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Executives

William U. Parfet - Non-Executive Chairman and Member of Governance & Nominating Committee

Dean H. Bergy - Secretary

Curt R. Hartman - Interim Chief Executive Officer, Chief Financial Officer and Vice President

Stryker Corporation (SYK) 33rd Annual Meeting of Shareholders April 24, 2012 2:00 PM ET

Operator

This meeting is now being recorded. 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 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 payors; a significant increase in product liability claims; resolution of tax audits; changes in financial markets; changes in the competitive environment; the company's ability to integrate acquisitions; and the company's ability to realize anticipated cost savings as a result of workforce reductions and other restructuring activities. Additional information concerning these and other factors are contained in the company's filings with the U.S. Securities and Exchange Commission, included in the company's annual report on Form 10-K and quarterly reports on Form 10-Q.

[Presentation]

William U. Parfet

Good afternoon, everybody, and welcome to the 33rd Annual Meeting of Shareholders of the Stryker Corporation. On behalf of your Board of Directors, I'd like to thank everybody for joining us today.

Now my name is Bill Parfet, and it's my privilege to serve as the nonexecutive Chairman of Stryker Corporation and preside at this meeting this afternoon.

I hope you all enjoyed that video. It tells a great story about Stryker and the exciting innovative products and technologies and also highlights how our employees give back to their various communities.

Also, recognition by Fortune and Forbes Magazine reaffirms the vision initially set forth by Dr. Homer Stryker, which our company continues to build on today.

Now joining me at the podium today and participating in this meeting are Curt Hartman, our interim Chief Executive Officer, and he also serves as the Chief Financial Officer. In addition, Dean Bergy, and Dean is the Secretary of the Corporation.

I'd like to say a few words about our former CEO, Steve MacMillan. As many of you undoubtedly know, Steve resigned as Chairman, President and CEO of Stryker in February. Steve's achievements during his almost 9 years at the company were admirable. During his tenure, Steve worked tirelessly to position Stryker for a growth in a global marketplace that continues to undergo unprecedented change. These efforts included focusing on enhancing Stryker's core competency, expanding our global reach, improving operational effectiveness, broadening our product and service offerings and positioning the company as a key resource for all the people who have and who will benefit from our products.

I worked with Steve for almost 15 years and very closely during the last 9 in my role as lead director of the Stryker Corporation. Steve resigned for family reasons. So just to clarify, on behalf of the Board of Directors, we'd like to clearly state that Steve never violated any company policy nor any Code of Conduct, and we thank him for his contributions to our company, and we wish him well in the future.

Before starting the formal business of this meeting, I'd like to introduce several special guests and ask them to stand as they're introduced. First, and with great admiration, join me in welcoming John Brown, our Chairman emeritus. I don't have to say this but I'm going to anyway because you all know it, but John led the company for over 3 decades, helping to build Stryker into Fortune 500 company that it is today. Accompanying John are his wife Rosemarie and daughters Sarah and Janine, who reside in Atlanta.

Also joining us today are 3 members of the Stryker family. Pat Stryker is a businesswoman and philanthropist. Pat grew up in Kalamazoo. Here we go, Pat. Oh, you got to stand up a little longer than that, it's okay. Let them see who you are, there you go. You're in Kalamazoo and, after all, you're right home finally. She has numerous business interests and resides in Boulder, Colorado.

Jon Stryker, Jon is an architect and the founder -- Jon is an architect, as many of you know, and the founder and President of the Arcus Foundation, which works to advance social justice and conservation issues. In addition to his philanthropic activities, Jon influence -- Jon's influence can be seen in numerous architectural designs around Kalamazoo. Jon resides at Manhattan [indiscernible]. Okay, good to have you here, Jon.

Pat and Jon, as well as Ronda Stryker, a member of the Board of Directors, who will be introduced in just a second, are grandchildren of Dr. Homer Stryker, the founder of the company, and children of Lee Stryker, a former President of the company. All 3 are great supporters of this organization. Thank you.

Now Ronda's husband, Bill Johnston, should also be recognized. He's a local developer, but he owns this brewery right here, this hotel. So he's the owner of Greenleaf Trust and the Radisson Plaza Hotel and Suites, and he baked the cookies. Thank you, Bill, and welcome. Please extend him a nice, warm welcome.

Now we tried something a little different, so at your seats is an agenda for today's meeting. Can you see that? The primary purpose of this annual meeting is to seek shareholder approval on 5 proposals that are outlined in the proxy statement and are listed on the agenda.

In a few minutes, I'll go through each of these proposals with you. Then, while the votes are being tabulated, Curt Hartman will share with you the results of our business activities for last year and for the first quarter. He'll also share some exciting opportunities that lie ahead for the company. We will then announce the voting results and, at the end, provide an opportunity for shareholder questions.

