually record in Other income, you'll be able to back your way into what that relative number may have been.

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

Back to Hips briefly, Steve, you highlighted seeing the sort of early signs of the positive impact of the new product launches. And I think you saw another one to launch maybe the Accolade II maybe this year or early next year. You've talked about the sort of the train and the slow-moving momentum. Is the momentum here now? And we should expect that year-over-year rate of growth to continue to pick up from here based on what we know about the markets, how you're thinking about that?

Yes, I think, Rick, clearly the MDM is getting some nice momentum, and I think it's building, I mean, frankly, we've been almost a little bit of supply-constrained on this one because we didn't overbuild inventory on this one. But it is building nicely. And I think it's going to be -- it is that train building. Accolade, probably by the way, we're going to -- even though we mentioned it at the Analyst Meeting, we'll probably end up pushing it back into next year, just to time [ph] the expectation because frankly, with OtisMed approval and all the momentum on MDM, we feel so good about the second half of this year. But that'll be -- that'll give us more news for next year. So I think that's why we feel really good as we look at the Hip pipeline over the next 18, 24 months. I agree we feel very good about seeing sequential build not just this year, but through next year as well. But it's not a ramp like our Medical business, as you know.

Great. But maybe back to the mid- to upper single digits in the second half, it doesn't sound unreasonable.

A lot of that -- we're still leered at over communicate numbers given we're not sure exactly what the total volume of the market will be. I think we'll be taking share and feel good about that.

Okay. And maybe just lastly a couple of bigger picture questions, just one, any updated thoughts on your European business just given the debt crisis and various concerns there? And last, you've had a very rapid pace of acquisitions over the last 12 months or so. Should we expect that same -- that pace to continue? I appreciate all subject to negotiation, but are you as intensively at work on adding the portfolio now as you were a year ago or say?

We are probably going to refrain from any specifics about whether the acquisition activity is going to be at the same pace, higher or lower. It's just the very nature of BD is such that it's going to ebb and flow and maybe following a period of a lot of activity, it ebbs a little bit more. But you never know in terms of -- there could be a strategic decision to make an acquisition and wouldn't want to have comments that could prove to be correct or incorrect down the road -- prove to be incorrect down the road. So a long winded way of saying probably not going to make a comment beyond reiterating. We've got a strategy for the 3-pronged use of cash, and M&A is part of that, but it will be more or less active at different periods of time.

And on the Europe piece, Rick, I think we feel really good about the -- our leadership over there right now. We've been reining in a lot of old product lines and dealing with a lot of things in fighting through a pretty tough market. I think we look at Europe right now and say it's a very low-growth market. And we're slugging it out and fighting through it. So I think we've stopped the bleeding there and on the way back, but we've also still got some stuff we can do better.

Your next question comes from the line of Steve Lichtman from Oppenheimer & Co. Steven Lichtman - Oppenheimer & Co. Inc.: Just on gross margin, we've gone through the near-term movements with currency. I was wondering if you could talk to the progress you're seeing being made by Lonny Carpenter in his efforts to streamline the manufacturing process overall?

Certainly, a big area of focus for the company and a lot of work going on, I think you have to keep in mind that anything revolving around manufacturing, product changes, product consolidations, the first approach is understanding what it does or how it influences the quality system that we worked so hard as a company to build and instill. So there -- almost in a sense, first, do no harm as we look at the opportunities. These opportunities are evident. There are project teams lining up and they are sorting through the priorities. And keep it in mind that some of these projects, the majority of the projects will take an investment to get them off the ground and get the long-term leverage. I would, however, as an early indicator point to perhaps, our tax rate as an indicator of some of the changes. As we've moved some of our manufacturing, it does have influence across the entirety of the P&L, including the tax rate. And just as a reminder, we made some changes with some of our Europe -- with one of our Europe plants last year, move some of that production into a different geography that has a better tax rate. Steven Lichtman - Oppenheimer & Co. Inc.: Okay, Curt. And just on Japan, were there any surprises in terms of the impact of the earthquake and tsunami as you went through 2Q? I'm guessing it wasn't material, overall, but were any segments impacted more than others and have things sort of normalized at this point?

Yes. Actually Japan, was probably one of our bigger upside surprises in the quarter. Our Japan business did very, very well, and pretty much across the board, but especially the Reconstructive. Hips and Knees were very healthy there. It's probably one of our, believe it or not, best regions in the world.

