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April 20, 2008 HEALTHCARE (MEDICAL PRODUCTS & SUPPLIES)
Henry Fund Research
Stryker Corporation (SYK) Investment Recommendation BUY
Gabriel Hilmoe [email protected]
Current Price $65.30
Target Price Range $81.84
Source: BigCharts.com – (4535 = DJ US Medical Equipment Index)
Key Stock Statistics
52-Week Price Range $58.86 – 76.89
Market Capitalization (B) $26.74
Shares Outstanding (M) 411.18
Institutional Ownership 51.5%
60-Month Beta 0.91
Dividend Yield 0.60%
Price/Earnings (ttm) 26.7
Price/Book 5.04
Price/Sales 4.52
ROA (ttm) 12.54%
ROE(ttm) 20.62%
Projected 5-Year Growth 17.8%
EPS ($)
Year 2005 2006 2007 2008E 2009E 2010E
EPS 1.67 1.91 2.48 2.87 3.40 3.78
All earnings represent earnings from operations and have been filtered from net nonrecurring gains.
Valuation Models
Discounted Cash Flow $81.84
Economic Profit $81.84
Relative P/E (EPS08) $58.28
Relative P/E (EPS09) $60.52
INVESTMENT THESIS
Stryker Corp. (Stryker) is a leading medical product and device company focusing in the orthopedic implant and medical specialty segments. The company has continued to produce strong operating results year-over-year across all business segments. This growth coupled with continuing product innovation as well as an ever changing demographic landscape should prove beneficial for the company going forward. The stock has recently seen a downtick in price, which we attribute primarily to the current macroeconomic environment. We view this is as a potential buying opportunity to purchase a premium stock at a discount.
(+) Sales in the MedSurg segment increased 19% in 2007. Revenue from this segment now comprises over 40% of total revenue for Stryker. We believe the company will be able to maintain 15-17% growth in this segment for the next 2-3 years.
(+) Stryker continued its strong performance in 2007 generating 17% overall revenue growth. We expect Stryker to be able to maintain annual top line growth of 12-14% for the next 2-3 years.
(+) Management continued to provide strong guidance for the coming fiscal year during the January conference call. In spite of the economic slowdown, management continues to believe they can produce earnings growth around 20% over the next few years. We view this projection as a positive for the company going forward.
(+) The continuous change in demographics, particularly growth in average age, domestically and globally, should prove to be a long term positive for Stryker. Chronic illness and orthopedic demands continue to increase as the population ages.
(-) Stryker continues to face scrutiny from the Department of Justice (DOJ) relating to gift payments made to orthopedic physicians. We view this as a potential lagging problem, with possible monetary implications in the future. However, we feel that the company will be able to maintain projected growth going forward in spite of this situation.
(-) Growth in the medical products and supplies industry is driven by innovation. Stryker will need to continue to be an innovator in the highly competitive industry to maintain current growth levels and dominant market share.
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EXECUTIVE SUMMARY
Stryker has continued to deliver strong operating results for the past decade. Growth in all areas of the business has contributed to healthy operating results and we look for this to continue into the future. The company is continuing to expand into high growth areas such as the endoscopy market, which we believe will support strong operating results going forward. The stock has recently seen a downtick in price which we view as a potential buying opportunity based on future opportunities and projected operating results.
COMPANY DESCRIPTION
Stryker Corp., founded in Kalamazoo, Michigan in 1941, is one the world’s leading medical technology firms with the broadest range of orthopedic products as well as medical specialty (MedSurg) products. Stryker derives the majority of its revenues in the United States; however they do have exposure globally with 20% of FY2007 revenues generated in Europe and 16% of FY2007 revenues generated in other foreign countries.
1
Stryker’s primary business segments consist of Orthopedic Implants and MedSurg Equipment.
Orthopedic Implants
The Orthopedic Implant segment is the largest segment in terms of revenue for Stryker; generating $3.6 billion in sales in 2007.
1 This represented an increase of 15%
over 2006. Within the orthopedic business, Stryker designs, produces and sells five lines of implant systems: Hips, Knees, Spine, Trauma and Other Reconstructive. These implant systems are used in joint replacement, trauma, spinal and craniomaxillofacial surgeries. The Hips and Knees segment represents more than 50% of all orthopedic sales for Stryker
1.
Chart 1 shows the breakdown of orthopedic sales for 2007.
Chart 1: 2007 Orthopedic Implants
Fact Book 2007-2008
Many of Stryker’s newest implants are designed to be used in minimally invasive surgeries (MIS), which limit soft tissue damage during the surgical procedure. This has become an important part of Stryker’s recent product development as the demand for this type of procedure has been gaining popularity. We look for continued expansion in this line of products in the future.
MedSurg Equipment
The MedSurg Equipment segment is Stryker’s fastest growing segment, generating $2.4 billion in sales in 2007. Revenue growth in 2007 was 19%, up from 15% the prior year. This segment now comprises approximately 40% of total sales for Stryker. The MedSurg Equipment segment is consists of the following sub segments:
Surgical Equipment
Endoscopic, Communications and Digital Imaging Systems
Patient Handling and Emergency Medical Equipment
Chart 2 shows the breakdown of MedSurg sales in 2007.
Chart 2: 2007 MedSurg Equipment
Fact Book 2007-2008
The MedSurg segment has continued to grow as a percentage of overall revenue. Chart 3 shows the breakdown by product line for all operating sub segments of Stryker’s business in 2007.
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Chart 3: 2007 Product Portfolio Sales
Fact Book 2007-2008
International Exposure
International sales represented 36% of total sales in 2007 or $2.2 billion. Foreign sales were also 36% of total revenues in 2006 or $1.8 billion.
1 The principal
area of operation outside of the U.S. for Stryker is Europe although the company also has operations in Japan, the Pacific Region, Canada, and the Latin Americas. Chart 4 shows a geographic breakdown of sales for FY 2007.
Chart 4: Total Sales by Geographic Region FY 2007
Fact Book 2007-2008
RECENT DEVELOPMENTS
FY 2007 was another strong year for Stryker with top line growth of 17%, compared to 12% in 2006. Management continued to forecast strong revenue growth for 2008, with expected sales growth of 12% -
13%. Recent earnings estimates met analysts’ expectations at $2.48 per share, as they have for the past several years. The consistent earnings production continues to increase our confidence regarding management’s ability to predict and produce strong growth. Our future EPS projections for 2008 and 2009 are $2.87 and $3.40 respectively, slightly more conservative than management’s expectations. Current street estimates for FY 2008 and FY 2009 are $2.88 and $3.43 respectively.
Despite the continued positive operating results and positive outlook from management, Stryker continues to face scrutiny over its gift payments to orthopedic physicians. The DOJ is continuing to investigate any improper “incentive” payments the company made to physicians. With this unresolved issue still up in the air and potential fallout unknown, we are somewhat conservative with our earnings estimates going forward. However, a quick and inexpensive resolution to the DOJ’s current investigation could change current earnings estimates. Management has consistently denied any wrong doing and we are cautiously optimistic that this issue will resolve itself in a timely and non-costly manner.
The company has also been under scrutiny from the FDA regarding its Trident hip replacement line. The company received a letter from the FDA regarding production quality problems with the division and Stryker voluntarily recalled the line in late 2007. Management’s guidance continues to show that this issue is being resolved and the company has even taken action to tie a portion of executive pay to the solution of this issue. We believe the market has overreacted to this issue and see the negative impact on operating results as minimal. Despite the product recall, management continues to project 20% EPS growth for the year and so far through quarter 1 of 2008 they have proven that operating results will not be adversely impacted by this issue, producing 20% earnings growth YOY.
INDUSTRY TRENDS
Stryker operates in a highly diversified and sometimes specialized industry. Several firms concentrate in the production of orthopedic implants and surgical instruments including; Zimmer Holdings, Medtronic, Smith & Nephew and Baxter International. Within these firms, Stryker maintains the largest market share globally for orthopedic implants and MedSurg equipment.
The entire industry is facing pricing pressures from internal competition as well as from government entities concerned about the rising costs of healthcare. Stryker is no exception to this pressure. One concern going
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forward is that the industry may see diminished revenues if pricing pressures continue to expand.
Stryker has been at the forefront of technological advances across all business segments and this has driven their market share results. The company has multiple products that are leaders in their respective markets. Stryker credits much of this success to long lasting relationships with physicians and medical service organizations, which we see continuing into the future.
The medical device market, including Stryker, has also been very acquisitive over the last few years. This acquisitive market has primarily been driven by companies flush with cash as well as a demand for new and complimentary technology. Since 2005, Stryker has acquired three companies and sold off its physical therapy business, which was done to isolate the company’s focus towards innovation and production medical products. Most recently Stryker acquired Sightline Technologies Ltd., an endoscope maker, for $50 million in cash, which the company expects to assist them in breaking into a new area of growth going forward.
MARKET PLACEMENT
The Orthopedics and MedSurg industries continue to maintain strong growth within healthcare industry, despite the macro trends and overall slowdown of the U.S. economy. Stryker has also maintained a strong market position during this period of growth. As chart 5 illustrates, Stryker continues to maintain dominate market placement with 16% of the worldwide orthopedics market.
Chart 5: Worldwide Orthopedic Market Share
FY 2007
Fact Book 2007-2008
Stryker has continued its market leadership in the MedSurg Equipment segment as well. Chart 6 shows the breakdown by major product type in this segment. Within this segment Stryker maintains 33% market share
Chart 6: Worldwide MedSurg Market FY 2007
Fact Book 2007-2008
Within this segment Stryker maintains 33% market share in operating room equipment, a 5% market share in the endoscopy market and 27% share in the patient handling market.
MARKETS AND COMPETITION
Stryker competes in the medical supplies and devices industry by operating segment. The medical supplies and devices industry is a highly diversified industry, with most companies specializing in specific aspects of product development. Chart 7 displays the overall medical technology market in terms of annual sales for FY 2007.
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Chart 7: Worldwide Market Sales FY 2007
Fact Book 2007-2008
Orthopedics
Stryker competes primarily with 4 companies globally in the orthopedic reconstructive products. These companies consist of DePuy Orthopedics Inc. (a subsidiary of Johnson & Johnson), Zimmer Holdings, Biomet Inc, and Smith & Nephew.