At this time, and out of consideration for the meeting speakers and attendees, we'd ask that all cellphones, as was announced, and pagers be turned off.

Investors are also reminded, and you can see this on the screen, that our meeting today may include forward-looking information. These factors are included in our most recent 10-K and are covered by the statement that you see right in front of you on the screen, and it's also printed on the agenda sheet.

So that I can officially now call this meeting to order, I'll ask Dean Bergy, then, to establish this meeting has been duly called and that a quorum is present. Dean?

Dean H. Bergy

Thanks, Bill, and good afternoon. With me, I have an affidavit from the proxy solicitor related to the mailing of the notice of the meeting and proxy materials on March 19, 2012 to all shareholders of record as of March 5, 2012, the record date fixed by the Board of Directors.

I have a certified list of the shareholders of record of the company as of March 5, 2012, which is available by -- for inspection by any shareholder during and immediately following the meeting, and the minutes of the 2011 Annual Meeting of Shareholders, which are also available for inspection by any shareholder. Tim Williams, Assistant Secretary of the Corporation and Bill Berry, Corporate Controller, have been appointed to serve as investors -- inspectors of election.

Based on the proxies received, the inspectors have reported to me that a majority of 381,263,511,000 (sic) [381,263,511] shares of common stock entitled to vote are represented at the meeting, either in person or by proxy. A quorum of common stock is therefore present, and the meeting may proceed.

William U. Parfet

Thank you, Dean. So on the basis of the secretary's report, this meeting is duly constituted, and we're ready to transact business.

First, I'd like to introduce the individuals who serve as directors of the corporation. I'll ask each director to stand as he or she is introduced.

Howard Cox. Howard is a partner of Greylock and its affiliated venture capital partnerships. He resides in Boston and is our longest-serving director. Howard joined the board in 1974, and he chairs our finance committee.

Srikant Datar. Srikant is the Arthur Lowes Dickinson Professor of Accounting at the Graduate School of Business Administration at Harvard University. He resides in Boston and has served as a director since 2009.

Roch Doliveux. Roch is CEO and Chairman of the Executive Committee of UCB, a global biopharmaceutical company. He resides in Belgium and has been a director since 2010.

Louise Francesconi. Louise is former President of Raytheon Missile Systems and also chairs the Governance and Nominating Committee. She has served as director since 2006 and resides in Tucson.

Allan Golston. Allan is President, U.S. Program for the Bill & Melinda Gates Foundation. He resides in Seattle, Washington and is our newest director. Allan joined us last year, and beginning this year, this new year, he's going to chair the Audit Committee.

Howard Lance. Howard is former Chairman, President, Chief Executive Officer of Harris Corporation. Howard became a director in 2009 and is Chairman of the Compensation Committee. He resides in Florida.

As many of you know, I'm Chairman and Chief Executive Officer of MPI Research. I've served on Stryker's board since 1993, and I'm a native of Kalamazoo.

Ronda Stryker. Ronda Stryker, there you go. You're waiting for your picture to come up. Okay. Ronda is the Vice Chairman and Director of Greenleaf Trust, Trustee of Spelman College and of Kalamazoo College and Vice Chairperson of the Kalamazoo Community Foundation. Ronda has served as a director since 1984 and resides in Kalamazoo.

I'd like to thank all our directors for their contributions to the success of Stryker Corporation. The job of outside director has changed significantly over the last several years, becoming more complex and requiring a greater time commitment. I can assure you that these individuals are highly engaged and committed board members of this wonderful company.

Now I'd like to ask Curt Hartman to introduce the executive leadership team. Curt has provided excellent leadership since stepping into the role of interim Chief Executive Officer in early February. Curt is a 22-year Stryker employee and has served in various leadership roles at the company's Instruments division prior to becoming Chief Financial Officer of the company in 2009. Curt?

Curt R. Hartman

Thank you, Bill, and good afternoon, everyone. I'm pleased to be here with all of you today. I'm also proud and very honored to introduce the executive leadership team of Stryker Corporation to you. These are the men and women who, along with our division officers and other corporate officers, run and conduct the affairs of our business on a daily basis. I'll ask each executive to stand as he or she is introduced so that you have an opportunity to connect a person with the picture we're going to show you on stage.

I'm going to start today with Lonny Carpenter, Group President, Global Quality and Operations. Lonny is responsible for Stryker's global product and service quality, regulatory affairs, manufacturing operations and supply chain network. This responsibility involves over 30 manufacturing locations in over 8,000 of Stryker's employees. Lonny has served in this role since 2009, and his leadership successfully steered the company through our quality remediation period and today allows the company to stay on track with the rapidly changing global regulatory and quality environment. Lonny has been with Stryker 23 years, has held a variety of leadership roles within our company and Lonny is based here in Kalamazoo, Michigan. Should we give Lonny a round of applause?

