Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Stryker Corporation (NYSE:SYK)

Q4 2009 Earnings Call Transcript

January 26, 2010 4:30 pm ET

Executives

Stephen MacMillan – Chairman, President, and CEO

Katherine Owen – VP, Strategy and IR

Curt Hartman – VP and CFO

Analysts

Derrick Sung – Sanford Bernstein

David Lewis – Morgan Stanley

Rick Wise – Leerink Swann

Tao Levy – Deutsche Bank

Matt Miksic – Piper Jaffray

Bruce Nudell – UBS

Taylor Harris – JPMorgan

David Roman – Goldman Sachs

Doug Schenkel – Cowen & Company

Bob Hopkins – Banc of America

Ben Andrew – William Blair & Company

Raj Denhoy – Jefferies & Co.

Glenn Novarro – RBC Capital Markets

Adam Feinstein – Barclays Capital

Michael Matson – Wells Fargo Securities

Steven Lichtman – JMP Securities

Kristen Stewart – Credit Suisse

Joanne Wuensch – BMO Capital Markets

Jeff Johnson – Robert Baird

Bill Plovanic – Canaccord Adams

Operator

Good day, ladies and gentlemen, and welcome to the fourth quarter 2009 Stryker earnings conference call. My name is Regina, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session (Operator instructions)

Certain statements made in today's conference may constitute forward-looking statements. They will be based upon management's current expectations and will be 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. For information concerning these risks and uncertainties please see the company's filings with the United States Securities and Exchange Commission, including the company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

The company does not undertake any obligation to update or revise any of these forward-looking statements. Today's conference call will include a discussion of constant current rates performance and adjusted diluted net earnings per share for the fourth quarter and years ended December 31, 2009 and December 31, 2008. Further discussion for these non-GAAP financial measures, including GAAP reconciliation apparent in the company's Form 8-K filed today with the SEC. The company’s SEC filings may be accessed from the ‘For Investors’ page on the company's website at www.stryker.com.

I would now like to turn the conference over to your host for today Mr. Stephen MacMillan, Chairman, President and CEO. Please proceed.

Stephen MacMillan

Thank you, Regina, and good afternoon everyone and welcome to Stryker’s fourth quarter 2009 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.

With 2009 results now complete, and as we focus on our commitments for 2010 we thought it would be helpful to put some of the key events over the past 12 months into perspective. Clearly, 2009 presented us with considerable challenges ranging from impact tied to the global economic upheaval to concerns over US healthcare reform. And for us, we also continue to invest in our quality and compliance initiative where we are now well into year two of our three-year initial program.

Against this complex backdrop, we were able to maintain our history of delivering year over year sales growth, albeit well below historical levels. Amidst the challenges, however, we were actually fairly pleased that four of our five implant franchises, including knees, trauma, spine and CMF achieved double-digit growth in the important US market for the full year, and hips continued their improvement but 6% for your US growth. Although, MedSurg 2009 sales were down 7% in the US owing to the drop off in hospital capital purchases, we benefited from our broad geographic footprint and continued focus on expanding these franchises outside the US, were sales achieved a 3% constant currency gain in 2009.

A focus on strict cost controls and leveraging our infrastructure allowed us to achieve adjusted EPS growth of 4% in 2009 and 11% for the fourth quarter, consistent with the commitments we made back in April. And we were also able to successfully deploy a portion of our sizable cash balance in a series of acquisitions, most notably, the late 2009 purchase of Ascent Healthcare, which we view as an important strategic move to help us better partner with hospitals to help them achieve their cost savings and sustainability goals.

So, in a year where we had to play some needed defense we were also laying the foundation for very accelerating growth in the quarters ahead. Also as part of our capital allocation strategy, we put in place a $750 million share buyback program in late 2009. Although M&A remains our preferred use of cash, the share buyback gives us additional flexibility.

As we sit here today, we believe we've emerged from what has undoubtedly been one of the most challenging years in our company's history. Although many of the headwinds that were presented to us in 2009 will linger a bit in 2010, we do expect to show improving momentum as evidenced by a return to more reasonable top and bottom line growth. To put it another way, our 2010 guidance does not yet reflect what we believe will be our longer-term sustainable sales and earnings growth rates. But we are clearly entering this year with improving momentum.

With that, I will now turn the call over to Katherine.

Katherine Owen

Thanks, Steve. As we done on prior calls, I would like to provide an update and some additional perspective on several key topics, including hospital capital budgets, pricing and OP-1. With respect to hospital capital budgets, the environment remains challenging however, we continue to believe that we are in a period of greater stability based on feedback from our hospital customers. Although we don't expect 2010 to go back to business as usual regarding new hospital capital projects or capital spending in general, we believe the environment will show signs of incremental improvement. Recall that close to 60% of our MedSurg sales are tied to capital purchases and we would expect that business to show continued stability with some incremental improvement in 2010. And note that with roughly 40% of MedSurg sales coming from disposables, there is an offset to the hospital capital pressure which will help the total franchise in 2010. Curt will go into more detail regarding some of the key assumptions that will help with your modeling.

Turning to pricing, we continue to experience low single digit price declines in our domestic hip and keen business, which was not significantly different from prior quarters. Our other implant businesses had varying pricing trends with trauma and CMF continuing to realize price gains while our spinal implants experienced ongoing pricing pressure.

On a geographic basis, pricing was flat outside the US, given price declines in Japan which was offset by more favorable pricing dynamics in other regions. Also our global total company price was down close to 1% in the fourth quarter.

Finally, I will make some comments regarding the status of OP-1. As many of you are aware, we have been evaluating various strategic options falling be disappointing FDA panel review in late March of 2009. This process has taken longer than we initially anticipated given the myriad consideration including our existing customer base in the US and Europe, our manufacturing facility in New Hampshire, and the early clinical data we have accumulated which demonstrates potential promising efficacy of OP-1 in the sizable soft tissue market. All of these factors and others are being actively reviewed and analyzed in order to make the appropriate next step.

Our ultimate goal is to ensure we are maximizing the potential for future applications of OP-1, while balancing that against the need to ensure acceptable returns on our investments in biotech.

With that, I will now turn the call over to Curt.

