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Stryker Reports 2008 Results

Stryker Corporation (Stryker) has reported net sales of $6.7 billion for the full year 2008, up 12%, compared with net sales of $6 billion in the previous year-end. It has also reported net earnings of $1.14 billion, or $2.78 per diluted share, for the full year 2008, up 19.7%, compared with the net earnings of $1.01 billion, or $2.44 per diluted share, in the previous year-end.

Fourth quarter highlights

Net sales increased 3.6% (7.7% constant currency) to $1,718 million

Orthopaedic Implant sales increased 4.2% (8.9% constant currency)

MedSurg Equipment sales increased 2.8% (6.2% constant currency)

Net earnings from continuing operations increased 0.6% to $278 million and adjusted net earnings from continuing operations increased 8.4% to $299 million

Diluted net earnings per share from continuing operations increased 4.5% to $0.69 from $0.66 and adjusted diluted net earnings per share from continuing operations increased 12.1% to $0.74 from $0.66

$250 million share repurchase program was initiated and completed during the quarter

Highlights for the year ended december 31, 2008

Net sales increased 12.0% (10.5% constant currency) to $6,718 million

Orthopaedic Implant sales increased 10.6% (8.8% constant currency)

MedSurg Equipment sales increased 14.0% (13.2% constant currency)

Net earnings from continuing operations increased 16.3% to $1,148 million and adjusted net earnings from continuing operations increased 17.0% to $1,170 million

Diluted net earnings per share from continuing operations increased 17.3% to $2.78 from $2.37 and adjusted diluted net earnings per share from continuing operations increased 17.9% to $2.83 from $2.40

$1.0 billion of share repurchase programs were initiated and completed during the year resulting in 17.4 million shares being purchased in the open market

“We are pleased to report our eighth consecutive year of double-digit sales growth for 2008 despite the slowdown in capital purchases by our hospital customers during the fourth quarter,” commented Stephen P. MacMillan, president and chief executive officer. “Six of our eight major product franchises achieved double-digit sales growth in 2008 demonstrating the strength of our diversified business model. As a result, we were able to deliver 18% adjusted diluted net earnings per share from continuing operations growth in a year that included significant internal and external challenges.”

Net sales increased 3.6% to $1,718 million in the fourth quarter of 2008, and increased 12.0% to $6,718 million for the year ended December 31, 2008. On a constant currency basis, net sales increased 7.7% in the fourth quarter and 10.5% for the year.

Net earnings from continuing operations for the fourth quarter and year ended December 31, 2008 were reduced by $22 million of restructuring charges (net of income tax benefits) related to the decisions to simplify the structure of the Company’s Japanese distribution business and to substantially reduce development efforts associated with the 2006 acquisition of Sightline Technologies, Ltd. Net earnings from continuing operations for the year ended December 31, 2007 were reduced by a $13 million intangible asset impairment charge.

Excluding the impact of the 2008 restructuring charges, adjusted net earnings from continuing operations for the fourth quarter of 2008 of $299 million increased 8.4% over net earnings from continuing operations of $276 million for the fourth quarter of 2007 and adjusted diluted net earnings per share from continuing operations for the fourth quarter of 2008 of $0.74 increased 12.1% over diluted net earnings per share from continuing operations of $0.66 for the fourth quarter of 2007. Excluding the impacts of the 2008 restructuring charges and the 2007 intangible asset impairment charge, adjusted net earnings from continuing operations of $1,170 million for the year ended December 31, 2008 increased 17.0% over adjusted net earnings from continuing operations of $999 million for the year ended December 31, 2007 and adjusted diluted net earnings per share from continuing operations for the year ended December 31, 2008 of $2.83 increased 17.9% over adjusted diluted net earnings per share from continuing operations of $2.40 for the year ended December 31, 2007.

Net earnings for the fourth quarter of 2008 were $278 million, representing a 0.6% increase over net earnings of $276 million for the fourth quarter of 2007. Diluted net earnings per share for the fourth quarter of 2008 increased 4.5% to $0.69 compared to $0.66 for the fourth quarter of 2007.

Net earnings for the year ended December 31, 2007 included a gain of $26 million (net of income taxes) to reflect the divestiture of the Company’s outpatient physical therapy business, Physiotherapy Associates, and net earnings from discontinued operations of $5 million.

Sales Analysis

Domestic sales increased 7.0% in the fourth quarter and 11.2% for the year. International sales decreased 2.3% in the fourth quarter and increased 13.3% for the year. The impact of foreign currency comparisons to the dollar value of international sales was unfavorable by $68 million in the fourth quarter and favorable by $85 million for the year. On a constant currency basis, international sales increased 9.0% in the fourth quarter and 9.4% for the year.

Worldwide sales of Orthopaedic Implants increased 4.2% in the fourth quarter and 10.6% for the year. On a constant currency basis, sales of Orthopaedic Implants increased 8.9% in the fourth quarter and 8.8% for the year.

Worldwide sales of MedSurg Equipment increased 2.8% in the fourth quarter and 14.0% for the year. On a constant currency basis, sales of MedSurg Equipment increased 6.2% in the fourth quarter and 13.2% for the year.

Income Taxes

The company’s effective income tax rates on earnings from continuing operations for the fourth quarter and year ended December 31, 2008 were 26.9% and 27.4%, respectively, as compared to effective income tax rates on such earnings for the fourth quarter and year ended December 31, 2007 of 28.1% and 28.0%, respectively. The effective income tax rates for the fourth quarter and year ended December 31, 2008 reflect the impact of the restructuring charges of $22 million (net of $13 million income tax benefits). The effective income tax rate for the year ended December 31, 2007 reflects the impact of the intangible asset impairment charge of $13 million (net of $7 million income tax benefit).

Outlook for 2009

The company projects that diluted net earnings per share for 2009 will be in the range of $3.12 to $3.22, an increase of 10% to 14% over adjusted diluted net earnings per share from continuing operations of $2.83 in 2008. The financial forecast for 2009 anticipates a constant currency net sales increase in the range of 6% to 9%. If foreign currency exchange rates hold near current levels, the company anticipates an unfavorable impact on net sales of about 4.5% to 5.5% in the first quarter of 2009 and an unfavorable impact on net sales of about 3.5% to 4.5% for the full year of 2009.