Next slide, please. Next up is Curtis Hall. Curtis is Stryker's Vice President and General Counsel and has served as the company's General Counsel since 1994. He's responsible for the global legal team, our legal affairs worldwide and also has responsibility for our compliance and corporate secretary functions. I would note that Curtis was the company's first full-time attorney, was our first General Counsel and was brought into the company by John Brown. You'll also understand if I tell you that we have more than one attorney on staff today. Curtis is based in Kalamazoo.

Next slide, please. Kevin Lobo is the next individual. Kevin is our Group President of Orthopedics, and he joined our organization early last year from Johnson & Johnson, where he held a number of senior global leadership roles in healthcare and the medical device arena over the previous decade. Kevin has really hit the ground running leading our Orthopedics Group, and we're thrilled to have him on our team. Kevin is based in New Jersey.

Next is Katherine Owen, our Vice President of Business Development, Strategy and Investor Relations. Katherine has been with the company for 5 years. Prior to Stryker, she worked as a leading sell-side analyst covering medical technology companies, including Stryker. Her responsibilities include interacting with shareholders and analysts, facilitating the company's strategic planning process and leading our corporate business development activities. As you will see shortly, her efforts combined with our global BD teams have been instrumental in reshaping this company for continued growth. She's based in Boston.

Mike Rude is our Vice President of Human Resources. Mike is responsible for our worldwide human resources functions as well as our global Communications and Public Affairs activities. Mike and his team have been the driving force behind our selection of one -- as one of Fortune's 100 Best Places to Work for 2 consecutive years. Mike has been with the company for 11 years and resides in Kalamazoo.

Next is Tim Scannell. Tim is our Group President, MedSurg and Spine. He's held this role since 2009. Over his 22-year career, he's held key leadership roles across the organization to include establishing and leading our spinal implant business through a very high-growth period. Tim is also the operating executive responsible for Stryker's entrance in 2010 in the reprocessing and remanufacturing arena through our acquisition of Ascent health [ph] sustainability solutions. Tim is based in New Jersey.

And finally, our last executive is Ramesh Subrahmanian. Mesh is the newest member of the team and is our Group Resident of International. He joined Stryker in September of 2011 from Merck, where he was most recently President of the Asia-Pacific region. Ramesh brings over 20 years of global healthcare experience to Stryker and has been quickly embraced by the Stryker team. I would also note today is Ramesh's birthday. Ramesh is based in Singapore.

Overall, the team that I just introduced has, collectively, more than 140 years of global healthcare experience, over 100 years of Stryker leadership experience. And I would argue they're one of the best teams, leadership teams in the medical device arena today. So one more time for the executive leadership.

Next, I'd like to ask our other corporate officers to please stand. Please stand. You can see the areas of responsibility noted on the slides presented. Each of these men and women are accomplished executives who take great measure to keep Stryker on track, and the majority of these folks work in support functions that span the entirety of our corporation. Could we give them a round of applause?

And now I'm going to go a little off-script. Eric, could you please stand?

Of note in this group is Eric Lum. I'm going to call out Eric today, as he has recently made the decision to transition into retirement and will be stepping down from the leadership of our tax organization as of June 30 of this year. Eric is a 25-year veteran of the corporation. He joined Stryker in 1987 as the company's first tax professional and has been the leader of our tax function ever since that day. As you might imagine, his contributions to the company over that time are many. Under his leadership, he has built a talented, high-performing global tax organization of the highest caliber as the company grew from a small Kalamazoo-based company into a large multinational corporation. In addition to ensuring the company maintained compliance with the complex rules of taxation across the globe, Eric and his team have been strong contributors to Stryker's earnings growth history, as evidenced by the declining effective tax rate during his 25-year tenure. I want to take a moment to publicly thank Eric for his 25 years of service and successful stewardship for the company's income tax obligations. Thank you, Eric.

And finally, this group's a little smaller this year. Generally, we have the whole contingent present. I'd like to ask a couple of our division leaders to stand. These are the people who are responsible for the day-to-day operations of running our business. And with me today, we have David Murphy, our Vice President and General Manager of Canada; and Brad Sauer, who runs our Medical division here in Kalamazoo. Could you please stand?

With that, Bill, I'll turn the podium back over to you.

William U. Parfet

Thank you, Curt. Two final introductions. Joining us is our Corporate Counsel from Skadden, Arps, Chip Mulaney, and also David Hoogendoorn, who represents Ernst & Young, our independent accountants.