Curt Hartman

Thanks, Katherine. I will open by saying we are generally pleased with our fourth quarter results. They were in line with our expectations and coupled with our third quarter have us leaving 2009 in far better shape than it began. Overall, we feel the operating businesses are on solid footing and importantly we took some key steps to strengthen the business. To that end in the quarter, we were pleased to close on a couple strategic acquisitions with the most notable being the Ascent Healthcare business. Finally, the quarter was very busy in terms of completing a number of changes in our capital structure to include the previously announced dividend policy change, approval of the $750 million share repurchase authorization and the election to repatriate from foreign earnings $787 million of cash. We view these actions is providing us with enhanced financial flexibility to pursue our strategic objectives.

Moving to a more in-depth look at our business results, I will begin with a review of the impact that foreign currency had on our sales. In the fourth quarter, currency contributed to an increase in top line sales by approximately $73 million and improved the company's overall sales growth by 4.3%. This was just over the top end of our expected range of 3.2% to 4.2% in the quarter. Overall, in 2009 currency variations cut sales by $110 million, which reduced reported growth by 1.6%.

Looking to the first quarter of 2010, currency should remain a positive and if rates hold near current levels, we would expect first-quarter sales to be favorably impacted by approximately 4% to 5% when compared to 2009. Using current rates, the full year currency impact on top line sales will be an increase in a range of 1.5% to 2.5% when compared to 2009.

Next, I would spend a moment on the impact of price and volume mix on the top line. In the quarter, companywide selling prices decline just shy of 1% on a worldwide basis. International pricing was flat, while domestic pricing declined by 1%. Domestically, hip and knee pricing was once again down in a low single-digits, while spine experienced another quarter of increased pricing pressure similar to the levels in Q3. Consistent with previous quarters, trauma and CMF implants had favorable pricing that largely offset this pressure.

For the year, the pricing was effectively flat with marginal gains in international pricing offset by less than 1% decline in domestic pricing. For the quarter and year, volume and mix was generally as expected for orthopedic implant products, while volumes were off across the MedSurg categories. In the quarter, there was one extra selling day in most markets compared with the prior year.

Moving to the franchise segments, I will restart with orthopedic implants, which represented 61% of our sales in the quarter. Orthopedic implants reported a 10% increase on a reported basis, which translated to a 5% gain in constant currency. Our hip franchise was up 10% as reported in dollars and increased 4% in constant currency in the quarter on a worldwide basis. Consistent with previous quarters, Accolade, X3 and Trident products paced our growth.

In the US, hip sales were up 7% continuing to favorable trends from the second and third quarters. We continue to feel that our momentum in this market is improving; Trident, Accolade and X3 all delivered solid gains. Internationally, hip sales were flat on a constant currency basis in the quarter. Also gains in Pacific region and Japan were offset by declines in other international markets. Europe was essentially flat in the quarter and top brands again included Trident and X3.

Our global knee franchise record 11% sales growth in dollars and 7% increase on a constant currency basis during the quarter. The US knee business had another solid quarter reporting growth of 10% against the stiff prior year gain of 16%. Growth was driven by the continued strength of the Triathlon line, strong primary growth being supported by continued acceptance of the Revision line. Internationally, knees were down 1% on a constant currency basis. Gaines in our Japan and Canadian business were offset by declines in other international markets. Europe knee results are stable and consistent with the third quarter. Triathlon system continues to gain broad acceptance in the international markets. Overall, the reconstructive implant market in Europe remains challenging, which we believe is principally a macro trend given economic pressures that are likely dampening procedure volume in countries with nationalized healthcare. The trend is not new and is likely cyclical as the inevitable back load of patients requiring hip or knee surgery will need to be addressed, although the exact timing is difficult to predict and will likely vary by geography.

The global trauma business recorded a 13% increase in dollars and 6% increase in constant currency in the quarter. Our US trauma franchise recorded 11% growth against an 18% prior year gain and essentially finished the year at growth rates consistent with the first half. Sales of foot and ankle, hip fracture and lower extremity products paced our trauma growth. International trauma sales were up 3% on a constant currency basis in the quarter, with sizable gains recorded in the Pacific region offset by softer performance in other international markets. On the product line basis, International trauma sales were paced by growth in hip fracture and extremity products.

Our global spine business delivered 9% growth in dollars and a 6% increase on a constant currency basis. US spine sales slowed to 4% growth in the quarter, which is clearly below our historical average in this market, an increasingly price sensitive market some internal product introduction delays and some gaps in our offering have us forecasting slower performance over the next couple of quarters for our US spine business. We are clearly uncomfortable with this pace, and we note that our team continues to work diligently to address our current shortcomings and we would expect this to translate into stronger top line results as we move towards the second half of 2010. Our spine results were buoyed, however, by strong international spine sales that delivered operational growth of 14%, representing our third consecutive quarter of double-digit international spine market growth. Interbody and thoracolumbar devices again [ph] paced our gains.

Next, I will turn to the MedSurg group, which represented 39% of our sales in the quarter. As a reminder, MedSurg is comprised of three segments that historically generate approximately 60% of sales from capital equipment. In the fourth quarter, consistent with previous quarters this year, slower capital equipment sales impacted the MedSurg business results. In total, MedSurg sales increased 2% as reported and were off just under 1% on a constant currency basis, representing an improvement from the 7% constant currency decline in Q3.

Sales for the global instruments business, which historically generate 40% of sales from capital equipment, grew 4% in the quarter and 1% in constant currency. In the US market, the instrument segment took a small step backwards from a growth standpoint, reporting a decline of 1% against the prior year comparable of 18%. Sales of single-use consumables as well as increased sales in the products to serve markets outside of orthopedics helped to offset lower capital equipment shipments. Internationally, instrument sales again posted also gains, regarding an increase of 6% in constant currency with nice gains in the European and Pacific markets.

Our endoscopy segment delivered a nice finish to a challenging year. Fourth quarter reported sales increased 7% and advanced 3% on a constant currency basis, and we would note that Q4 represented the fourth quarter in a row of a sequential increase in dollars since. As a reminder, approximately 60% of sales are from capital equipment in this business. Our US endoscopy sales moved into positive territory in the quarter by posting 2% growth. The consumable portion of our mainline endoscopy business again delivered solid growth and the supported by a modest uptick in the video segment in the quarter. Internationally, endoscopy sales remained positive recording a 6% constant currency gain growth spread across all international markets.

Finally our medical products, which generate approximately 90% of sales from capital equipment saw global sales decline 8% in the quarter as reported and 10% in constant currency. On an absolute dollar basis, medical has now posted three quarters of sequential increases in quarterly sales. US medical sales delivered sequentially better results in dollars, but still declined 11% versus last year, while our international market sales were down 6% in constant currency.