3 Depending on
product segment within the Orthopedics division; Stryker also competes with other firms including Medtronic, and Synthes Inc. The following table shows these companies by Market Cap, P/E Ratio and EPS.
Stryker currently trades at a premium relative to many of its peers. We attribute this multiple to strong
historical growth as well as management’s projected operating results going forward. Management has consistently provided accurate guidance over the past few years and with the recent projections of 20% earnings growth, we view Stryker as a solid investment opportunity currently trading at a discounted price.
MedSurg
Within the MedSurg segment, Stryker competes with 4 primary companies; Medtronic, Zimmer, Johnson and Johnson’s subsidiary DePuy and Smith & Nephew. The overall market for MedSurg products in 2007 was approximately $23.0 billion, up from 13.1 billion the previous year.
3 We view this industry growth as a major
opportunity for Stryker in the future.
Stryker continues to dominate this market with overall global market share of 33% and we expect this trend to remain in the future. Stryker has been an innovator in this market, particularly in the endoscopy segment. The overall endoscopy market in 2007 was $16.5 billion compared to $9.4 billion in 2006. Stryker maintained 5% of this market compared to the market leader, Johnson and Johnson who has an estimated market share of 25%. We look for Stryker to make strides in this area moving forward with product innovation and an increased focus to this line of the business. Chart 8 shows the product breakout of the current endoscopy market. (Stryker participates only in the shaded areas.)
Chart 8: Worldwide Endoscopy Market
FY 2007
Fact Book 2007-2008.
ECONOMIC OUTLOOK
In general, the healthcare industry is a defensive industry during economic downturns. Spending generally does not subside as much as it does in non-
Market Cap (B) P/E Ratio (ttm) EPS (ttm)
Stryker 25.17 25.10 2.44
Johnson & Johnson 176.87 17.18 3.64
Zimmer Hldgs. 17.51 23.06 3.26
Biomet Inc.* N/A N/A N/A
Smith & Nephew 11.82 37.45 1.71
Medtronic 54.08 24.72 1.94
Synthes Inc.* N/A N/A N/A
* German corporations
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staple industries. However, Stryker and its competitors continue to operate in an economic environment where volatility has been ever increasing.
Stryker’s FY 2007 operating results did not appear to be negatively impacted by the current economic environment with strong sales and earnings growth. In fact, some of the fallout from the current economy has actually helped the company increase revenues. In FY 2007, Stryker reported a sales increase of 17%, 3% of which was attributed to the foreign currency exchange on products sold globally. We believe this trend of the weak dollar will continue, however quarterly results for the company do need to be watched carefully to ensure that the current monetary tightening is not adversely impacting operating results.
Real GDP
Real GDP growth, which is an indicator of the overall health of the economy, has been stagnant recently. This trend is expected to continue, leading to what many economists believe will be a recession. In general, Stryker is not a company directly impacted by slowed output or even slowed consumer spending. The products Stryker develops are generally thought of as fundamental healthcare products required to provide proper medical attention. Slowed GDP growth generally does not have the same significant impact on this industry as it does for other superfluous products and services.
Stryker is, however, operating in an economy that has slowed severely as of late and looks to be continued down that path, at least in the first half of 2008. We believe Stryker will maintain its growth expectations in this environment; however the company may be forced to react strategically if this current environment persists. The Henry fund projects 0.8% GDP growth for the next six months and 2.64% growth for the next 2 years.
The table below shows the seasonally adjusted change in GDP growth from 2000 – 2007.
Source: Federal Reserve-Fed Views
National Healthcare Expenditures
Per the Centers for Medicare and Medicaid Services (CMS), national healthcare expenditures in the U.S. are expected to grow to $2.4 trillion in 2008, a 6%-7% increase from the previous year
4. The medical products
and supplies industry is directly impacted by healthcare spending and as spending fluctuates, there is more or less money in the system to funnel back to device and supply manufacturers to complete R&D work as well as stimulate demand. Healthcare spending is not projected to drop in the near future, however governments domestically and abroad are all looking into ways to curb mounting healthcare costs. If healthcare spending were to actually retract, medical supplies would likely be adversely impacted.
Stryker has already seen some of this pricing pressure occurring in Japan and we foresee further pressure abroad and domestically. In the near term we do not see spending retracting at high rates; however Stryker could face growing pressure due to changes in the U.S. political scene as well as a global shift to curb healthcare costs.
Government Sponsored Healthcare
Government sponsored healthcare programs (Medicare and Medicaid), play an integral role in America’s overall health expenditure measure. In 2006, the two programs paid a combined 34.4% of the overall healthcare bill.
4
This segment of healthcare spending is integral to the business of high-end medical products, because the reimbursement rate for such products is generally dictated by the Medicare system and the products are not priced in an open and free market.
Recent projections by CMS show Medicare expenditures are expected to increase annually by 8.8% from 2005 – 2016.
4 Stryker’s primary end-user
clientele in the past has been the elderly population receiving surgeries for chronic illness as well as
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orthopedic implants. We believe the consistent increase in public spending will continue to aid demand for Stryker’s products and services well into the future.
Source: NCHC- Impact of Rising HC Costs
Consumer Price Index
Source: Centers for Medicare and Medicaid Services
According to the Bureau of Labor and Statistics (BLS), medical service inflation was 5.2% for the year ended December 2007 as opposed to 4.1 for the overall consumer price index. This increase is generally attributed to price increases in hospital and related services as well as prescription drug prices. Outside of transportation and energy, medical services experienced the highest price growth in 2007.
Healthcare related inflation has generally tracked higher than the overall price index, and we do not foresee this pattern subsiding. However, we also do not see inflation in general, maintaining its current pace long term. Stryker, as well as other medical device companies have continued to hear cases for reduced pricing
initiatives domestically and abroad. This may reduce the heightened inflationary trends of the medical device industry; however we do not see this happening in the near term. Japan has been a leader in pushing for price reductions. We view this action as a potential threat to the company’s operating results; however we have not seen any major impact up to this point. First quarter operating results in 2008 continued to be strong showing no signs of deflated prices in the market.
In general, as overall inflation climbs, the purchasing power of consumers is greatly impacted. A cause for concern going forward for companies like Stryker is that end users will not view their medical products as a necessary staple if inflation gets out of control. Non-essential healthcare treatments may as a result decline, reducing demand for the newest technology. We project a 4.03% inflation rate for the short term 6-month period going forward and a 3.45% inflation rate for the 2-year period going forward.
R&D
The medical products and supplies industry survives on new technology and innovation. Without it, the industry would become a commoditized provider of dated products. In general, high-technology companies spend between 9% - 11% of annual revenues on R&D. The average industrial company will spend about 5% annually.
Conversely, the pharmaceutical industry, which also thrives on innovating new products, spends approximately 15% of annual revenues on R&D
2.
However, the pharmaceutical industry is quite different from the medical products and supplies industry. If a pharmaceutical industry produces a blockbuster drug, the revenue stream that occurs is quite lengthy. The medical device industry rarely, if ever, experiences this scenario. Because of constant innovation by competitors that renders existing technology obsolete, medical device firms rarely have a monopolistic position in the market.
Stryker has continued to innovate with new product offerings and lines in both the Orthopedics and MedSurg segments. Historically the company has spent approximately 6.3% of sales on R&D and engineering expenses, which is slightly less than its peers. This is low compared to the overall medical device industry, but is in line with Stryker’s focus in the orthopedics and MedSurg segments. Beyond developing brand new one-off products, Stryker also produces improvements and complimentary products to their existing product line.
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Exchange Rates
Global companies continue to benefit from the current weak condition of the U.S. dollar. For FY 2007, 3% of Stryker’s revenue growth was attributable to foreign currency exchange rates. Stryker currently maintains about 36% of its revenues from foreign countries. Based on the current macro environment, particularly in the U.S., we believe that for the near term, the dollar will remain in its weak state and companies like Stryker who have significant global exposure will continue to benefit.
The following two charts show the recent decline in purchasing power of the U.S. dollar over the last 120 days.
Euro to 1 Dollar
Source: XRates.com
Japanese Yen to 1 Dollar
Source: XRates.com
CATALYSTS FOR GROWTH
Emerging Technology
Stryker continues to be an industry leader in innovation, which is a primary reason it maintains the largest market share in each of its operating segments; 33% in MedSurg and 15% in Orthopedics
1. Stryker has
continued to evolve its product line and has become a more diversified company through the MedSurg segment.
Stryker has also stayed on the forefront of technology through small strategic acquisitions over the past few years. These acquisitions have been complimentary in nature, meant to augment current Stryker technology in
endoscopy and orthopedic implants. Management’s guidance suggests that this trend, small acquisitions with the use of excess cash, will continue, which we view as a growth strategy for the company.
Demographics
The biggest driver influencing Stryker’s long-term future is the changing demographics, both domestically and globally. Globally the number of people aged 65 and over is likely to increase over 100% from 1994 to 800 million in 2025.
5
Continued aging will no doubt increase the prevalence of chronic disease which requires new innovation in the market place, as patients become more sophisticated and demanding. The demands for new life improving products will also likely increase exponentially as elderly patients become more and more common.
Globalization
The current global market presents great avenues of growth for Stryker. Global revenues have remained a steady percentage of total sales for the company at 35%-36%.
1 Going forward, as the global economic
environment matures financially, demand for orthopedic products and advanced surgical devices should increase. In our view, this is not a near term outlook. As illustrated in China, even with exponential economic expansion, the trickledown effect to actual end users and consumers is a lengthy process.
INVESTMENT POSITIVES
Stryker continues to be a growth story, in spite of the current macroeconomic condition. Management’s guidance points to a strong 2008 and beyond in all segments. Given the current state of the economy, we are cautiously optimistic of management’s projections and feel that Stryker will be able to produce strong earnings growth in the near term.
The ageing of the global population has created a market flush with new end-users of orthopedic devices and medical equipment. We look for this continued shift in demographics to drive demand in the near and short term. Stryker maintains a dominant position in an industry that will likely capitalize on this demographic shift, which we believe will last well into this century.
Stryker currently derives approximately 35% of its revenues from foreign countries.
3 This market has
been growing as a percentage of sales for the last few years, and should continue to drive demand for Stryker’s products in the future. The foreign exposure has also aided the company in expanding revenues, with 3% of the sales growth in 2007
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coming from foreign currency exposure. Based on our macro outlook, we believe this trend will continue for the near term and the company will likely continue to benefit from global exposure.