Now we'll move to the business part of the meeting. We will vote on each of the 5 shareholder proposals that were included in the proxy and are reflected in your agenda. Now if anyone during this voting period would like to speak or raise a question, please move to a microphone located in the aisles. Remember, these comments should relate to specific proposals being voted on.

For questions not directly related to proposals, there will be a time period for shareholder questions, as I indicated before, following the announcement of the votes.

At this time, and as we move to voting matters, I'd ask if any shareholders in the room have a completed proxy in hand and would like to turn it in. If you do, please raise your hand and one of our inspectors will collect that completed proxy from you. Any completed proxies? Okay, I didn't see any. For the proposals listed in your proxy statement and on the agenda, we don't require motions or seconds. So the polls are now officially open for voting on these proposals. If there are any shareholders who would like to vote their shares from the floor, please raise your hand, and one of our inspectors will distribute a ballot to you.

Anyone voting from the floor? Okay, one right there. Now your ballots will be collected right after the proposals have been presented.

So the first matter, the first proposal, the first matter, is the election of 8 directors constituting the entire Board of Directors. At Stryker, we annually elect directors to serve a 1-year term, a governance practice that many companies are now adopting. So the nominees for election of directors are: Howard Cox, Srikant Datar, Roch Doliveux, Louise Francesconi, Allan Golston, Howard Lance, Bill Parfet and Ronda Stryker.

As there have been no other nominations and in accordance with our bylaws, the nominations are now closed.

The second matter to become before the meeting is ratification of the appointment of Ernst & Young as the company's independent registered public accounting firm for 2012. Under SEC rules, the responsibility for appointment and oversight of the company's auditors resides with the Audit Committee. However, today we continue our practice of asking shareholders to ratify this appointment. Is there any discussion?

Okay, moving on. The third matter to come before the meeting is the approval of an amendment to the company's Restated Articles of Incorporation to implement a majority vote standard for uncontested election of directors. Now the company had previously adopted a plurality plus voting standard in 2008. After a consultation with the couples of our shareholders and an examination of steps taken by other public companies, the Board of Directors is now proposing adoption of the majority vote standard, which we -- which is explained in detail in the proxy. We believe this enhances corporate governance for the company. Are there any comments or discussion?

Thank you. The fourth matter to come before the meeting is reapproval of the material terms of the performance goals under the Executive Bonus Plan as outlined in the proxy. Adoption of this proposal reserves the company's ability to take a federal tax deduction for certain compensation awards. One of the conditions requires shareholders' approval every 5 years of the material terms in our performance goals. Accordingly, shareholders approved a similar proposal 5 years ago. This has become common practice with almost all SEC registrants. Is there any discussion?

Okay. Finally, the fifth matter to come before the meeting is an advisory vote to approve named executive officer compensation. Shareholders have asked for and been recently granted the right to offer an advisory vote on executive compensation practices. The advisory vote on executive compensation was offered as a proposal by the company for the first time last year and was approved by 98% of the votes cast. Our goal regarding executive compensation is to be as transparent as possible. The philosophy in setting executive compensation is discussed in detail in the proxy under a Compensation Discussion and Analysis. Is there any discussion?

All of the proposals on the agenda are now before the meeting, and the polls are open. We are ready to receive the votes from shareholders. If you've not turned in your proxy and wish to do so, please raise your hand and an inspector of election will collect it.

I think we're all set there. In addition, any shareholder of record who is present may vote by ballot. And if you were previously granted a proxy, you may now vote your ballot which would revoke that proxy. All these rules we got to go by, make sure everybody is covered. Okay, anybody in that category? Okay. If anyone wants to vote by ballot, you can raise your hand.

And we've collected now -- okay, we've got -- we're all set, okay. The inspectors will now complete the vote count and will announce the results a little later in the meeting. While that's taking place, Curt Hartman will share with you some views on Stryker's performance and its great future. Curt?

Curt R. Hartman

Thank you, Bill. So what I'd like to do over the next couple of minutes is walk you through our 2011 results and then also take you through our first quarter results, which recently ended and were discuss with analysts earlier this month.

Starting with 2011, the slide in front of you would highlight some of the key accomplishments of your company during the year. Notably, it was in addition of $1 billion in revenue over 2010. It's not a small company, folks. The growth attributes and aspirations of the company dictate that type of performance. Now a portion of that revenue certainly did come through acquisitions, so it didn't have a prior-year comparable. But a significant portion of that did come through the core underlying business growth.

And the acquisitions were also supplemented by an aggressive outlook by our operating leaders that innovation is going to matter in healthcare, both today and into the future. And we supported that by an increasing 17% investment in our R&D over the prior year.

We formally established under Lonny Carpenter our global quality and ops organization. That was about a 2.5 year journey, where we took the previous decentralized alignment and moved those resources under one global leader so that we could bring out synergies and get better alignment with the expectations of the global regulatory bodies around the world.