That wraps up the business segment. So I'll now turn to the remainder of the income statement beginning with our gross margin performance. Fourth quarter gross margin increased 10 basis points compared to 2008 and increased 30 basis points sequentially from the third quarter. Margins the quarter continued to be impacted by a favorable mix of product sales and pressured by continued investments in our compliance initiatives. For the year, we lost 80 basis points of the gross margin line versus prior year as favorable mix of product sales was more than offset by a continued quality investment in higher inventory charges. Research and development spending represented 4.9% of the sales in the quarter. While this represented the lowest percentage of sales for the year, it did represent the highest absolute dollar investment in R&D in 2009. And for the year, R&D represented 5% of sales.

Turning to our selling, general and administrative costs; fourth quarter spending increased 7%, but was flat as a percentage of sales compared with prior year levels. This excludes the impact of the patent litigation settlement, which was recorded in G&A. For the year, SG&A declined by 90 basis points as a percentage of sales versus 2008 levels. I would reiterate that we remain comfortable with fluctuations in these categories for selective investments. Once again, excluding the impact of the patent litigation favorability in the 2008 restructuring charges, our fourth quarter adjusted operating income increased 11% and the operating margin increased hundred basis points versus prior year to 24.6%. For the year, on an adjusted basis our operating margin improved 70 basis points to 23.8%.

Other income of $9 million in the quarter was made up of $15 million of investment income offset by interest expense of $6 million, and the company's effective income tax rate excluding the impact of the repatriation of the patent litigation was 28.3% in the fourth quarter of 2009. Our full year 2009 tax rate excluding repatriation and restructuring charges was 27.5%, roughly flat with 2008 levels.

In terms of the balance sheet, we ended the fourth quarter and the year with $2.95 billion of cash and marketable securities, up $750 million from the $2.2 billion at year-end 2008. Further in the quarter we took several actions to enhance our capital structure to include the repatriation, dividend policy change, and share repurchase authorization.

It’s been a challenging year. I'm particularly proud of our asset management performance as delivered by our divisional business leaders and the divisional CFOs. Our year end and full year performance demonstrates sound stewardship here as evidenced by our final metrics in AR and DII [ph]. On that note, AR days ended the year at 56 which represents a decrease of three days compared to the prior year. For the quarter, AR days averaged 58. Clearly our focus here remains an imperative and it’s nice to see the effort paying off. Days in inventory finished the quarter at 145, which was down 19 days sequentially and 10 days against the prior year. Although we realized solid improvement, our inventory levels and overall inventory management remain a continued area of opportunity.

Finally, I will provide some quick commentary on cash flow. We continue to perform well with full year cash flow from operations up 24% to $1.46 billion and free cash flow up 29% to $1.33 billion. In summary, 2009 finished better than it started. We had solid results from our implant franchises, but incurred a bigger than anticipated hit to our capital equipment sales. Our actions to stem the slide were quick and while our results were not at historic levels, we do feel they represent an important step in returning to growth in 2010 and beyond.

Turning to our outlook, the financial forecast for 2010 includes a constant currency net sales increase of 5% to 8% as a result of growth in shipments of orthopedic implants and MedSurg equipment. This range is inclusive of the impact of the Ascent acquisition, which we anticipate will add approximately 2% to our top line. If foreign currency exchange rates hold near current levels, we anticipate net sales will be favorably impacted by approximately 4% to 5% in the first quarter of 2010 and approximately 1.5% to 2.5% for the full year of 2010.

Supporting this outlook I'd like to offer some comments regarding our underlying assumptions for certain key markets. With respect to reconstructive joint replacement, we assume that we will see stability in the domestic markets, which translates into mid-single-digit growth plus or minus a point or two. As mentioned earlier, the international reconstructive markets experienced some level of procedure delay and that trend is expected to continue during 2010. Against that backdrop global market growth rates could average low to mid single-digit on a constant currency basis in 2010. Globally, pricing is expected to remain under pressure similar to what we have discussed in our 2009 results, but we are not forecasting a further degradation at this time. Our trauma and CMF franchises should continue to perform in markets that appear to be moving in high single-digit ranges. Certainly any meaningful economic recovery could add to growth rates as procedures here are closely tied to large construction and driven miles. Finally, in spine we see high single-digit procedure volumes with forecast increased pricing intensity. We will continue to focus on expanding our product offering in spine and leveraging our sales footprint with plans to return to our long-term track record of gaining market share.

Turning to our MedSurg franchises, we assume modest growth in capital spending defined as a low to mid single-digit increase. We would underscore that there will likely continue to be quarterly variability as it relates to the growth rates for all three of our MedSurg businesses given the timing of product launches and the swings in year-over-year comparables. Put another way, we would not model the recovery of our MedSurg franchise as strictly a function of the percentage of sales that are tied to hospital capital budgets. Although that's clearly a factor, it's but one of many that dictates the quarter to quarter performance for these businesses. In summary, our guidance assumes 2010 global MedSurg sales growth in the mid-single-digits on a constant currency basis.

Turning to the P&L, we expect margin improvement at the gross margin line, offset by continued investments in our compliance initiative. R&D spending is planned to increase in 2010, both as a percentage of sales and in absolute dollars as we move closer to the midpoint of our desired 5% to 6% range. We see continued opportunities for leveraging SG&A as a percentage of sales as we look to remain disciplined with respect to discretionary spending, while making the necessary investments in our sales force. We expect tax rates will remain substantially in line with 2009 levels notwithstanding the increasing complexities for all in the global tax environment. Finally we expect diluted net earnings per share for 2010 will be in the range of $3.20 to $3.30, an increase of 8% to 12% over adjusted diluted net earnings per share of $2.95 in 2009. This range includes the interest expense associated with our recently completed public debt offering. On our current open repurchase authorization I would note at this time that we have not been in an open window to make any repurchases. Further you should assume that the goal of the authorization is to prevent dilution as well as position the company to opportunistically acquire shares as the market opportunities present themselves.

With that I will turn the call back over to Steve.

Stephen MacMillan

Thanks, Curt. Before we open up the call to Q&A I would like to offer some closing comments. We really excited about our future, particularly as we emerge from the difficulties presented in 2009, which limited our ability to maximize our sales potential. With that said, we remain cognizant that there will likely be ongoing uncertainty and new challenges presented to us in 2010. We believe our 2010 target strike the appropriate balance between returning to our objective of delivering superior sales and earnings growth, while recognizing that we are not yet back to what we believe will be our long-term normalized growth levels. Our ongoing investments in compliance will strengthen our infrastructure, but will also serve to be an important competitive advantage longer term and allow us to operate more efficiently.