INVESTMENT NEGATIVES
Stryker continues to see pricing pressure within the industry and from governmental agencies both domestically and globally. If this pricing pressure results in large reductions in reimbursement and pricing plans, Stryker could see a dramatic drop in growth.
Stryker currently trades at a premium P/E relative to many of its competitors, which is likely due to very strong growth in recent operating results. This trend has stabilized somewhat lately due to overall market depreciation; however the company still experiences a high P/E relative to competitors, which the market may view as overpricing.
Stryker has consistently produced double digit increases in earnings for the last eight years. Investors have become accustomed to strong exponential growth. If Stryker were to experience a decline in earnings or missed EPS estimate, the likely reaction would be a significant reduction of the stock price.
Stryker has been a solid growth story for the better part of a decade, consistently topping earnings forecasts with double digit growth. Some analysts believe the company has reached a peak and is due for a price correction, which may impact overall market sentiment toward the company.
Regulatory action remains a concern. Stryker is currently under the scrutiny of the FDA for quality issues in one it’s hip implant devices. Management’s guidance seems to indicate that this will be a non-issue; however we believe it could be a concern in the near term if left unresolved.
As the U.S. economy continues to falter, at least in the near term, end-users may focus spending and demand away from cutting edge medical devices, leading to reduced demand and revenues for the company.
VALUATION
Based on the attached relative valuations and DCF model, which forecasts top line growth of approximately 12-14% over the next 5 years, a continuing value growth of 3% and a weighted average cost of capital of 8.07%, the modeled target price for Stryker Corp. is $81.84.
Currently the stock is trading at $65.30, which represents a discount of 20% to our best estimate. We feel that Stryker is a premium stock representing a good long term investment and maintain a BUY recommendation.
We believe Stryker is a premium company leading a growing industry that has been negatively impacted by the overall macro pressures and tightening of the market. This has occurred in spite of healthy earnings growth in 2007 and strong projections going forward.
If the company were to miss earnings forecasts going forward for consecutive quarters, we would view this as a definite slowdown in the company’s business. So far in FY 2008, we have not seen the current economic environment slow Stryker or the orthopedics industry in terms of revenues or shipments. This could potentially change in the near term if an overall tightening of the economy continues, and spending on what we view as premium healthcare products declines. The medical devices industry has in general been somewhat protected from the economic slowdown due to global exposure and stable demand, however if this trend were to reverse, we suggest conservatism regarding Stryker.
The company’s stock price has followed suit with many other industries so far this year, tracking the index into double digit price depreciation. We believe Stryker’s stock price will see a recovery in late 2008, early 2009, however we are unsure how much price depreciation is yet to come due to overall market sentiment.
Analysis and valuation calculations can be found in the appendix of this report.
Trading Discipline
Based on our analysis, the potential upside for Stryker is 25% from the company’s current trading price. If the upside for Stryker were to approach 10% or below, we would recommend a review of the stock and any positions that are maintained.
REFERENCES
1. FY 2007 10-K
2. Standard and Poor’s Industry Report-2008
3. Stryker Fact Book 2007-2008
4. Centers for Medicare and Medicaid Services-National Healthcare Expenditure Report
5. Census.gov-Fact Finder
6. Federal Reserve Bank of San Francisco- FedViews
7. BigCharts.com
8. X-rates.com
9. U.S. Department of Commerce-Business and Industry
10. World Health Organization-World Health Report 2006
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IMPORTANT DISCLAIMER
This report was created by a student(s) enrolled in the Applied Securities Management (Henry Fund) program at the University of Iowa’s Tippie School of Management. The intent of these reports is to provide potential employers and other interested parties an example of the analytical skills, investment knowledge, and communication abilities of Henry Fund students. Henry Fund analysts are not registered investment advisors, brokers or officially licensed financial professionals. The investment opinion contained in this report does not represent an offer or solicitation to buy or sell any of the aforementioned securities. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Henry Fund may hold a financial interest in the companies mentioned in this report.
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62
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$
65
.82
$
69
.25
$
73
.27
$
78
.05
$
83
.83
$
90
.94
$
99
.92
$
11
1.6
2$
Co
st o
f Pre
ferre
dN
/A1
.01
60
.76
$
63
.49
$
66
.62
$
70
.28
$
74
.59
$
79
.77
$
86
.07
$
93
.94
$
10
4.0
3$
WA
CC
8.0
7%
Co
mp
ute
d o
n W
AC
C p
age
.1
.06
58
.80
$
61
.30
$
64
.18
$
67
.51
$
71
.43
$
76
.08
$
81
.70
$
88
.64
$
97
.40
$
CV
Gro
wth
Ra
te3.0
0%
1.1
15
6.9
5$
5
9.2
6$
6
1.9
1$
6
4.9
6$
6
8.5
1$
7
2.7
1$
7
7.7
5$
8
3.8
9$
9
1.5
7$
Co
st o
f De
bt
4.6
2%
1.1
65
5.2
1$
5
7.3
5$
5
9.7
8$
6
2.5
8$
6
5.8
2$
6
9.6
3$
7
4.1
5$
7
9.6
3$
8
6.3
9$
DC
F T
arg
et
81.8
4$
EP
Ta
rge
t81.8
4$
Re
lativ
e P
/E (E
PS
08)
58.2
8$
81
.84
$
1.0
0%
1.5
0%
2.0
0%
2.5
0%
3.0
0%
3.5
0%
4.0
0%
4.5
0%
5.0
0%
Re
lativ
e P
/E (E
PS
09)
60.5
2$
3.8
2%
75
.21
$
79
.80
$
85
.27
$
91
.92
$
10
0.1
6$
1
10
.66
$
12
4.4
9$
1
43
.52
$
17
1.3
7$
4.0
2%
72
.96
$
77
.22
$
82
.27
$
88
.37
$
95
.88
$
10
5.3
4$
1
17
.64
$
13
4.2
7$
1
58
.01
$
4.2
2%
70
.83
$
74
.79
$
79
.48
$
85
.09
$
91
.95
$
10
0.5
1$
1
11
.50
$
12
6.1
3$
1
46
.57
$
4.4
2%
68
.82
$
72
.51
$
76
.86
$
82
.04
$
88
.32
$
96
.09
$
10
5.9
6$
1
18
.92
$
13
6.6
7$
4.6
2%
66
.91
$
70
.37
$
74
.40
$
79
.19
$
84
.96
$
92
.04
$
10
0.9
5$
1
12
.49
$
12
8.0
3$
4.8
2%
65
.11
$
68
.34
$
72
.10
$
76
.53
$
81
.84
$
88
.31
$
96
.38
$
10
6.7
1$
1
20
.40
$
5.0
2%
63
.40
$
66
.42
$
69
.92
$
74
.04
$
78
.94
$
84
.87
$
92
.20
$
10
1.4
9$
1
13
.64
$
5.2
2%
61
.77
$
64
.60
$
67
.88
$
71
.71
$
76
.24
$
81
.69
$
88
.37
$
96
.76
$
10
7.5
9$
5.4
2%
60
.22
$
62
.88
$
65
.94
$
69
.51
$
73
.71
$
78
.73
$
84
.85
$
92
.44
$
10
2.1
5$
5.6
2%
58
.74
$
61
.25
$
64
.12
$
67
.44
$
71
.34
$
75
.98
$
81
.59
$
88
.50
$
97
.23
$
5.8
2%
57
.34
$
59
.69
$
62
.38
$
65
.49
$
69
.12
$
73
.41
$
78
.57
$
84
.87
$
92
.77
$
Beta
CV
Gro
wth
Rate
CV
Gro
wth
Rate
MRP
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
12
Stryker C
orp
.
Reven
ue D
ecom
po
sition
Fiscal Y
ear En
ded
Decem
ber 3
1st
Rep
orted
in 1
,00
0's
20
05
A2
00
6A
20
07
A2
00
8E
20
09
E2
01
0E
20
11
E2
01
2E
CV
Gro
ss Pro
fit:
Total R
eve
nu
es
4,6
08
,90
05
,14
7,2
00
6,0
00
,50
06
,86
6,3
48
7
,83
3,6
68
8
,78
4,7
64
9
,85
6,1
29
1
0,8
22
,07
6
11
,72
8,6
86
Co
st of Sale
s1
,48
9,2
00
1,6
16
,60
01
,86
5,2
00
2,1
45
,73
4
2,3
69
,68
5
2,6
57
,39
1
2,9
81
,47
9
3,2
73
,67
8
3,5
47
,92
7
Gro
ss Pro
fit Be
fore
Expe
nse
s3
,11
9,7
00
3,5
30
,60
04
,13
5,3
00
4,7
20
,61
45
,46
3,9
83
6,1
27
,37
36
,87
4,6
50
7,5
48
,39
88
,18
0,7
58
Pe
rcen
tage G
row
th1
3.3
5%
13
.17
%1
7.1
3%
14
.15
%1
5.7
5%
12
.14
%1
2.2
0%
9.8
0%
8.3
8%
Total O
pe
rating Exp
en
ses
2,1
87
,60
02
,46
7,0
00
2,8
28
,00
03
,10
7,7
08
3
,54
5,5
17
3
,97
5,9
83
4
,46
0,8
83
4
,89
8,0
71
5
,30
8,4
02
Gro
ss Pro
fit9
32
,10
01
,06
3,6
00
1,3
07
,30
01
,61
2,9
05
.77
1
,91
8,4
66
.00
2
,15
1,3
89
.47
2
,41
3,7
66
.82
2
,65
0,3
27
.49
2
,87
2,3
56
.26
Pe
rcen
tage G
row
th2
9.3
9%
14
.11
%2
2.9
1%
23
.38
%1
8.9
4%
12
.14
%1
2.2
0%
9.8
0%
8.3
8%
Pro
fit Margin
20
.22
%2
0.6
6%
21
.79
%2
3.4
9%
24
.49
%2
4.4
9%
24
.49
%2
4.4
9%
24
.49
%
CG
S as Pe
rcen
t of R
eve
nu
e3
2.3
1%
31
.41
%3
1.0
8%
31
.25
%3
0.2
5%
30
.25
%3
0.2
5%
30
.25
%3
0.2
5%
Pro
du
ct Line
Sales
Orth
op
ed
ic Imp
lants
2,8
49
,50
0
3,1
10
,10
0
3,5
70
,70
0
3,9
99
,18
4
4,4
79
,08
6
4,9
26
,99
5
5,4
19
,69
4
5,8
53
,27
0
6,2
62
,99
9
% o
f total sale
s6
1.8
3%
60
.42
%5
9.5
1%
58
.24
%5
7.1
8%
56
.09
%5
4.9
9%
54
.09
%5
3.4
0%
YOY G
row
th1
1.4
7%
9.1
5%
14
.81
%1
2.0
0%
12
.00
%1
0.0
0%
10
.00
%8
.00
%7
.00
%
Re
lated
Cap
ital Expe
nd
iture
s1
83
,50
0
13
4,9
00
1
26
,70
0
% o
f total sale
s3
.98
%2
.62
%2
.11
%
Me
dSu
rg Equ
ipm
en
t1
,75
9,4
00
2
,03
7,1
00
2
,42
9,8
00
2
,86
7,1
64
3
,35
4,5
82
3
,85
7,7
69
4
,43
6,4
35
4
,96
8,8
07
5
,46
5,6
87
% o
f total sale
s3
8.1
7%
39
.58
%4
0.4
9%
41
.76
%4
2.8
2%
43
.91
%4
5.0
1%
45
.91
%4
6.6
0%
YOY G
row
th2
0.4
1%
15
.78
%1
9.2
8%
18
.00
%1
7.0
0%
15
.00
%1
5.0
0%
12
.00
%1
0.0
0%
Re
lated
Cap
ital Expe
nd
iture
s6
9,9
00
5
3,3
00
5
2,2
00
% o
f total sale
s1
.52
%1
.04
%0
.87
%
Ne
t Sales G
row
th:
14
.30
%1
1.6
8%
16
.58
%1
4.4
3%
14
.09
%1
2.1
4%
12
.20
%9
.80
%8
.38
%
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
13
Stryker Co
rp.