In addition, as has previously been mentioned, we did receive some outside recognition form Fortune Magazine, and we're very proud of that and the other recognition that the company continues to receive.

As we look at our 2011 results, it was $8.3 billion in revenue, which is an increase of 13% over the prior year. That translated into adjusted earnings of $3.72, which was up 12%. From an SEC standpoint, they prefer that we look at GAAP earnings, which was $3.45, up 8%. GAAP earnings are the true reflection of the financial measures that hit your P&L every -- each and every single day.

On the other side of the slide, you see a pie chart. The goal of the pie chart is to depict the diversity of our business. You see we have a reconstructive segment highlighted in blue, which represents 45% of our revenue; MedSurg, which represents 38%; and the newest segment that we created in January based on the acquisition of the Neurovascular business in January of 2011 was our Neurotech and Spine business, which is 17%. If you like to look at this chart and see the diversity of the product offering recognizing that our single biggest line is knees at 16% of our revenue. The beauty here is the diversification in the portfolio. As any individual segment is up, others may be down. And from that, we get a real nice consistency in the results.

And these are those results over an extended period of time. So you see the results continuing to increase. 2009, even arguably one of the most challenged periods in the global economy, Stryker was still able to eke out ever so small positive year-over-year growth gain, and you can see the $8.3 billion represented in 2011.

Consistent sales results then translate into consistent earnings performance, which are depicted here dating back to 2005. Again, we feel the underlying balance diversification of the portfolio of products that we offer our customers around the world is what has allowed us to deliver consistent performance year in and year out.

Now the other side of the business results is looking at the cash we generate and the balance sheet that we hold. And 2011 was also a very good year, where the company generated $1.4 billion of cash. And we ended the year with $3.4 billion of cash and marketable securities on the balance sheet. Now you'll notice in the chart that 2010, 2011 tend to dip a little bit. That's a reflection of working capital adjustments that are required to be made when we acquire new companies. So when we acquire something like Neurovascular, we have to go through the buildup of their accounts receivable, we have to go through the buildup of their inventory on the balance sheet. So these things reflect the pulldown in the cash we generated, but they're for the right reasons at this point in time.

And then the question from shareholder perspective is what do you do with that cash? How do you leverage the cash for the long-term benefit of the company while at the same time recognizing there are some shorter-term needs? Now our strategy for a number of years now has been to have a highly focused M&A approach, investing in our core but also looking at adjacencies, a consistent dividend approach. We've been on this journey for a while, and we continue to stay on this journey, and a consistent share repurchase program. So those are the 3 ways we look at allocating cash off of the balance sheet.

And this chart depicts the prior period, 2004 to 2007, as compared to the 2008 through 2011 period. And you can see in the dividend category, about $900 million have been spent on dividends between '08 and '11. You can see share repurchases, $2 billion during that same 3-year period, and then acquisitions consume $2.9 billion.

You can do these kind of measures when you have positive cash generation in a business that spins out cash. And we think this is a nice distribution of that cash. Far on the left, the dividend share repurchases being benefit to shareholders. The acquisitions being more of a long-term growth play, which long-term is to the benefit of the shareholder.

And this is just an annual depiction of the dividends. Last year was $0.72. Clearly, we're on track for an $0.85-per-share dividend increase this year, which would be up 18% over prior year and consistent with the growth that we've seen over the last several years and the dividend payout.

Moving on to M&A. We look at our M&A strategy along 2 lines. Number one, supplementing the core business. The core business are those items that you saw on that previous pie chart. So if we can find acquisition targets that fit in with our Orthopedics group, our MedSurg Spine group, those are very attractive, because generally, our management teams know how to run those business, know how to run the innovation, know how to manufacture, provide high quality.

However, med tech is constantly evolving. Technology is constantly pushing the boundary. And as we're going through our M&A strategy, we're also looking to add growth platforms that are in key adjacent markets. And I'll walk you through a little bit of a story on that. Stryker has been in the Neuro space in the open Neuro surgical arena for a number of years, decades, if you will.

In 2011, we acquired the Neurovascular business. The Neurovascular business is a placement of coils and hemorrhagic aneurysms. That's a closed Neuro procedure. We would've never had a visibility to that if we were not in the open Neuro procedure. So we call that adjacency, and it fits right in with where our strategy is for growth of the company. So it's a nice adjacency, it's parallel, in sync with the markets we're already calling, but it's in new technology. So these 2 areas give you an idea of how we think about our M&A strategy.