In closing, we are committed to not only delivering on our financial targets for 2010 but also reestablishing Stryker as a company that achieves consistent and superior results for all of our customers, physicians, patients and investors.

With that, we will now open it up for Q&A.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Derrick Sung with Sanford Bernstein. And your line is open, sir.

Derrick Sung – Sanford Bernstein

Hi, thanks for taking my question. Let me start with spine. You saw a pretty substantial slowdown there on a sequential basis especially in the US. How much of that is company specific and how much of that is market specific, and if you could just go into a little bit more detail there?

Stephen MacMillan

We bet it is mostly company specific.

Derrick Sung – Sanford Bernstein

And can you provide any further color on how that might be?

Stephen MacMillan

Yes, it really relates to the product flow at this point. I think we were a little bit lower in terms of new product launches in the second half of last year. So for us, we view it as a temporary short-term transitional period, but that business will be coming back.

Derrick Sung – Sanford Bernstein

Okay, and do you see any impact of the economy on the spine market as the whole? It seems that spines have been pretty resilient to the economy up to this point, but with unemployment continuing to stay at the current levels do you foresee any sort of lagging effect of economic impact on the spine market?

Stephen MacMillan

We still don’t see much of a slowdown there. There might be a little bit of market slowdown in our numbers, but we always assume that it is us, if we have a little bit of slowdown. And I think a lot of spine surgery, while some people call it elective, you have to remember you’ve got a lot of people who are working age that want to get back to work or want to get back to action, and we think that is going to keep that market still relatively healthy. We will be a little bit slower than it has been over the last year potentially, but probably on the margin.

Operator

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

David Lewis – Morgan Stanley

Hi, good afternoon.

Stephen MacMillan

Hi, David.

David Lewis – Morgan Stanley

Curt, maybe just one question, following up on the third quarter, maybe you can give us an update on sort of the impact on OP-1 implants are delayed, but I am assuming that spending levels are coming down for 2010. So could you provide any sort of outlook or quantification on sort of the relative savings for OP-1 in ’10 versus ’09? You also talked about restructuring in the third quarter and maybe you suggest you provide us an update about what the restructuring could mean in ‘10 as it relates to the savings?

Curt Hartman

David, just a couple of questions embedded in that. I think the third quarter restructurings that we talked through really involved both segments of our businesses MedSurg and the implant category where we had some product obsolesce. We did had some limited restructuring that did touch our biotech division, but really those things were more cleaning up around the edges I would call them versus anything material that’s going to show up in 2010. I don’t think we have gotten into breaking out any of the details on year-over-year savings that we might be anticipating for biotech, and I think as Katherine tried to allude to, we are still sorting through the host of options that are presented with our biotech business at this point in time. So probably not going to get into any breakout here on potential financial gains associated with any changes in the way we are running biotech right now because that saving has fundamentally not been made.

David Lewis – Morgan Stanley

Okay, and then Steve you talked a lot about how mix makes you comfortable, you can maybe offset some of these pricing pressures. If we look at your 510(k) approvals track record the last six years, ‘09 was sort of a trough year for Stryker since I think 2003. So do you think ‘10 or is it ‘11 where we start to see that that relative level of 510(k) begin to turn around and go in the right direction?

Stephen MacMillan

Dave, it is probably a little closer to ‘11. I think we will have some good things coming through in ’10. I think part of that I would point to is things like the magnitude of some of the approvals we will have just gotten, for example the Rejuvenate Hip, that you really should revitalize one of our largest product lines. So it is not just absolute numbers, that will be the magnitude of them. So I think we feel truthfully solid about our flow but not doing back what’s thinking we have got it quite as good as we like it to be. So probably be accelerating through the year.

David Lewis – Morgan Stanley

Okay, just one last quick question follow-up, Curt, on spine. In terms of the sequential change, can you share with us how pricing change sequentially from third to fourth quarter?

Curt Hartman

Pricing third quarter versus fourth quarter was substantially in line. My comments relative to increased pricing pressure in spine were really, second half was more dramatic than first half. That was moving down in that low single digit range that we talked about really I think back in the first quarter call. So third and fourth quarter were substantially in line a little bit worse than what we saw in the first half of the year.

Operator

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

Rick Wise – Leerink Swann

Good afternoon everybody. MedSurg, maybe you can expand a little bit on the 2010 outlook. At first I want to make sure I understood your comments, I think you were saying sort of low to mid single digit growth if I heard you correctly. Does that include a sense, and is that where we are going to see it? Or do we layer Ascent on top of that?

Curt Hartman

Rick the comment on MedSurg was directly targeted at the traditional MedSurg which would be the medical instruments and endoscopy franchises. From a public reporting standpoint, the Ascent business will roll up underneath MedSurg in our first quarter results.

Rick Wise – Leerink Swann

Okay. So is it reasonable to think that with the, let’s call it core MedSurg and together with Ascent, we are going to see as we saw throughout 2010, sequential dollar increases in MedSurg as we go through the year? Does that sound like a plausible scenario?

Curt Hartman

I think our last two to three quarters which suggest that the trends in sequential dollars are moving in the right direction. I think in the outlook commentary what we were trying to imply here is that we right now given the variations in new product launches in these businesses, given the certainly depressed comparables that we're now starting to sunset over, you're going to see varying growth rates by the franchises given their mix of capital versus consumables. But all in, we see kind of this mid single digit level of growth when you put all those factors on the table.

Operator

(Operator instructions) Your next question comes from the line of Tao Levy with Deutsche Bank.

Tao Levy – Deutsche Bank

Hi, good afternoon. Steve, I have a quick question for you on the 2000 – in your comment you said 2010 where your outlook doesn’t really reflect that what you feel is sustainable long-term revenue and EPS growth. Well, what do think Stryker’s sustainable growth rates are down the road?

Stephen MacMillan

Tao, I think we just want to avoid that until the economy – until we’ve got a much better handle on where the global economy is. So we don’t want to get into a position of putting something out there and then backing off, and I think having just come through the year we have come through, we want to get our footing back and we’re still really good about getting our footing back but want to be careful in terms of articulating the longer term goals at this point. But I would say we think it will be a little bit better than certainly the guidance we have put out there for this year.