Inco
me Sta
temen
t
Fiscal Y
ear En
ded
Decem
ber 3
1st
Rep
orted
in 1
,00
0's
12
34
5
20
05
A2
00
6A
20
07
A2
00
8E
20
09
E2
01
0E
20
11
E2
01
2E
CV
Net sales
4,6
08
,90
0
5,1
47
,20
0
6,0
00
,50
0
6,8
66
,34
8
7,8
33
,66
8
8,7
84
,76
4
9,8
56
,12
9
10
,82
2,0
76
1
1,7
28
,68
6
Reven
ue b
y Segm
ent
Orth
op
edic
2,8
49
,50
0
3,1
10
,10
0
3,5
70
,70
0
3,9
99
,18
4
4,4
79
,08
6
4,9
26
,99
5
5,4
19
,69
4
5,8
53
,27
0
6,2
62
,99
9
Med
Surg
1,7
59
,40
0
2,0
37
,10
0
2,4
29
,80
0
2,8
67
,16
4
3,3
54
,58
2
3,8
57
,76
9
4,4
36
,43
5
4,9
68
,80
7
5,4
65
,68
7
Total Sales
4,6
08
,90
0
5,1
47
,20
0
6,0
00
,50
0
6,8
66
,34
8
7,8
33
,66
8
8,7
84
,76
4
9,8
56
,12
9
10
,82
2,0
76
1
1,7
28
,68
6
Co
st of sales
1,4
89
,20
0
1,6
16
,60
0
1,8
65
,20
0
2,1
45
,73
4
2,3
69
,68
5
2,6
57
,39
1
2,9
81
,47
9
3,2
73
,67
8
3,5
47
,92
7
Gro
ss pro
fit3
,11
9,7
00
3
,53
0,6
00
4
,13
5,3
00
4
,72
0,6
14
5
,46
3,9
83
6
,12
7,3
73
6
,87
4,6
50
7
,54
8,3
98
8
,18
0,7
58
Rese
arch, d
evelop
men
t & en
gineerin
g expen
ses2
84
,70
0
32
4,6
00
3
75
,30
0
41
1,9
81
4
70
,02
0
52
7,0
86
5
91
,36
8
64
9,3
25
7
03
,72
1
Selling, gen
eral & ad
min
istrative expen
ses1
,83
9,4
00
2
,04
7,0
00
2
,39
1,5
00
2
,64
3,5
44
3
,01
5,9
62
3
,38
2,1
34
3
,79
4,6
10
4
,16
6,4
99
4
,51
5,5
44
Intan
gibles am
ortizatio
n4
7,6
00
4
2,7
00
4
1,4
00
4
4,6
31
5
0,9
19
5
7,1
01
6
4,0
65
7
0,3
43
7
6,2
36
Pu
rchased
in-p
rocess research
& d
evelop
men
t e1
5,9
00
5
2,7
00
-
-
-
-
-
-
-
Intan
gible A
sset Imp
airmen
t1
9,8
00
7
,55
2
8,6
16
9
,66
2
10
,84
1
11
,90
3
12
,90
0
Restru
cturin
g & acq
uisitio
n-related
charges
-
-
-
-
-
-
-
-
-
Total co
sts & e
xpen
ses2
,18
7,6
00
2
,46
7,0
00
2
,82
8,0
00
3
,10
7,7
08
3,5
45
,51
73
,97
5,9
83
4,4
60
,88
34
,89
8,0
71
5,3
08
,40
2
Op
erating in
com
e9
32
,10
01
,06
3,6
00
1,3
07
,30
01
,61
2,9
06
1,9
18
,46
62
,15
1,3
89
2,4
13
,76
72
,65
0,3
27
2,8
72
,35
6
Oth
er inco
me
(expen
se)4
,90
03
0,2
00
62
,80
0
72
,09
7
94
,00
4
10
5,4
17
8
8,7
05
8
1,1
66
8
7,9
65
Inco
me taxes (cred
it)3
04
,50
03
22
,40
03
83
,40
0
50
5,5
01
6
03
,74
1
67
7,0
42
7
50
,74
2
81
9,4
48
8
88
,09
6
Earnin
gs befo
re extraord
inary item
30
4,5
00
32
2,4
00
38
3,4
00
4
36
,27
6
49
7,7
38
5
58
,16
9
62
6,2
42
6
87
,61
7
74
5,2
21
Extraord
inary gain
(loss), n
et1
1,1
00
6
,30
0
30
,70
0
12
,01
4
13
,70
7
15
,37
1
17
,24
5
18
,93
6
20
,52
2
Earnin
gs befo
re min
ority in
terest-
-
-
-
-
-
-
-
-
Min
ority in
terest-
-
-
-
-
-
-
-
-
Net earn
ings (lo
ss)6
43
,60
07
77
,70
01
,01
7,4
00
1,1
91
,51
61
,42
2,4
36
1,5
95
,13
61
,76
8,9
76
1,9
30
,98
12
,09
2,7
47
Weigh
ted average sh
ares ou
tstand
ing-b
asic4
03
,70
04
06
,50
04
09
,70
0
41
2,7
50
41
6,2
50
41
9,7
50
42
3,2
50
42
6,7
50
43
0,2
50
Year end
shares o
utstan
din
g4
05
,20
04
07
,90
04
11
,00
0
41
4,5
00
41
8,0
00
42
1,5
00
42
5,0
00
42
8,5
00
43
2,0
00
Net earn
ings (lo
ss) per sh
are-basic
1.6
7
1.9
1
2.4
8
2.8
7
3.4
0
3.7
8
4.1
6
4.5
1
4.8
4
Divid
end
s per sh
are of co
mm
on
stock
0.1
1
0.2
2
0.3
3
0.4
0$
0
.50
$
0.5
5$
0
.65
$
0.7
5$
0
.85
$
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
14
Stryker Co
rp.