And this is a depiction which I mentioned when I introduced Katherine about the activity on M&A. This shows our 2009 through 2011 period and the number of acquisitions. Those highlighted in green are new platforms. Ascent, which is the reprocessing, remanufacturing business; and Neurovascular, which is the minimally invasive, hemorrhagic coiling acquisition we had closed on in 2011. Everything else in blue fits in nicely with one of our existing businesses. So for example, the Gaymar acquisition fits in very nicely with our medical business. We've been long been in the bed and frame manufacturing, but we never had a surface. Now we have a surface through the acquisition of Gaymar.

This is also a trade show photo that I thought I'd share with you. Most people think of Stryker as an orthopedic company. With the acquisitions of the Neurovascular business, Stryker is now the world leader in complete stroke care. So in addition to being an orthopedic company, we are also, via acquisition, where we leverage the cash we generate in our balance sheet, we've now staked out a leadership position in a completely new segment. Importantly, this is a high-growth segment. Stroke care is very much in its infancy stages, and the assets that we were able to acquire through the Boston Scientific property and, later, the Concentric acquisition, are 2 of the market pioneers in this space, and we think will give us long-term growth for many years ahead.

As important to go out and find targets on the outside, it's critically important that you continue to innovate internally. And we have global R&D centers for every one of our businesses, including some R&D centers that we've now recently built in places like India. Investments and innovation internally are what keep Stryker on offense. That's what allows our sales forces around the world to talk to customers about new treatments, new devices for the treatment and better -- provide better healthcare for patients around the world.

So 2011, in summary, was a very good year. Growth was really driven by a balanced and diversified set of products and services. We continued our capital allocation strategy along dividends, repurchases and M&A. We're seeing early returns from the realignment that we've gone through with Lonny and the Global Quality and Ops team. Goals coming out of that are better standard cost roles, reduced warranty costs, things of that nature that are inside of our manufacturing environment. And we have a lot of positive momentum as we head into 2012, and it's interesting to say that as we stand here in April, because we're well in to 2012 at this point.

So I'll jump into 2012. And as we set out our plans for this year, we always like to start with a list of opportunities and risks that we see in the market. And as always, the opportunities are numerous, but so are the risks. You simply look at the headlines every day, there's a new risk every day, and they tend to move, come and go as quickly as you could ever imagine.

What we really see as key opportunities is the offering we've built and how we've moved into some higher-growth markets and a decreasing exposure to elective procedures. So we're now more tied into the long-term outlook of healthcare and patients through some of these acquisitions.

Our service offerings that we've been building over the last couple of years give us better alignment with our customers. When you walk in and talk to a customer about our sustainability solutions business, we're able to put real financial savings in front of our customers in addition to the environmental savings that, that business also provides.

We have new product launches across every one of our franchises. Those R&D dollars are great, but what you want to see coming out of the back of those R&D dollars are new product launches. And our operating leaders today would tell you, we have a wonderful portfolio of new product launches going on around the company.

We're very focused on decentralizing efficiencies, and we believe those will help us long-term drive 10% or greater EPS growth. And we also announced in November of last year, a global restructuring, a targeted global restructuring, to realign parts of the businesses that were no longer in the high-growth areas so that we can make investments in higher-growth portions of the company. And we think that will gain us about $100 million of productivity gains by 2013.

Obviously, the risks, you can read them all. Elective procedures with the economic slowdown in 2009. Who would have thought hips and knees were an elective procedure, but they are, as that market has gone from about 4% to 6% growth to 1% to 3% growth on a global basis. European austerity measures. Europe is in the news every single day. And obviously, they're sorting through in those markets how healthcare is paid for. In most of those markets, healthcare is a single-payer system: the government. So as governments contract, as tax revenue contracts, governments have to wrestle with how they're going to pay for healthcare on an ongoing basis.

The market has also experienced some price pressure. And the med tech market, in general, has slowed to a 1% to 3% range when you aggregate all the businesses that make up med tech today. So clearly, a long list of opportunities, and as always and as to be expected, a set of risks. But your company is up to the challenge, and we just recently reported our Q1 results. And we had a very solid start to the new year. Sales finished at $2.16 billion, up 7% reported; backing out currency, up 7.4%, a very good results and warmly received by Wall Street.

We have balanced growth by geography and business segment, which is very important as well. Remember we have a number of geographies we participate in, a number of business segments, and it's nice to see the balance in the results across both of those categories.

I've already touched on new products. And then, to be ultimately fair, we have to call out that 2 points of that 7.4% growth did come from acquisitions. Revenue that was not part of the business last year that we now count as part of the business because of the acquisition.

On the earnings side, we achieved adjusted earnings per share of $0.99, which was a $0.10 increase over the prior year, and on a GAAP earnings level, that was $0.91, which was an increase of 17%. And it was really the gains driven by that sales growth that I mentioned on line one and a continued focus by your leadership team on cost reduction. Quality cost and innovation are key elements of the future of healthcare, and this leadership team is very much in line with those goals.