Tao Levy – Deutsche Bank

Okay, fair enough. And thanks, Curt, for providing the guidance on MedSurg. Can you just give me the currency impact or benefit that you expect for MedSurg specifically?

Curt Hartman

Tao, we have not historically broken that out. We just tend to talk about currency on a total company perspective.

Operator

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

Matt Miksic – Piper Jaffray

Hi, thanks for taking our questions. So I have one question, I guess we have covered, I mean clarify your comment on MedSurg, Curt, just to make sure I understand this. Your mid single digit is excluding the impact of the Ascent, is that correct?

Curt Hartman

That is correct.

Matt Miksic – Piper Jaffray

So first question on trauma and then I have the follow up just on sort of regulatory environment. So trauma, we've seen some deceleration, slight sequentially but year over year it came in. I am wondering, how much of that you see is being sort of an economy driven, how much is competitive and maybe what kinds of things do you see coming to turn that around?

Curt Hartman

I think a lot of it is economy. I think the biggest thing we learned last year is that a fare chunk of our business goes to constructional related jobs. I hate to say that it is both construction and driving and I don’t think we had ever drilled it down into our business that much to realize how much of that affected and the same in Europe. You saw countries like Spain where certainly construction starts dropped dramatically and we saw a similar drop offs in our business. So we think that when we will actually probably near of the economic recovery a little bit more in terms of the global basis.

Matt Miksic – Piper Jaffray

Okay, and then a follow up on – there was a question on 5 10(k)s, I am curious how you had looked at these potential changes coming to the 510(k) process? FDA is spinning up another meeting in the next several weeks. You have, I am sure, a number of these things in a hopper. How do you think about the risk to your near-term approvals and maybe the impact to your business over the long term should they decide to make some more formal changes?

Stephen MacMillan

Yes, probably like everybody else we are assuming that the requirements for some of the products will be a little more stringent. We are waiting to see where it plays out and trying to – we are obviously putting our own preparations in place, but it is little bit like health care reform. We spend a lot of time thinking about it all and until it is settled and established, there is only so much we can comment on it.

Matt Miksic – Piper Jaffray

Great.

Stephen MacMillan

Great, thanks Matt.

Operator

Your next question comes from the line of Bruce Nudell with UBS.

Bruce Nudell – UBS

Thank you, Steve, do you guys – when you think of the world wide major joint market now is mid single-digit units and flat ASPs net of price of mix about how you think of the steady state business.

Stephen MacMillan

I think that’s about it. I think we would like to continue to think that innovation will command a bit of a premium and allow some of that ASP to still ramp up, offset or more than offset the pricing declines, pricing pressures. And ultimately it is probably going to be a little bit more of a share gain than instead of just riding the market for us.

Bruce Nudell – UBS

Okay. And then with regards to trauma, that market has historically been marked by relatively-low unit growth, or procedure growth, but very solid ASP inflation net of price and mix and is that likely to come – that latter component of growth likely to come under pressure or how could you offset that? What's explaining the great ASP capability in the industry?

Stephen MacMillan

I think it will come under a little more pressure. I think probably the biggest driver of the ASP growth over the last five, six years if you think about it has been the growth in the lock plating segment that really brought much more premium pricing to that marketplace and premium priced solutions. And I think that growth is probably largely embedded in the base now and the additional growth in that area probably won’t be as great going forward.

Operator

Your next question comes from the line of Mike Weinstein with JP Morgan.

Taylor Harris – JPMorgan

Thanks. It's actually Taylor Harris here for Mike. On the O-US hips and knees, the recon business, can you guys talk about is it really just Europe where you're seeing the impact of delayed procedures? And is there any evidence here at the beginning of the year that budgets are loosening up or not?

Stephen MacMillan

It fell primarily for us to be Europe and we don’t really – nothing significant in the start of the year, nor do we really want to typically comment within the quarter.

Taylor Harris – JPMorgan

Okay. And then switching to MedSurg, would you guys be willing to give us a general sense of, in 2009, how the business grew segmented between the capital portion and the disposables portion?

Stephen MacMillan

Taylor, if I am understanding your question correctly and I am not trying to be short here, but I think if you go business by business and go to the earlier comments, if instruments franchise has capital making up 40% of that business, you should assume that there is a negative growth in the capital segments in those businesses, and on the flip side the consumables which are tied more closely to first hip and knee procedures but on a broader basis perhaps other surgical specialties like NeroSpine ENT and some other less-invasive procedures, those are going to ride the trend and perhaps be slightly above procedure volume rates. And I think the same methodology would apply to our endoscopy business where the capital segments, the video cameras, the endoscopy suites that are installed and renovation and hospital construction projects, that capital component is certainly going to be under pressure given all the events of 2009.

On the other hand, the consumable portion which we tried to comment on here in the last couple quarters experienced nice single-digit growth probably in line or so of both procedure volumes and then the last but certainly not least would be medical which is 90% plus capital really tied and focused heavily in the renovation new construction market as well as replacement market and that experienced a greatest pressure and I think that one is part of the clearest read-through in terms of the absolute reported results versus capital sales.

Operator

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

David Roman – Goldman Sachs

Good evening, everybody, just quickly maybe on R&D. How much of a year-over-year decline in 2009 was due to biotech versus just rationalizing spending priorities?

Stephen MacMillan

I don’t think that we have broken that out historically, David. I would point to a couple of things however that part of the year over year decline can be attributed to that we have publicly discussed which was a year ago we shut down our investment in Sightline, which you should assume was principally all R&D work, and then certainly there is some currency variation in the R&D year over year but that I wouldn’t call that the material component of an absolute dollar drop. It’s – the Sightline investment was principally R&D and that certainly came out of the base in 2009, very little change.

David Roman – Goldman Sachs

I am sorry; you said biotech was very little.

Stephen MacMillan

Very little change.

David Roman – Goldman Sachs

So if I look at the R&D numbers this year being down 9% for the full year and CapEx being down 10%, can you just help us with how that squares with your comments about investing for the long term and what type of spending levels we're going to see in 2010?

Stephen MacMillan

Well, I think and try to talk about the R&D that we should expect that numbers to be more at the midpoint of our historical range of 5% to 6%. So you can probably back into that math. And on the comments relative to investing for the long term, I don’t think you necessarily kind of correlate CapEx investments to the long-term investments that we try to make which have been really over the last 18 to 24 months quality-initiative driven and those are major investments for the long term. They don’t necessarily require large CapEx investments in many cases it is process – simplification process standardization. Yes, there are some CapEx investments that are associated with. But they are not game changing CapEx investments. They are more focused on process and continuity of process. So I think we have made the right investments and I think that CapEx investments are really driven from the ground up by our businesses as they look at machine and equipment and larger future R&D projects that may have a component of CapEx associated with them.