Ba
lan
ce Sheet
Fiscal Y
ear En
ded
Decem
ber 3
1st
Rep
orted
in 1
,00
0's
12
34
5
20
05
A2
00
6A
20
07
A2
00
8E
20
09
E2
01
0E
20
11
E2
01
2E
CV
Asse
tsC
urren
t Assets
Cash
& cash
eq
uivalen
ts4
91
,20
04
16
,60
02
90
,50
03
26
,60
15
48
,35
76
14
,93
36
89
,92
97
57
,54
58
21
,00
8
Marketab
le secu
rities5
65
,30
09
98
,20
02
,12
0,3
00
2,4
03
,22
22
,74
1,7
84
3,0
74
,66
73
,44
9,6
45
3,7
87
,72
74
,10
5,0
40
Acco
un
ts receivab
le, net
77
0,3
00
86
7,2
00
1,0
30
,70
01
,16
1,2
87
1,3
24
,88
81
,48
5,7
44
1,6
66
,94
11
,83
0,3
09
1,9
83
,64
2
Inven
tories
56
3,5
00
67
7,6
00
79
6,2
00
88
4,8
36
1,0
09
,49
01
,13
2,0
54
1,2
70
,11
61
,39
4,5
93
1,5
11
,42
4
Deferred
inco
me taxes
38
3,1
00
41
7,2
00
53
4,4
00
5
49
,30
86
26
,69
37
02
,78
17
88
,49
08
65
,76
69
38
,29
5
Prep
aid e
xpen
ses & o
ther cu
rrent assets
96
,70
01
57
,50
01
32
,80
01
68
,71
01
92
,47
82
15
,84
72
42
,17
12
65
,90
52
88
,18
1
Total cu
rrent assets
2,8
70
,10
03
,53
4,3
00
4,9
04
,90
05
,49
3,9
64
6,4
43
,69
07
,22
6,0
27
8,1
07
,29
28
,90
1,8
46
9,6
47
,59
0
Pro
perty, P
lan
t & Eq
uip
men
t
Land
, bu
ildin
gs & im
pro
vemen
ts5
59
,40
06
22
,60
06
77
,10
0
75
5,2
98
8
61
,70
3
96
6,3
24
1
,08
4,1
74
1
,19
0,4
28
1
,29
0,1
55
Mach
inery &
Equ
ipm
ent
84
3,1
00
95
2,0
00
1,1
08
,80
0
1,2
64
,93
7
1,4
43
,14
0
1,6
18
,35
3
1,8
15
,72
3
1,9
93
,67
3
2,1
60
,69
1
Pro
perty, P
lant &
Equ
ipm
ent
1,4
02
,50
01
,57
4,6
00
1,7
85
,90
02
,02
0,2
36
2,3
04
,84
32
,58
4,6
77
2,8
99
,89
73
,18
4,1
01
3,4
50
,84
6
Less allow
ance fo
r dep
reciation
57
1,5
00
65
9,7
00
79
4,3
00
8
80
,46
3
1,0
04
,50
2
1,1
26
,46
0
1,2
63
,83
9
1,3
87
,70
2
1,5
03
,95
5
Pro
perty, p
lant &
equ
ipm
en
t, net
83
1,0
00
9
14
,90
0
99
1,6
00
1
,13
9,7
72
1
,30
0,3
41
1
,45
8,2
18
1
,63
6,0
58
1
,79
6,3
99
1
,94
6,8
91
Oth
er Assets
Go
od
will, n
et5
13
,20
0
51
1,0
00
5
27
,40
0
52
7,4
00
5
27
,40
0
52
7,4
00
5
27
,40
0
52
7,4
00
5
27
,40
0
Oth
er intan
gibles, n
et4
09
,70
0
40
3,8
00
3
98
,10
0
37
8,1
95
3
59
,28
5
34
1,3
21
3
24
,25
5
30
8,0
42
2
92
,64
0
Intan
gibles, n
et-
-
-
-
-
-
-
-
-
Loan
er instru
men
tation
, net
24
5,6
00
2
87
,70
0
29
3,1
00
3
77
,64
9
43
0,8
52
4
83
,16
2
54
2,0
87
5
95
,21
4
64
5,0
78
Deferred
charges, n
et-
-
-
-
-
-
-
-
-
Deferred
inco
me taxes
42
,70
0
11
8,6
00
1
71
,80
0
18
5,5
44
2
00
,38
8
21
6,4
19
2
33
,73
2
25
2,4
31
2
72
,62
5
Oth
er assets3
1,8
00
1
03
,50
0
67
,10
0
82
,39
6
94
,00
4
10
5,4
17
1
18
,27
4
12
9,8
65
1
40
,74
4
Total o
ther assets
1,2
43
,00
0
1,4
24
,60
0
1,4
57
,50
0
1,5
51
,18
4
1,6
11
,92
9
1,6
73
,71
9
1,7
45
,74
8
1,8
12
,95
2
1,8
78
,48
7
Total A
ssets
4,9
44
,10
05
,87
3,8
00
7,3
54
,00
08
,18
4,9
21
9,3
55
,96
01
0,3
57
,96
31
1,4
89
,09
81
2,5
11
,19
71
3,4
72
,96
8
Liabilities an
d Sh
areho
lder's Eq
uity
Cu
rrent Lia
bilities
Acco
un
ts payab
le2
06
,50
0
25
2,2
00
2
65
,50
0
31
5,9
63
3
60
,47
5
40
4,2
41
4
53
,54
1
49
7,9
90
5
39
,70
9
Accru
ed co
mp
ensatio
n2
52
,90
0
28
5,9
00
3
13
,70
0
37
2,3
75
4
24
,83
5
47
6,4
15
5
34
,51
7
58
6,9
02
6
36
,06
9
Inco
me taxes
20
7,3
00
2
08
,20
0
58
,70
0
75
,82
5
90
,56
1
10
1,5
56
1
12
,61
1
12
2,9
17
1
33
,21
4
Divid
end
payab
le-
8
9,7
00
1
35
,60
0
13
7,3
27
1
56
,67
3
17
5,6
95
1
97
,12
3
21
6,4
42
2
34
,57
4
Accru
ed exp
enses &
oth
er liabilities
53
4,7
00
5
00
,70
0
54
2,7
00
4
80
,64
4
54
8,3
57
6
14
,93
3
68
9,9
29
7
57
,54
5
82
1,0
08
Cu
rrent m
aturities o
f lon
g-term d
ebt
47
,40
0
14
,80
0
16
,80
0
36
,52
8
41
,67
4
46
,73
4
52
,43
3
57
,57
2
62
,39
5
Total cu
rrent liab
ilities1
,24
8,8
00
1,3
51
,50
01
,33
3,0
00
1,4
18
,66
31
,62
2,5
76
1,8
19
,57
52
,04
0,1
54
2,2
39
,36
82
,42
6,9
69
Net Lo
ng-Term
De
bt
18
4,2
00
-
-
-
-
-
-
-
-
Oth
er liabilities
25
9,3
00
3
31
,30
0
64
2,5
00
4
33
,94
1
49
5,0
73
5
55
,18
1
62
2,8
89
6
83
,93
5
74
1,2
31
Total Liab
ilities1
,69
2,3
00
1,6
82
,80
01
,97
5,5
00
1,8
52
,60
32
,11
7,6
49
2,3
74
,75
52
,66
3,0
43
2,9
23
,30
43
,16
8,2
01
Shareh
old
er's Equ
ity
Co
mm
on
Equ
ity3
18
,40
06
09
,90
07
53
,00
0
75
7,2
03
7
61
,40
7
76
5,6
10
7
69
,81
4
77
4,0
17
7
78
,22
0
Treasury Sto
ck(7
6,1
02
)
(38
7,7
47
)
(1,0
10
,36
5)
(1
,66
4,4
47
)
(2,5
16
,41
8)
(3
,52
9,2
94
)
Retain
ed earn
ings
2,9
28
,20
03
,49
0,5
00
4,3
64
,70
0
5,3
90
,41
66
,60
3,8
52
7,9
67
,16
29
,45
9,8
88
11
,06
9,4
94
12
,79
5,0
41
Accu
mu
lated o
ther co
mp
rehen
sive inco
me (lo
ss)5
,20
09
0,6
00
26
0,8
00
2
60
,80
0
26
0,8
00
2
60
,80
0
26
0,8
00
2
60
,80
0
26
0,8
00
Total sto
ckho
lders' e
qu
ity3
,25
1,8
00
4
,19
1,0
00
5
,37
8,5
00
6
,33
2,3
18
7
,23
8,3
11
7
,98
3,2
08
8
,82
6,0
54
9
,58
7,8
93
1
0,3
04
,76
7
Total Liab
ilities and
Shareh
old
er's Equ
ity4
,94
4,1
00
5,8
73
,80
07
,35
4,0
00
8,1
84
,92
19
,35
5,9
60
10
,35
7,9
63
11
,48
9,0
98
12
,51
1,1
97
13
,47
2,9
68
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
15
Stryker Co
rp.
CF Sta
temen
t
Fiscal Y
ear En
ded
Decem
ber 3
1st
Rep
orted
in 1
,00
0's
12
34
5
20
05
A2
00
6A
20
07
A2
00
8E
20
09
E2
01
0E
20
11
E2
01
2E
CV
Cash
From
Op
eratio
ns
Net e
arnin
gs (loss)
64
3,6
00
77
7,7
00
1,0
17
,40
01
,19
1,5
16
1,4
22
,43
61
,59
5,1
36
1,7
68
,97
61
,93
0,9
81
2,0
92
,74
7
Ad
justm
ents to
reco
ncile n
et inco
me to
net cash
pro
vided
by o
peratin
g activities:
Ad
d: D
epreciatio
n an
d am
ortizatio
n4
7,3
00
88
,20
01
34
,60
08
6,1
63
12
4,0
38
12
1,9
58
13
7,3
80
12
3,8
62
11
6,2
53
Allo
wan
ce for d
ou
btfu
l accou
nts
Ch
anges in
WC
Acco
un
ts:
(Increase
) in re
ceivables
(19
,20
0)
(96
,90
0)
(16
3,5
00
)(1
30
,58
7)
(16
3,6
00
)(1
60
,85
6)
(18
1,1
97
)(1
63
,36
8)
(15
3,3
32
)
(Increase
) in in
ven
tories
(11
,00
0)
(11
4,1
00
)(1
18
,60
0)
(88
,63
6)
(12
4,6
54
)(1
22
,56
4)
(13
8,0
62
)(1
24
,47
7)
(11
6,8
31
)
(Increase
) in p
repaid
exp
enses an
d o
ther cu
rrent assets
(14
,60
0)
(60
,80
0)
24
,70
0(3
5,9
10
)(2
3,7
68
)(2
3,3
69
)(2
6,3
24
)(2
3,7
34
)(2
2,2
76
)
Increase
in acco
un
ts payab
le(8
,00
0)
45
,70
01
3,3
00
50
,46
34
4,5
12
43
,76
64
9,3
00
44
,44
94
1,7
19
Increase
in accru
ed co
mp
ensaito