As we look at our full year expectations, we expect sales to finish in the 3.5% to 6.5% sales growth range when you factor out the impact of foreign currency. We you take currency and acquisitions out, it's a 2% to 5% growth. Now clearly, you might be scratching your head and say, "Wait a minute, you guys just exceeded that in the first quarter." And so I have to call out that in the first quarter, we had one extra selling day versus the prior year. So on an adjusted basis, our growth was really about 4.2%, so we're still right inside that 2% to 5% range. We have to be intellectually honest when we look at our results, and we are shooting for 10% plus adjusted earnings-per-share growth.

So the story of Stryker, 2011 was a good story. 2011 start -- off to a very nice start. Thanks to the leadership of the executive team and various division officers and other corporate officers. But it really does reside around our balance diversification and our ultimate focus on delivering results for you, our shareholders.

That's it, Bill. Thank you.

William U. Parfet

Thank you, Curt. Exciting. Now I'd like to resume the business portion of the meeting. And we've had a chance to tally the votes, and I'll ask Dean to report the results.

Dean H. Bergy

Okay. Thanks, Bill. I am advised by the inspectors of election that each of the persons nominated for director and Proposal 1 received at least 270,659,524 votes in favor of his or her election, and, therefore, each has been duly elected a director of the company.

I am also advised by the inspectors of election that 338,137,340 shares, representing 98% of the total shares cast on Proposal 2, were voted for ratification of the appointment of Ernst & Young as independent registered public accounting firm for 2012. I therefore declare that Ernst & Young is appointed as the company's independent registered public accounting firm for 2012.

I'm also advised by the inspectors of election that a majority of the total shares cast on Proposal 3, approval to amend the company's Restated Articles of Incorporation, were voted in favor of that proposal. I declare that the amendment to the company's Restated Articles of Incorporation as presented to the meeting has been duly approved by the shareholders.

I am also advised by the inspectors of election that a majority of the total shares cast on Proposal 4, reapproval of the material terms of the performance goals under the Executive Bonus Plan, were voted in favor of that proposal and that the total votes cast on that proposal represent over 50% of the outstanding shares.

I declare that the material terms of the performance goals under the Executive Bonus Plans have been duly approved by the shareholders.

I'm also advised by the inspectors of election that a majority of the total shares cast on Proposal 5, the advisory vote on the resolution awaiting to the company's executive compensation, were voted in favor of that proposal. The final results of the meeting will be filed on a Form 10-K with the SEC shortly after the close of this meeting. And as a result, I declare that the business portion of the meeting is now adjourned. Bill?

William U. Parfet

Thank you again, Dean. So now, just before we begin our Q&A, I want to provide a quick update on our efforts to find a permanent CEO for the company.

We have a search committee, which is headed by Louise Francesconi, and the board, in conjunction with an outside search firm, is going through a comprehensive and thorough search of both internal and external candidates.

The process is ongoing. And although the timing will be announced at the appropriate time when it's when most appropriate, the board is comfortable with the pace of this review. So we're being thorough, we're being complete and we also realize that there are some unique requirements to run a company like this with such a great and terrific growth record. The board understands that, and we're going to be diligent in our effort to find the best possible person for that job.

Okay, we would now like to hear any questions or comments that you have.

Question-and-Answer Session

William U. Parfet

Shareholders who wish to be recognized are asked to come to one of the microphones located in the main 2 aisles. And if you need a microphone, we can have one passed to you at your seats, just raise your hand. So please, if you'd like, come up to the microphones. We would ask that you state your full name and affiliation before your questions and please ask that only one question be asked at a time, and we ask that you limit your time to 3 minutes. But we look forward to anyone who would like to ask a question. Please.

Yes, ma'am? It should be on.

Unknown Shareholder

Yes, okay, I was wondering...

William U. Parfet

You've got it? Remember, you've got to give your name -- yes, okay.

Unknown Shareholder

Cheryl Townsend [ph], no affiliation. I was wondering if it was public information as to whether or not Curt would be running for the CEO position permanently.

William U. Parfet

No, the way this works is that we have invited any insider who would like to apply to go ahead and apply, and the procedure that's used universally, but also in our case, is to keep that silent. So you don't have to let anybody know. But if you get to the final stages, of course, then those who make the final stage, if it's one of the internal candidates, their name would be revealed.

Any other questions? Okay, well, we thank you for coming.

Unknown Shareholder

Jay Tyler [ph], representing myself. With the full implementation of ObamaCare expected in 2014, do you expect that to adversely or positively affect earnings per share? If so, why, either positively or negatively? And what adjustments are you making in that anticipation?