Your next question comes from the line of Bill Plovanic from Canaccord.

Just 2 clarification questions. One, I think for gross margin, you said there's about a one-time charge of about $55 million pretax. What was that number for SG&A? And then also, as you look at Q3 and Q4 for the one-time charges, I know you gave us an earnings impact, but how much of that do you think will fall in Q3, how much in Q4? And then I think you said that most of it will flow through the G&A, and I just want to get clarification there.

In the quarter, it was about $9 million, rough numbers. And then, we didn't break it out between third and fourth quarter. And honestly, Bill, I don't have that in front of me right now off the top of my head.

Okay. And then lastly, just on the Orthovita, I think you said that -- when you said CORTOSS is in Neurotech and Spine, is that more of the Neuro piece or the Spine piece?

No. What I said is CORTOSS is distributed by our Interventional Spine organization, which from a public reporting standpoint, used to be included in the Instruments segment. And beginning this year, when we created the new segments, we moved that over to report it under the Neurotech and Spine segment.

It would be specifically in the Spine of the Neurotech and Spine.

Sorry, specifically within Spine of the Neurotech.

Your next question comes from the line of Rajeev Jashnani from UBS.

Just maybe a quick one R&D. The company has aggressively increased R&D investment in recent quarters including this one. I'm just wondering if you could comment on what you might see as a sustainable steady-state level of spending given the current mix of businesses and given the regulatory environment?

We haven't called out long-term targets specifically. We have said to assume that R&D is generally in that 5% to 6% range of sales, and you've seen it trend upward this year. So I think for near-term modeling, 2011, that remains a big assumption.

If I could just follow-up, do you see this as a line that's going to consistently grow faster than revs? Or is this potentially going to moderate understanding there is an impact of an acquisition in there currently, obviously?

Clearly, it's a little bit inflated this year by the acquisition. Having said that, as we said, we grew R&D 17% last year. I think as long as we continue to feel good about the products in the pipeline, that line may grow faster than sales.

And your final question is coming from the line of Jeff Johnson from Robert Baird. Jeffrey Johnson - Robert W. Baird & Co. Incorporated: Curt, I'm wondering if I could just ask one last clarifying question around gross margin. And maybe I missed it last quarter, but I remember on the fourth quarter call, you talked about gross margins expecting them to be up a little bit from the 2010 level of 68.8%. Did you formally update that last quarter? Is the next formal update just coming this quarter?

No, this quarter is the update. Jeffrey Johnson - Robert W. Baird & Co. Incorporated: Okay, and so I guess I understand what you're saying the U.S. dollar obviously has been weaker since the fourth quarter when you really last addressed that and that all makes sense. Obviously, orthopedic implants probably a little softer here than any of us would have thought in the second half. Recovery maybe not going to be as robust and MedSurg has been stronger. Is there anything else going on besides those 3 things? Any of the deals you've done now maybe being more margin dilutive, gross margin dilutive than any of us might realize or anything else in there? Is it really just those 3 factors changing from the fourth quarter guidance [indiscernible] ?

There are no other factors. I think I understand the confusion. It's just part of the complexity of the manufacturing network. When currency moves, it's not only the cost of the underlying currency. It's the inventory excess and obsolete charges and how those dollars are restated in the U.S.-based P&L. So there's -- you got to think about it in broad terms of how these currency movements impact the entirety of the P&L, and they're not insignificant movements. So that said, we do have some things that helped hedge that a little bit with the way we're set up. But it's not appropriate model by any stretch, and there's going to be movements as currency and as inventory turns change. Jeffrey Johnson - Robert W. Baird & Co. Incorporated: Yes. No, I understood. There's just nothing else hanging out in there, I guess, is all I'm trying to confirm here.

No, Jeff. And I want to clarify that as well, because clearly, it's not anything from the acquisitions. What I'd also say is Curt and his team are really doing a much better job, I'd say, than what we had historically in terms of understanding swings in gross margin because of all the various lag effects in the inventory. And when you go back and look historically, I think second and third quarters last year, we probably got even more of a benefit from the FX than we had fully maybe grasped at the time. If you recall, we were surprised by the gross margin. And I think it probably was more driven FX, and it's a bigger headwind this year than what we had fully grasped. All right, and thank you, Derek. I think we'll wrap up on that, and so that everybody knows, the conference call for our third quarter results will be held on exactly 3 months from today, October 19, 2011. Thank you, everyone.

Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.