n an
d o
ther liab
ilities8
,90
03
3,0
00
27
,80
05
8,6
75
52
,46
05
1,5
80
58
,10
25
2,3
85
49
,16
7
Increase
in in
com
e taxes payab
le2
0,3
00
90
0(1
49
,50
0)
17
,12
51
4,7
36
10
,99
51
1,0
55
10
,30
61
0,2
97
(Increase
)decrease
in o
ther asse
ts1
,80
0(1
05
,70
0)
20
,30
0(7
9,9
40
)(4
5,9
01
)(4
5,7
59
)(5
4,7
15
)(4
8,5
06
)(4
5,3
41
)
Increase
(decrease
) in d
eferred taxes
4,1
00
75
,90
05
3,2
00
13
,74
41
4,8
44
16
,03
11
7,3
13
18
,69
92
0,1
94
Increase
(decrease
) in d
eferred tax asse
ts(2
4,4
00
)3
4,1
00
11
7,2
00
14
,90
87
7,3
86
76
,08
88
5,7
09
77
,27
67
2,5
29
Increase
(decrease
) in o
ther n
on
-curren
t liabilites
41
,70
07
2,0
00
31
1,2
00
(20
8,5
59
)6
1,1
33
60
,10
86
7,7
08
61
,04
65
7,2
96
Ne
t cash p
rovid
ed
by o
pe
rating activitie
s6
90
,50
07
50
,00
01
,28
8,1
00
88
8,9
61
1,4
53
,62
11
,62
3,1
12
1,7
95
,24
51
,95
8,9
19
2,1
22
,42
3
Cash
Flow
s From
Investin
g Activite
s
(Increase
) decre
ase in sh
ort-te
rm in
vestm
ents
(56
5,3
00
)(4
32
,90
0)
(1,1
22
,10
0)
(28
2,9
22
)(3
38
,56
2)
(33
2,8
84
)(3
74
,97
8)
(33
8,0
82
)(3
17
,31
3)
Cap
ital expen
ditu
res6
1,1
72
(30
1,9
62
)(1
56
,47
0)
(32
8,0
37
)(2
96
,55
6)
18
,53
85
95
,42
51
,28
4,5
72
2,1
54
,84
7
Cap
itilizaiton
of in
tangib
le assets
(Increase
) decre
ase in o
ther asse
ts
Ne
t cash u
sed
for in
vestin
g activities
(50
4,1
28
)(7
34
,86
2)
(1,2
78
,57
0)
(61
0,9
58
)(6
35
,11
8)
(31
4,3
46
)2
20
,44
79
46
,49
01
,83
7,5
34
Cash
Flow
From
Finan
cing A
ctivities
Pro
ceed
s from
issuan
ce of n
ote
s payab
le & lo
ng-term
deb
t-
-
-
-
-
-
-
-
-
Paym
ents o
f no
tes p
aybale &
lon
g-term d
ebt
Paym
ent o
f divid
end
s(4
4,5
72
)(8
9,7
38
)(1
35
,63
0)
(16
5,8
00
)(2
09
,00
0)
(23
1,8
25
)(2
76
,25
0)
(32
1,3
75
)(3
67
,20
0)
Pro
ceed
s from
issuan
ce of co
mm
on
stock
Rep
urch
ases of co
mm
on
stock
(76
,10
2)
(38
7,7
47
)(1
,01
0,3
65
)(1
,66
4,4
47
)(2
,51
6,4
18
)(3
,52
9,2
94
)
Ne
t cash p
rovid
ed
by fin
ancin
g activities
(44
,57
2)
(89
,73
8)
(13
5,6
30
)(2
41
,90
2)
(59
6,7
47
)(1
,24
2,1
90
)(1
,94
0,6
97
)(2
,83
7,7
93
)(3
,89
6,4
94
)
Effect of Exch
ange
Ne
t Incre
ase (D
ecre
ase) In
Cash
14
1,8
00
(74
,60
0)
(12
6,1
00
)3
6,1
01
22
1,7
56
66
,57
77
4,9
96
67
,61
66
3,4
63
Cash
Be
ginn
ing O
f Ye
ar3
49
,40
04
91
,20
04
16
,60
02
90
,50
03
26
,60
15
48
,35
76
14
,93
36
89
,92
97
57
,54
5
Cash
, End
Of Y
ear
49
1,2
00
41
6,6
00
29
0,5
00
54
8,3
57
61
4,9
33
68
9,9
29
75
7,5
45
82
1,0
08
82
1,0
08
Balan
ce Shee
t Cash
Be
ginn
ing
34
9,4
00
49
1,2
00
41
6,6
00
29
0,5
00
32
6,6
01
54
8,3
57
61
4,9
33
68
9,9
29
75
7,5
45
Balan
ce Shee
t Cash
en
d4
91
,20
04
16
,60
02
90
,50
03
26
,60
15
48
,35
76
14
,93
36
89
,92
97
57
,54
58
21
,00
8
Ch
ange
14
1,8
00
(74
,60
0)
(12
6,1
00
)3
6,1
01
22
1,7
56
66
,57
77
4,9
96
67
,61
66
3,4
63
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
16
Stryker Co
rp.
Co
mm
on
Size Inco
me Sta
temen
t
Fiscal Y
ear En
ded
Decem
ber 3
1st
Rep
orted
in 1
,00
0's
12
34
5
20
05
A2
00
6A
20
07
A2
00
8E
20
09
E2
01
0E
20
11
E2
01
2E
CV
Net sales
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
Reven
ue b
y Segm
ent
Orth
op
edic
61
.83
%6
0.4
2%
59
.51
%5
8.2
4%
57
.18
%5
6.0
9%
54
.99
%5
4.0
9%
53
.40
%
Med
Surg
38
.17
%3
9.5
8%
40
.49
%4
1.7
6%
42
.82
%4
3.9
1%
45
.01
%4
5.9
1%
46
.60
%
Total Sales
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
10
0.0
0%
Co
st of sales
32
.31
%3
1.4
1%
31
.08
%3
1.2
5%
30
.25
%3
0.2
5%
30
.25
%3
0.2
5%
30
.25
%
Gro
ss pro
fit6
7.6
9%
68
.59
%6
8.9
2%
68
.75
%6
9.7
5%
69
.75
%6
9.7
5%
69
.75
%6
9.7
5%
Rese
arch, d
evelop
men
t & e
ngin
eerin
g exp
enses
6.1
8%
6.3
1%
6.2
5%
6.0
0%
6.0
0%
6.0
0%
6.0
0%
6.0
0%
6.0
0%
Selling, gen
eral & ad
min
istrative expen
ses3
9.9
1%
39
.77
%3
9.8
6%
38
.50
%3
8.5
0%
38
.50
%3
8.5
0%
38
.50
%3
8.5
0%
Intan
gibles am
ortizatio
n1
.03
%0
.83
%0
.69
%0
.65
%0
.65
%0
.65
%0
.65
%0
.65
%0
.65
%
Pu
rchased
in-p
rocess research
& d
evelop
men
t e0
.34
%1
.02
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%
Intan
gible A
sset Imp
airmen
t0
.00
%0
.00
%0
.33
%0
.11
%0
.11
%0
.11
%0
.11
%0
.11
%0
.11
%
Restru
cturin
g & acq
uisitio
n-relate
d ch
arges0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%
Total co
sts & e
xpen
ses4
7.4
6%
47
.93
%4
7.1
3%
45
.26
%4
5.2
6%
45
.26
%4
5.2
6%
45
.26
%4
5.2
6%
Op
erating in
com
e2
0.2
2%
20
.66
%2
1.7
9%
23
.49
%2
4.4
9%
24
.49
%2
4.4
9%
24
.49
%2
4.4
9%
Oth
er inco
me
(expen
se)0
.11
%0
.59
%1
.05
%1
.05
%1
.20
%1
.20
%0
.90
%0
.75
%0
.75
%
Inco
me taxes (cred
it)6
.61
%6
.26
%6
.39
%7
.36
%7
.71
%7
.71
%7
.62
%7
.57
%7
.57
%
Earnin
gs befo
re extraord
inary item
6.6
1%
6.2
6%
6.3
9%
6.3
5%
6.3
5%
6.3
5%
6.3
5%
6.3
5%
6.3
5%
Extraord
inary gain
(loss), n
et0
.24
%0
.12
%0
.51
%0
.17
%0
.17
%0
.17
%0
.17
%0
.17
%0
.17
%
Earnin
gs befo
re min
ority in
terest
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
Min
ority in
terest
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
Net earn
ings (lo
ss)1
3.9
6%
15
.11
%1
6.9
6%
17
.35
%1
8.1
6%
18
.16
%1
7.9
5%
17
.84
%1
7.8
4%
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
17
Stry
ke
r Co
rp.
Co
mm
on
Size
Ba
lan
ce S
he
et
Fisca
l Ye
ar E
nd
ed
De
cem
be
r 31
st
Re
po
rted
in 1
,00
0's
20
05
A2
00
6A
20
07
A2
00
8E
20
09
E2
01
0E
20
11
E2
01
2E
CV
Asse
tsC
urre
nt A
ssets
Ca
sh &
cash
eq
uiv
ale
nts
10
.66
%8
.09
%4
.84
%4
.76
%7
.00
%7
.00
%7
.00
%7
.00
%7
.00
%
Ma
rke
tab
le se
curitie
s1
2.2
7%
19
.39
%3
5.3
4%
35
.00
%3
5.0
0%
35
.00
%3
5.0
0%
35
.00
%3
5.0
0%
Acco
un
ts rece
iva
ble
, ne
t1
6.7
1%
16
.85
%1
7.1
8%
16
.91
%1
6.9
1%
16
.91
%1
6.9
1%
16
.91
%1
6.9
1%
Inv
en
torie
s1
2.2
3%
13
.16
%1
3.2
7%
12
.89
%1
2.8
9%
12
.89
%1
2.8
9%
12
.89
%1
2.8
9%
De
ferre
d in
com
e ta
xes
8.3
1%
8.1
1%
8.9
1%
8.0
0%
8.0
0%
8.0
0%
8.0
0%
8.0
0%
8.0
0%
Pre
pa
id e
xpe
nse
s & o
the
r curre
nt a
ssets
2.1
0%
3.0
6%
2.2
1%
2.4
6%
2.4
6%
2.4
6%
2.4
6%
2.4
6%
2.4
6%
To
tal cu
rren
t asse
ts6
2.2
7%
68
.66
%8
1.7
4%
80
.01
%8
2.2
6%
82
.26
%8
2.2
6%
82
.26
%8
2.2
6%
Pro
pe