Katherine Owen

Just one additional comment on that, if you do look at our R&D, although below normal levels of recent years in 2009, we are still well within accepted 4% to 6% targeted range and we are expected to move up this year. So I think part of the investing for longer term conviction comes from the fact we are not in some multi-year period where R&D is running at extraordinarily low rates.

Operator

CapEx Your next question comes from the line of Doug Schenkel with Cowen & Company.

Doug Schenkel – Cowen & Company

Hi, good afternoon. In a difficult environment we've heard that a lot of community hospitals are trying to reduce their mix of revision work because of the less attractive economics associated with revisions. Have you seen any increase in concentration of the revision business at larger, maybe academic centers relative to what you've seen in the past few years and, if so, is that having a more meaningful negative impact on price in recent quarters?

Katherine Owen

Doug, we are all kind of shaking our head here. We just – if that’s a trend, it just hasn’t hit our radar screen. We haven’t seen that dynamic playing out.

Doug Schenkel – Cowen & Company

Okay.

Stephen MacMillan

But you can bet we’ll go ask now.

Doug Schenkel – Cowen & Company

Okay. And then maybe just jump in over to another pricing question. Have you heard any new details on the magnitude of Japan and Australia price cuts and what O-US price cuts in those geographies are factors into your guidance?

Stephen MacMillan

We will refer the final out of Japan, but we as a company are assuming it will be less bad than it was last time. If you recall, we got really wacked in our trauma business, which is a big chunk of our Japanese business. So we are assuming marginally – still decline, but marginally better than last round.

Operator

Your next question comes from the line of Bob Hopkins with Banc of America.

Bob Hopkins – Banc of America

Guys, good afternoon. Can you hear me okay?

Stephen MacMillan

Yes, Bob.

Bob Hopkins – Banc of America

All right, Great. Just wanted to follow up on spine and make sure I heard you correctly. You were nice to give your assumptions about market rates of growth for various markets and I think for spine I heard you say high single-digit units and then some increasing price pressure. Did I hear you correctly? So you're forecasting maybe a market rate of growth of, I don't know, 5% to 7%, not to put words in your mouth?

Stephen MacMillan

Number one, you did hear us right, but I think the market growth rate procedure volume number that we would be working off might be a little higher range than 5% to 7%. I think it is higher than that. I think you are at low end; it’s a little too low.

Bob Hopkins – Banc of America

No, I meant for total – so it's for total market growth what you were assuming?

Stephen MacMillan

Yes, it is still quite a little bit higher Bob. We will probably, total market growth, I think we are thinking in the high singles.

Operator

Your next question comes from the line of Ben Andrew with William Blair.

Ben Andrew – William Blair & Company

Hi, thanks for taking the question. Maybe following in on Bob's logic. So if you think market growth for spine is high single does that suggest that the pricing dynamic you saw in the second half and what you anticipate for 2010 is more a Stryker issue and what products within your portfolio are you missing here that you think are hurting you so much?

Stephen MacMillan

Yes, there is probably a little bit of pressure on the way, probably the biggest thing we are missing is the cervical plate, a great cervical plate offerings.

Ben Andrew – William Blair & Company

Okay. And so just to follow up, again, the pricing in the second half and next year, are you expecting market price to be down?

Katherine Owen

Yes, that’s primarily a – that’s not – we wouldn’t view pricing pressure is strictly affecting Stryker overall, as the overall spine market had seen increase in pricing pressure all in now when you put all the factors, we are assuming some type of call it upper single digit growth, plus or minus a few points.

Ben Andrew – William Blair & Company

Okay the mixed dynamics, spine remains steady?

Stephen MacMillan

We still like the spine markets can be a very good market to be in.

Ben Andrew – William Blair & Company

Okay, thanks.

Operator

Your next question comes from the line of Raj Denhoy with Jefferies & Co.

Raj Denhoy – Jefferies & Co.

Hi, good afternoon. Wonder if I could just ask a little bit about the pricing environment overall. In terms of your expectations about pricing and I guess I'm just broadly wondering what gives you confidence that given all the macro factors out there influencing hospitals and the like that the pricing environment isn't going to go appreciably worse over the next couple of years?

Katherine Owen

Maybe because of a lot of those macro factors that have been issued that we have been seeing in one form or another year in and year out, I think could some dramatic change in health care reform change that dynamic, it is possible but I think it is specially with some of the recent event that backed up some of the recent events, that backdrop's more clouded, then you layer into that our geographic footprint and then the mix of our businesses, we have seen pretty consistent relatively flattish plus or minus a point or so impact from price overall. So it is going to take a pretty sizable change in a number of businesses to dramatically change that pricing dynamic. It’s how we look at it.

Raj Denhoy – Jefferies & Co.

So long term we should really think about – your outlook should be maybe 1% pricing overall as a way to think about the long-term trends?

Katherine Owen

We kind of look at it flattish and put a plus or minus one or two point parameter around that because we just don’t have that level of granularity to give you such a precise target, but something flattish.

Raj Denhoy – Jefferies & Co.

Okay, fair enough. Thank you.

Stephen MacMillan

Great, thanks Raj.

Operator

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

Glenn Novarro – RBC Capital Markets

Hi. Just a question on the FDA warning letters. Would you say no news is good news at this point? Any update on the timing of a resolution to any of the outstanding warning letters? And just as a follow up, can you quantify how much you're going to be spending in 2010 on the quality initiatives relative to 2009? Thanks.

Katherine Owen

I will take the first part then Curt will follow up on your second question. I think the way you should look at it is we are well into the second year of this three-year program that we have articulated both to the listening audience as well as the FDA. We feel like we have made some very solid progress on some fronts, but we also have a lot more work to do and we really going to look at it as we have got something definitive we can report back to you whether it is resolution of the biotech as we have done previously. Those are really going to be the data points you should look for. But we are still in the midst of implementing a very comprehensive program.

Curt Hartman

Glen on the investments, I will go back to the higher level comments. We had originally announced this as a $200 million investment and anticipated that to be over about a three-year period in looking through our plans that investment really started to accelerate in the third quarter of ‘08 as we got into 2009 and plans further materialized across the manufacturing network, I think it was the second quarter or thirds quarter call that we said the anticipated 2009 range was in the midpoint of the $60 million to $90 million category.