Curt R. Hartman

It's a very good question. The provisions of the Affordable Care Act have both a positive connotation for our company and a potentially negative connotation. Number one, Stryker and its leadership team are fully behind providing more access to health care, and this bill has the potential to do that. On the other side of that, somebody's got to pay for that healthcare, and one of the provisions in the current bill requires a 2.3% medical device tax on all sales of devices in the U.S. market. So it's on sales, not on profit. So that 2.3% on a company the size of Stryker is the equivalent of roughly $150 million that will hit our operating expense line. So the answer to your question, will it have an impact on earnings, absolutely. The way the company has been maneuvering to address that is threefold. Number one, we're moving into year 3 of the efforts around Global Quality and Operations and aligning 30-plus decentralized plants under one global leader who now has the authority to make decisions on behalf of manufacturing efficiency. Number two, the acquisition string that this company has been on. We have stated when we closed those acquisitions that we see the synergies coming out of those really starting in year 2 and beyond, because the integration part of acquisitions tends to slow down the revenue line, and it's also the period where we tend to spend more money. Many of our acquisitions are now hitting year 2 and year 3, especially as we hit next year. And then year 3 is the rest of the leadership team coming back in November of last year, saying, "We need to reshape our business," and that's what the Global Restructuring was about that we said that would bring out $100 million plus of savings and efficiencies across our company. So those are our 3 current approaches. We obviously have other ones that are not quite as material as those 3, but those are the 3 that we're using to address it.

William U. Parfet

Any other comments or questions anybody has? We'll get a microphone to you here in just a second. Just one? Okay.

Unknown Shareholder

[indiscernible]

William U. Parfet

He's signaling no, but he has a big smile on his face. And he will continue to serve forever as Chairman Emeritus of this great company. So thank you for your compliments to John.

Yes?

Unknown Shareholder

[indiscernible]

Curt R. Hartman

Tony [ph], if I can repeat your question so everybody can hear, the question is, will Stryker step outside the box on acquisitions? If I take you back to the slide, number one, our focus is on core, things that are close. We then look at adjacencies. Things like Neurovascular, which is -- I think we would view that as stepping outside the box. That was the second-biggest acquisition in the company's history at $1.5 billion. It really took us in the complete stroke care market, where this company has never participated. The next level would be that two-step move, which is a new market customer and a new technology. History would say those type of acquisitions don't generally have a positive outcome or good payback for shareholders. In fact, history would say about 70% of all acquisitions fail and don't deliver value to shareholders. So we've really tried to have our teams focus on core acquisitions, a little bit on the adjacencies, and we've tended to steer away from those things that fall into that last category. That doesn't mean it's never. It just means the bar for something like that would have to be really, really high, and it would be a very robust discussion with our management team as well as our Board of Directors because it would be introducing a new level of risk to the company.

William U. Parfet

Jim?

Unknown Shareholder

James Bridenstine [ph], stockholder. And I just have a comment that as a stockholder, I want to thank the 2 gentlemen standing on stage for stepping forward at what is a difficult time in the history of this company and for doing such an outstanding job during this time. Thank you, Curt. Thank you, Bill.

William U. Parfet

Thank you, Jim. Any other questions?

Unknown Shareholder

I'm George Magus [ph], and I want to thank you for lowering the amount of pages in your annual report, because when you make a decision like that, you help the environment. Your ecological footprint is less. So that's not a money deal, but that's a good thing. The other thing is you have less pages with the printing is cheaper and the pages, you're saving money there. That goes back on the bottom line, you can invest it to somewhere else. And the other thing is the sending of it. Because I had to wait, and that's postage, and it costs you $2 apiece to send. You cut it in half, you have $10 million, annual report, that would be $20 million, we save $10 million. So whatever those numbers are. So this is a wonderful thing. And the other thing I would like to suggest, there's -- I know at Coca-Cola, I don't own as much stock in Coca-Cola, but the interesting thing that they're doing is they do an e-annual report. They will plant a tree for every shareholder that does that. And we could go out and plant trees in Africa and different places where trees have been eliminated. They have drought problems in Africa and different places, and that causes wars, because people don't -- can't make food. they can't grow stuff and then they become violent. And that's why there's more wars, and that's what they showed in the statistics of why wars are happening, so we can help the world and make people love America and Stryker.

William U. Parfet

Thank you, George. We'll take that under advisement. Any other questions before we adjourn? Well, before we say goodbye, I would just apologize for last year, we had a little parking lot problem, and it took a long time to get out of the parking lot. So this year, we've left the gates open for 40 minutes. So it won't take so long to get out of the parking lot.

So we thank you for attending today. We thank you for your support of this great corporation, and we look forward to seeing you back here next year. Have a great afternoon.

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