rty, P
lan
t & E
qu
ipm
en
t
Lan
d, b
uild
ing
s & im
pro
ve
me
nts
12
.14
%1
2.1
0%
11
.28
%1
1.0
0%
11
.00
%1
1.0
0%
11
.00
%1
1.0
0%
11
.00
%
Ma
chin
ery
& e
qu
ipm
en
t1
8.2
9%
18
.50
%1
8.4
8%
18
.42
%1
8.4
2%
18
.42
%1
8.4
2%
18
.42
%1
8.4
2%
30
.43
%3
0.5
9%
29
.76
%2
9.4
2%
29
.42
%2
9.4
2%
29
.42
%2
9.4
2%
29
.42
%
Less a
llow
an
ce fo
r de
pre
ciatio
n1
2.4
0%
12
.82
%1
3.2
4%
12
.82
%1
2.8
2%
12
.82
%1
2.8
2%
12
.82
%1
2.8
2%
Pro
pe
rty, p
lan
t & e
qu
ipm
en
t, ne
t1
8.0
3%
17
.77
%1
6.5
3%
16
.60
%1
6.6
0%
16
.60
%1
6.6
0%
16
.60
%1
6.6
0%
Oth
er A
ssets
Go
od
will, n
et
11
.13
%9
.93
%8
.79
%7
.68
%6
.73
%6
.00
%5
.35
%4
.87
%4
.50
%
Oth
er in
tan
gib
les, n
et
8.8
9%
7.8
5%
6.6
3%
5.5
1%
4.5
9%
3.8
9%
3.2
9%
2.8
5%
2.5
0%
Inta
ng
ible
s, ne
t0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%
Loa
ne
r instru
me
nta
tion
, ne
t5
.33
%5
.59
%4
.88
%5
.50
%5
.50
%5
.50
%5
.50
%5
.50
%5
.50
%
De
ferre
d ch
arg
es, n
et
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
De
ferre
d in
com
e ta
xes
0.9
3%
2.3
0%
2.8
6%
2.7
0%
2.5
6%
2.4
6%
2.3
7%
2.3
3%
2.3
2%
Oth
er a
ssets
0.6
9%
2.0
1%
1.1
2%
1.2
0%
1.2
0%
1.2
0%
1.2
0%
1.2
0%
1.2
0%
To
tal o
the
r asse
ts2
6.9
7%
27
.68
%2
4.2
9%
22
.59
%2
0.5
8%
19
.05
%1
7.7
1%
16
.75
%1
6.0
2%
To
tal A
ssets
10
7.2
7%
11
4.1
2%
12
2.5
6%
11
9.2
0%
11
9.4
3%
11
7.9
1%
11
6.5
7%
11
5.6
1%
11
4.8
7%
Liab
ilities a
nd
Sh
are
ho
lde
r's Eq
uity
Cu
rren
t Liab
ilities
Acco
un
ts pa
ya
ble
4.4
8%
4.9
0%
4.4
2%
4.6
0%
4.6
0%
4.6
0%
4.6
0%
4.6
0%
4.6
0%
Accru
ed
com
pe
nsa
tion
5.4
9%
5.5
5%
5.2
3%
5.4
2%
5.4
2%
5.4
2%
5.4
2%
5.4
2%
5.4
2%
Acq
uisitio
n-re
late
d re
org
an
izatio
n re
serv
es
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
Re
structu
ring
& a
cqu
isition
-rela
ted
liab
ils0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%
Inco
me
taxe
s4
.50
%4
.04
%0
.98
%1
.10
%1
.16
%1
.16
%1
.14
%1
.14
%1
.14
%
Div
ide
nd
pa
ya
ble
0.0
0%
1.7
4%
2.2
6%
2.0
0%
2.0
0%
2.0
0%
2.0
0%
2.0
0%
2.0
0%
Accru
ed
exp
en
ses &
oth
er lia
bilitie
s1
1.6
0%
9.7
3%
9.0
4%
7.0
0%
7.0
0%
7.0
0%
7.0
0%
7.0
0%
7.0
0%
Cu
rren
t ma
turitie
s of lo
ng
-term
de
bt
1.0
3%
0.2
9%
0.2
8%
0.5
3%
0.5
3%
0.5
3%
0.5
3%
0.5
3%
0.5
3%
To
tal cu
rren
t liab
ilities
27
.10
%2
6.2
6%
22
.21
%2
0.6
6%
20
.71
%2
0.7
1%
20
.70
%2
0.6
9%
20
.69
%
Ne
t Lon
g-T
erm
De
bt
4.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
Oth
er lia
bilitie
s5
.63
%6
.44
%1
0.7
1%
6.3
2%
6.3
2%
6.3
2%
6.3
2%
6.3
2%
6.3
2%
To
tal Lia
bilitie
s3
6.7
2%
32
.69
%3
2.9
2%
26
.98
%2
7.0
3%
27
.03
%2
7.0
2%
27
.01
%2
7.0
1%
Sh
are
ho
lde
r's Eq
uity
Co
mm
on
Eq
uity
6.9
1%
11
.85
%1
2.5
5%
11
.03
%9
.72
%8
.72
%7
.81
%7
.15
%6
.64
%
Tre
asu
ry S
tock
0.0
0%
0.0
0%
0.0
0%
-1.1
1%
-4.9
5%
-11
.50
%-1
6.8
9%
-23
.25
%-3
0.0
9%
Re
tain
ed
ea
rnin
gs
63
.53
%6
7.8
1%
72
.74
%7
8.5
0%
84
.30
%9
0.6
9%
95
.98
%1
02
.29
%1
09
.09
%
Accu
mu
late
d o
the
r com
pre
he
nsiv
e in
com
e (lo
ss)0
.11
%1
.76
%4
.35
%3
.80
%3
.33
%2
.97
%2
.65
%2
.41
%2
.22
%
To
tal sto
ckh
old
ers' e
qu
ity7
0.5
5%
81
.42
%8
9.6
3%
92
.22
%9
2.4
0%
90
.88
%8
9.5
5%
88
.60
%8
7.8
6%
To
tal Lia
bilitie
s an
d S
ha
reh
old
er's E
qu
ity1
07
.27
%1
14
.12
%1
22
.56
%1
19
.20
%1
19
.43
%1
17
.91
%1
16
.57
%1
15
.61
%1
14
.87
%
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
18
WACC:
Common Shares Outstanding 411,000
Current Price $65.30
Market Value of Equity 26,838,300 99.6%
Market Value of Debt 113,736 0.4%
Value of Capital (D + E + PFD) 26,952,036 100.0%
Risk Free Rate 3.69% 10-Year Bond - 4/20/2008
Market Premium (LT Ave, geo.) 4.82%
Beta 0.9
Cost of Equity 8.09%
Implied Debt Rating A+ S&P current rating
Implied Default Spread 0.93% 10-Year Industrials default spread, bondsonline.com, 4/20/2008
Cost of Debt 4.62%
WACC 8.07%
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
19
Stryker Co
rp.
Ba
lan
ce Sheet A
na
lysis
Fiscal Y
ear En
ded
Decem
ber 3
1st
Rep
orted
in 1
,00
0's
20
05
A2
00
6A
20
07
AA
verageO
verride
20
08
E2
00
9E
20
10
E2
01
1E
20
12
EC
V
Asse
ts6
,86
6,3
48
.00
7
,83
3,6
67
.96
8
,78
4,7
63
.85
9
,85
6,1
28
.69
1
0,8
22
,07
6.3
7
11
,72
8,6
85
.92
Cu
rrent A
ssets
Cash
& cash
eq
uivalen
ts1
0.6
6%
8.0
9%
4.8
4%
6.7
2%
7.0
0%
48
0,6
44
5
48
,35
7
61
4,9
33
6
89
,92
9
75
7,5
45
8
21
,00
8
Marketab
le secu
rities1
2.2
7%
19
.39
%3
5.3
4%
35
.00
%3
5.0
0%
2,4
03
,22
2
2,7
41
,78
4
3,0
74
,66
7
3,4
49
,64
5
3,7
87
,72
7
4,1
05
,04
0
Acco
un
ts receivab
le, net
16
.71
%1
6.8
5%
17
.18
%1
6.9
1%
16
.91
%1
,16
1,2
87
1
,32
4,8
88
1
,48
5,7
44
1
,66
6,9
41
1
,83
0,3
09
1
,98
3,6
42
Inven
tories
12
.23
%1
3.1
6%
13
.27
%1
2.8
9%
12
.89
%8
84
,83
6
1,0
09
,49
0
1,1
32
,05
4
1,2
70
,11
6
1,3
94
,59
3
1,5
11
,42
4
Deferred
inco
me taxes
8.3
1%
8.1
1%
8.9
1%
8.4
4%
8.0
0%
54
9,3
08
6
26
,69
3
70
2,7
81
7
88
,49
0
86
5,7
66
9
38
,29
5
Prep
aid e
xpen
ses & o
ther cu
rrent assets
2.1
0%
3.0
6%
2.2
1%
2.4
6%
2.4
6%
16
8,7
10
1
92
,47
8
21
5,8
47
2
42
,17
1
26
5,9
05
2
88
,18
1
Total cu
rrent assets
62
.27
%6
8.6
6%
81
.74
%
Pro
perty, P
lan
t & Eq
uip
men
t
Land
, bu
ildin
gs & im
pro
vemen
ts1
2.1
4%
12
.10
%1
1.2
8%
11
.84
%1
1.0
0%
75
5,2
98
8
61
,70
3
96
6,3
24
1
,08
4,1
74
1
,19
0,4
28
1
,29
0,1
55
Mach
inery &
eq
uip
men
t1
8.2
9%
18
.50
%1
8.4
8%
18
.42
%1
8.4
2%
1,2
64
,93
7
1,4
43
,14
0
1,6
18
,35
3
1,8
15
,72
3
1,9
93
,67
3
2,1
60
,69
1
Pro
perty, P
lant &
Equ
ipm
ent
30
.43
%3
0.5
9%
29
.76
%3
0.2
6%
30
.26
%2
,07
7,8
52
2
,37
0,5
77
2
,65
8,3
91
2
,98
2,6
01
3
,27
4,9
11
3
,54
9,2
63
Less allow
ance fo
r dep
reciation
40
.75
%4
1.9
0%
44
.48
%4
2.3
7%
42
.37
%8
80
,46
3
1,0
04
,50
2
1,1
26
,46
0
1,2
63
,83
9
1,3
87
,70
2
1,5
03
,95
5
Pro
perty, p
lant &
equ
ipm
en
t, net
18
.03
%1
7.7
7%
16
.53
%1
7.4
4%
17
.44
%1
24
,03
8
Oth
er Assets
Go
od
will, n
et1
1.1
3%
9.9
3%
8.7
9%
9.9
5%
8.7
9%
60
3,5
02
6
88
,52
2
77
2,1
16
8
66
,28
2
95
1,1
81
1
,03
0,8
66
Oth
er intan
gibles, n
et8
.89
%7
.85
%6
.63
%7
.79
%6
.00
%Fo
llow
ing d
ecreasing tren
d - 9
8%
Intan
gibles, n