Certainly, there are puts and takes on that number and I would tell you that in 2009 we were very comfortable with saying that it was right near the midpoint of that number and as we head into 2010, we anticipate a similar level of spending, all of that said were as good as our last inspection and something that goes wrong in anyone of these sites that requires additional investment we are committed to make in that. But right now, the plans as we’ve laid them out remain with us consistent to the $200 million, remain consistent with the three-year plan and obviously it is not a perfect calendar plan, it is going to spill into 2011 giving that our spending really started here in the third quarter of 2008.

Glenn Novarro – RBC Capital Markets

Okay great. Thank you.

Curt Hartman

Thanks, Glenn.

Operator

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

Adam Feinstein – Barclays Capital

Okay, thank you, just a couple of questions here. First, maybe just if you think of the O-U S markets within your ortho, recon business seeing the weakness there but within MedSurg you're actually seeing better growth there, so just curious to get your thoughts in terms of why you're seeing more equipment purchases outside of the US but the procedures aren't down? And then secondly, just wanted to get you to talk a little bit more about some of your recent deals. You guys have done some acquisitions recently, Ascent being the biggest, just curious if you can just give us some feedback about how you plan to integrate those businesses and some of the opportunities in 2010? Thank you.

Stephen MacMillan

Sure. On the MedSurg piece outside the US, I think the better way to think about that is the strategic context that we articulated a few years ago that we were going to be ramping up our sales forces for MedSurg products outside the United States. So we are really coming from much more significantly lower market shares there. So even if the markets slowed down we were on the, call it, on the growth curve as we are more so outside the United States where our shares are very small. So, that’s probably the answer to that. On Ascent, we really, really like this business. One of the first things we are going to do is try not to mess it up, because it has been doing really well. So it is going to be pretty much run as a standalone business consistent with our decentralized operating model but as part of the MedSurg team, and we'll connect the dots, obviously, where appropriate. But day in, day out, going to stay very much on its own.

Adam Feinstein – Barclays Capital

Okay. Thank you.

Operator

Your next question comes from the line of Michael Matson with Wells Fargo Securities.

Michael Matson – Wells Fargo Securities

Hi. I was wondering if you could give us an update on the letter that you got from the IRS. I think you announced this probably in early 2009, if I remember correctly, just any implications for your tax rate? And then my second question would just be around your latest thoughts on metal on metal-on-metal hips?

Stephen MacMillan

Sure Mike, this is Curt. I will cover the IRS letter and what your are referring to there just as a reminder for everyone was an issue that we discussed in the first quarter call last year, and it has to do with cost sharing arrangements and certain high-risk subsidies – subsidiaries of Stryker, as we have said at that time, it is an ongoing issue that we were dealing with the IRS on, and we also anticipate that it would continue to take a long period of time to resolve these matters. We commented that if we had anything of substance to discuss we would do that, and at this point in time, we don’t have anything to discuss. It has no impact currently on tax rates. Certainly, there is always that risk that should this issue go the wrong way from our chair that tax rates could be impacted, but at this point in time that would inappropriate to make that statement or to model that.

Katherine Owen

And then on metal on metal, we continue to actively evaluate all the offerings in the hip market and clearly there's a benefit to having larger head sizes. Whether or not that’s always going to be best address through strictly metal on metal or other material, I think it’s one of those areas of R&D that will continue to focus on. It does appear that the penetration rate for metal on metal, which has clearly been a challenge for our hip business since we are not in that piece has stabilized somewhere around a third of the market. So we'll continue to actively monitor it, not going to make any definitive statements whether or not we will ever get in or not get into that, but do recognize the importance of being able to address that larger head segment.

Operator

Your next question comes from the line of Steven Lichtman with JMP Securities.

Steven Lichtman – JMP Securities

Thanks, hi guys. Two questions, one on MedSurg and one on instruments and one on orthopedic implants; within MedSurg, the increase in 2010 versus the decline in ’09 in CapEx to what extent is that new customer orders and perhaps you benefitting from some new construction versus more of a replacement cycle kicking in. And then within US hips and knees, what is driving positive mix for you guys right now either products or product categories and what gives you the confidence that you will continue to be able to generate that either through runway of your current products or through new products? Thanks.

Stephen MacMillan

I think the 2010 MedSurg capital numbers should we see growth in those markets, I think our first assumption is going to be that it's coming from product replacement cycles because the capital that our instruments and endoscopy divisions sell is central to the procedure actually happening. So in terms of keeping that hospital moving and operating, having replacement cycles executed in 2010 would be where we first and foremost would see that capital growth coming from. I think any return of new construction or renovation is probably more variable in nature.

Steven Lichtman – JMP Securities

And the mix?

Curt Hartman

Well, on the mix if you play the recon piece, Steve, it’s certainly within the knee franchise over the last year with the Triathlon partial knee replacement and also the Triathlon Revision were probably the two big drivers on our knee business, which as you guys all know continues to truck along at ballpark 10% growth well into that franchise and I think what we are really excited about this year will be a couple of launches in the hip particularly the rejuvenate, basically our first entry, really big entry into the United States market as it relates to a great modular offering.

Operator

Your next question comes from the line of Kristen Stewart with Credit Suisse.

Kristen Stewart – Credit Suisse

Hi, thanks for taking my question. Just kind of a bigger picture, one I guess, to the extent that you do see a greater recovery within orthopedics or MedSurg, would you be more inclined to maybe accelerate some of the investment spending in R&D or sales positions in SG&A or would basically be inclined to, you know, let it flow through.

Stephen MacMillan

Kristen, we would probably look to some additional expansions. If you think about what we said historically, in times of really strong growth we’ve often use that to more significantly accelerate hiring both our sales forces and our R&D investments. And a year like last year candidly we pulled back. As we went into the year, we realized the year was unfolding very differently than any of us were imagining and everything else, we got more restrictive. So I think there are probably some sales forces here and there we would look to boost, and maybe some other R&D projects. So we would have some flow through but probably not a 100%.

Kristen Stewart – Credit Suisse

All right. And then just in terms of the gross margin, I think when you gave guidance commentary, I guess there was a phrase about some marginal improvement but offset by continued investments in compliance initiatives. Should we just assume, then that the gross margin is going to be more down relative to this phase and what sort of level, I guess another question would be FX impacting that why would we expect to get out maybe positively back to –

Curt Hartman

Kristen, I think the comment on gross margin was to cover two things to probably get you to a sideways movement in gross margin. We do think there were some great actions taken this year by our various manufacturing entities and really excited by the appointment of Lonny Carpenter, Head of our Global Manufacturing and Regulatory and Quality Affairs, function because I think it's just bringing a lot of the opportunity together on the table. And we think that will translate very well into the manufacturing network conversely, every dollar that we find there, there's a potential offset in our quality to investments to compliance initiatives and we are not going to back off of those under any circumstances. So I think we see the opportunity for improvement, but we are going to model it fairly conservatively, given the work that we still have to do on this quality journey.

Operator

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

Joanne Wuensch – BMO Capital Markets

Thank you very much for taking the question. What are you dialing in for the Ascent contribution in your guidance?

Katherine Owen

That’s 2% at the top line.

Joanne Wuensch – BMO Capital Markets

And what about at the bottom line?

Katherine Owen

We haven’t broken that out beyond saying that we expected it to be neutral to earnings in 2010.

Joanne Wuensch – BMO Capital Markets

Okay, and then just as a quick follow up, which new products would you like us to be focusing on? I know it’s funny to say quick follow-up because there's a list, but highlighted in at least hips and knees. Thank you.

Katherine Owen

Steve, touched on rejuvenate on the hip side which is clearly an important addition to that business. We're really going to beg off going into any more product highlights until the academy [ph]. That's typically where we walk through some of the newer product offerings followed by the May Analyst meeting.

Joanne Wuensch – BMO Capital Markets

Thank you.

Stephen MacMillan

Thanks, Joanne.

Operator

Your next question comes from the line of Jeff Johnson with Robert Baird.

Jeff Johnson – Robert Baird

Thank you. Good evening guys. Wonder if I could ask two questions here, one kind of intermediate term I guess in nature and that would be Steve, kind of just your thoughts around MedSurg and orthopedic implants over the next maybe one or two, three years. Which do you think has the greatest growth potential and how do you think about those in the next couple of years? And then, Katherine, I hear what you are saying about no new product discussions. Just wondering if you can touch on Restoration ADM, I know that’s a product you guys have been thinking about launching here over the last year or so and I think it’s moving into X3 in the next few months; any thoughts on that product for 2010?

Stephen MacMillan

If you want, I’ll take the first one here Jeff. I think as we look at all of our franchises, over the next few years we think they’re all going to be great growth franchise. Every one of the implant businesses we are in, we still feel good about. Every one of the MedSurg businesses that we are in, we feel good about. The key question will be at what rate do the MedSurg ones rebound? But cautiously, we feel like they will be coming back, and this year we’ve basically baked in similar growth rates on a macro basis for MedSurg and orthopedic implants. But we would be hopeful that maybe even MedSurg kind of start bouncing back a little bit better maybe. Again, from where we were last year just want to be very careful there. But we still feel great about every business we are in.

And I think on the new product side, we are going to beg off of the product-specific question that you asked Jeff, and steer folks to try to attend the AOS [ph] and walk through the booth.

Operator

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

Bill Plovanic – Canaccord Adams

Great, thanks. My questions, one on the Ascent business, is that going to be a separate line item in MedSurg, or are you burying it into one of the other businesses? And two, is rejuvenate, did that already get the 510(k) approval?

Stephen MacMillan

The rejuvenate product is already out and it’s not a 100% fielded to our sales force, but we will be on the 50% mark. And your question on Ascent, that will not be a separate line item broken out.

Bill Plovanic – Canaccord Adams

In which division will you bury that into?

Stephen MacMillan

It will be under MedSurg.

Operator

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

Matt Miksic – Piper Jaffray

Hi, thanks for the opportunity to follow up here. Just two quick follow ups on a couple of questions other folks had asked. On that last question, just to be clear, Curt, so within MedSurg are you not being specific about where Ascent is going to go?

Katherine Owen

Ascent isn’t being included in any of the three divisions of MedSurg. From a reporting standpoint, we are going to report it as part of our total MedSurg results, but it is not getting lumped in with any of the other three.

Curt Hartman

We're not going to hide it.

Matt Miksic – Piper Jaffray

So it will be sort of like another MedSurg implicit, other MedSurg line or something?

Curt Hartman

The public reporting here will continue to look very similar to what you see today. However, growth of MedSurg will reflect the addition of the Ascent business.

Operator

Your next question comes from the line of Mike Weinstein with JP Morgan.

Taylor Harris – JPMorgan

Thanks. It's Taylor in. Thanks for the follow up. Curt, on the tax rate, even excluding the repatriation it was a few points above what we were thinking for the quarter, why was that? And then what are you dialing in for 2010?

Curt Hartman

I’ll start with the last one, Taylor. The 2010 rate, I think I commented should be substantially in line with 2009, and the little – I think it was – probably if you do the backwards math a couple million dollars higher in overall tax when you backup those one-time items, and I think what I tried to imply in some of my other comments was the – the global tax environment is very dynamic right now. And I think other companies have talked in their quarterly calls about some tax controversy that they've worked through that has put more variability in their quarter over quarter tax rates. And I think that’s just a reality of where the economy is and the activity levels that you are seeing from the various tax authorities and as you resolve or settle issues, you may see variability both up and down in tax rate on a quarter-over-quarter basis.

Taylor Harris – JPMorgan

Okay, so just to make sure we have the right adjusted numbers, I have something like 28.4% for 2009. Is that right and about what you are expecting for 2010?

Curt Hartman

You said you had 28.4% for all of ’09?

Taylor Harris – JPMorgan

That’s right. I just want to make sure we calculated –

Curt Hartman

The ’09 number was 27.5%.

Taylor Harris – JPMorgan

27.5%? Okay. Thanks.

Curt Hartman

Your 28.4% was Q4.

Operator

This concludes our question-and-answer session of the call. And I would like to turn the call back over to Mr. MacMillan.

Stephen MacMillan

Okay, great. Actually, Regina, can we go to one more question or no? Might be too late. I suspect we are too late. Okay. Well, we will – we certainly appreciate everybody's time today. Again we feel good about where we are headed. We came out of the year stronger than we entered in and as we come into the year, we will report on our first quarter 2010 operating results on April 20 of this year. Thank you everybody.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes our presentation and you may now disconnect. Thank you and have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Stryker Corporation Q4 2009 Earnings Call Transcript
This Transcript
All Transcripts