et0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%H
eld stead
y at 0
Loan
er instru
men
tation
, net
5.3
3%
5.5
9%
4.8
8%
5.2
7%
5.5
0%
37
7,6
49
4
30
,85
2
48
3,1
62
5
42
,08
7
59
5,2
14
6
45
,07
8
Deferred
charges, n
et0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%H
eld stead
y at 0
Deferred
inco
me taxes
0.9
3%
2.3
0%
2.8
6%
2.0
3%
2.0
3%
13
9,4
72
1
59
,12
1
17
8,4
40
2
00
,20
2
21
9,8
23
2
38
,23
8
Oth
er assets0
.69
%2
.01
%1
.12
%1
.27
%1
.20
%8
2,3
96
9
4,0
04
1
05
,41
7
11
8,2
74
1
29
,86
5
14
0,7
44
Total o
ther assets
26
.97
%2
7.6
8%
24
.29
%2
6.3
1%
26
.31
%
Total A
ssets
10
7.2
7%
11
4.1
2%
12
2.5
6%
11
4.6
5%
11
4.6
5%
Liabilities an
d Sh
areho
lder's Eq
uity
Cu
rrent Lia
bilities
Acco
un
ts payab
le4
.48
%4
.90
%4
.42
%4
.60
%4
.60
%3
15
,96
3
36
0,4
75
4
04
,24
1
45
3,5
41
4
97
,99
0
53
9,7
09
Accru
ed co
mp
ensatio
n5
.49
%5
.55
%5
.23
%5
.42
%5
.42
%3
72
,37
5
42
4,8
35
4
76
,41
5
53
4,5
17
5
86
,90
2
63
6,0
69
Acq
uisitio
n-relate
d reo
rganizatio
n reserves
0.0
0%
0.0
0%
0.0
0%
0.0
0%
0.0
0%
-
-
-
-
-
-
Restru
cturin
g & acq
uisitio
n-relate
d liab
ils0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%-
-
-
-
-
-
Inco
me taxes as a %
of in
com
e taxes6
8.0
8%
64
.58
%1
5.3
1%
49
.32
%1
5.0
0%
75
,82
5
90
,56
1
10
1,5
56
1
12
,61
1
12
2,9
17
1
33
,21
4
Divid
end
payab
le0
.00
%1
.74
%2
.26
%1
.33
%2
.00
%1
37
,32
7
15
6,6
73
1
75
,69
5
19
7,1
23
2
16
,44
2
23
4,5
74
Accru
ed exp
enses &
oth
er liabilities
11
.60
%9
.73
%9
.04
%1
0.1
2%
7.0
0%
48
0,6
44
5
48
,35
7
61
4,9
33
6
89
,92
9
75
7,5
45
8
21
,00
8
Cu
rrent m
aturities o
f lon
g-term d
ebt
1.0
3%
0.2
9%
0.2
8%
0.5
3%
0.5
3%
36
,52
8
41
,67
4
46
,73
4
52
,43
3
57
,57
2
62
,39
5
Total cu
rrent liab
ilities2
7.1
0%
26
.26
%2
2.2
1%
25
.19
%2
5.1
9%
Net Lo
ng-Term
De
bt
4.0
0%
0.0
0%
0.0
0%
0.9
1%
0.0
0%
-
-
-
-
-
-
Oth
er liabilities
5.6
3%
6.4
4%
10
.71
%6
.32
%6
.32
%4
33
,94
1
49
5,0
73
5
55
,18
1
62
2,8
89
6
83
,93
5
74
1,2
31
Total Liab
ilities3
6.7
2%
32
.69
%3
2.9
2%
32
.26
%3
2.2
6%
Shareh
old
er's Equ
ity
Co
mm
on
Equ
ity6
.91
%1
1.8
5%
12
.55
%8
.50
%0
.00
%
Treasury Sto
ck0
.00
%0
.00
%0
.00
%0
.00
%0
.00
%
Retain
ed earn
ings
63
.53
%6
7.8
1%
72
.74
%6
1.9
0%
0.0
0%
Accu
mu
lated o
ther co
mp
rehen
sive inco
me (lo
ss)0
.11
%1
.76
%4
.35
%2
.72
%2
.72
%
Total sto
ckho
lders' e
qu
ity7
0.5
5%
81
.42
%8
9.6
3%
73
.12
%7
3.1
2%
Total Liab
ilities and
Shareh
old
er's Equ
ity1
07
.27
%1
14
.12
%1
22
.56
%
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
20
Stryker Co
rp.
Va
lue D
rivers
Fiscal Y
ear En
ded
Decem
ber 3
1st
Rep
orted
in 1
,00
0's
20
05
A2
00
6A
20
07
A2
00
8E
20
09
E2
01
0E
20
11
E2
01
2E
CV
NO
PL
AT
EBITA
93
7,0
00
1,0
93
,80
01
,37
0,1
00
1,6
85
,00
22
,01
2,4
70
2,2
56
,80
72
,50
2,4
72
2,7
31
,49
32
,96
0,3
21
Less: Taxes on
EBITA
Margin
al Tax Rate
32
.50
%2
9.4
8%
27
.98
%3
0.0
0%
30
.00
%3
0.0
0%
30
.00
%3
0.0
0%
30
.00
%
Total In
com
e Tax Pro
vision
30
4,5
00
32
2,4
00
38
3,4
00
50
5,5
01
60
3,7
41
67
7,0
42
75
0,7
42
81
9,4
48
88
8,0
96
Plu
s: Tax Shield
on
Inte
rest Expen
se-
-
-
-
-
-
-
-
-
Less: Tax on
Inte
rest Inco
me
-
-
-
-
-
-
-
-
-
Less: Tax on
No
no
peratin
g Inco
me
-
-
-
-
-
-
-
-
-
Taxes on
EBITA
30
4,5
00
32
2,4
00
38
3,4
00
50
5,5
01
60
3,7
41
67
7,0
42
75
0,7
42
81
9,4
48
88
8,0
96
Plu
s: Ch
ange in
Deferred
Taxes(2
0,3
00
)1
10
,00
01
70
,40
02
8,6
52
92
,22
99
2,1
19
10
3,0
23
95
,97
49
2,7
23
NO
PL
AT
61
2,2
00
88
1,4
00
1,1
57
,10
01
,20
8,1
54
1,5
00
,95
81
,67
1,8
83
1,8
54
,75
32
,00
8,0
20
2,1
64
,94
8
INV
ES
TE
D C
AP
ITA
L
Op
erating W
orkin
g Cap
ital:
Plu
s: No
rmal C
ash (< 7
.0%
of Sales)
25
3,4
90
2
83
,09
6
33
0,0
28
3
77
,64
9
43
0,8
52
4
83
,16
2
54
2,0
87
5
95
,21
4
64
5,0
78
Plu
s: Re
ceivables
77
0,3
00
86
7,2
00
1,0
30
,70
01
,16
1,2
87
1,3
24
,88
81
,48
5,7
44
1,6
66
,94
11
,83
0,3
09
1,9
83
,64
2
Plu
s: Inven
tory
56
3,5
00
67
7,6
00
79
6,2
00
88
4,8
36
1,0
09
,49
01
,13
2,0
54
1,2
70
,11
61
,39
4,5
93
1,5
11
,42
4
Plu
s: Prep
aid Exp
enses
96
,70
01
57
,50
01
32
,80
01
68
,71
01
92
,47
82
15
,84
72
42
,17
12
65
,90
52
88
,18
1
Less: Acco
un
ts Payab
le2
06
,50
02
52
,20
02
65
,50
03
15
,96
33
60
,47
54
04
,24
14
53
,54
14
97
,99
05
39
,70
9
Less: Accru
ed Exp
enses: C
om
pen
sation
25
2,9
00
28
5,9
00
31
3,7
00
37
2,3
75
42
4,8
35
47
6,4
15
53
4,5
17
58
6,9
02
63
6,0
69
Less: Inco
me Taxes P
ayable
20
7,3
00
20
8,2
00
58
,70
07
5,8
25
90
,56
11
01
,55
61
12
,61
11
22
,91
71
33
,21
4
Less: Divid
end
s Payab
le0
89
,70
01
35
,60
01
37
,32
71
56
,67
31
75
,69
51
97
,12
32
16
,44
22
34
,57
4
Less: Accru
ed Exp
enses an
d O
ther Liab
ilities5
34
,70
05
00
,70
05
42
,70
04
80
,64
45
48
,35
76
14
,93
36
89
,92
97
57
,54
58
21
,00
8
Net O
peratin
g Wo
rking C
apital
48
2,5
90
6
48
,69
6
97
3,5
28
1
,21
0,3
48
1
,37
6,8
06
1
,54
3,9
66
1
,73
3,5
94
1
,90
4,2
25
2
,06
3,7
50
Net P
rop
erty, Plan
t and
Equ
ipm
ent (C
ap Ex)
83
1,0
00
91
4,9
00
99
1,6
00
1,1
39
,77
21
,30
0,3
41
1,4
58
,21
81
,63
6,0
58
1,7
96
,39
91
,94
6,8
91
Net P
resent V
alue o
f Op
er. Leases
82
,92
49
1,2
96
98
,95
01
13
,73
61
29
,75
91
45
,51
31
63
,25
91
79
,25
91
94
,27
7
Oth
er Op
erating A
ssets6
87
,10
07
95
,00
07
58
,30
08
38
,24
08
84
,14
19
29
,90
09
84
,61
61
,03
3,1
21
1,0
78
,46
2
NE
T IN
VE
ST
ED
CA
PIT
AL
2,0
83
,61
3
2,4
49
,89
2
2,8
22
,37
7
3,3
02
,09
6
3,6
91
,04
7
4,0
77
,59
6
4,5
17
,52
7
4,9
13
,00
5
5,2
83
,37
9
RO
IC (N
OP
LA
T/In
veste
d C
ap
ital)
NO
PLA
T6
12
,20
0
88
1,4
00
1
,15
7,1
00
1
,20
8,1
54
1
,50
0,9
58
1
,67
1,8
83
1
,85
4,7
53
2
,00
8,0
20
2
,16
4,9
48
Invested
Cap
ital (Begin
nin
g)1
,98
2,1
28
2
,08
3,6
13
2
,44
9,8
92
2
,82
2,3
77
3
,30
2,0
96
3
,69
1,0
47
4
,07
7,5
96
4
,51
7,5
27
4
,91
3,0
05
RO
IC (N
OP
LA
T/In
veste
d C
ap
ital)
30
.9%
42
.3%
47
.2%
42
.8%
45
.5%
45
.3%
45
.5%
44
.4%
44
.1%
FR
EE
CA
SH
FL
OW
NO
PLA
T6
12
,20
08
81
,40
01
,15
7,1
00
1,2
08
,15
41
,50
0,9
58
1,6
71
,88
31
,85
4,7
53
2,0
08
,02
02
,16
4,9
48
Net In
vestmen
t (chan
ge in in
veste
d cap
ital)1
01
,48
5
36
6,2
79
3
72
,48
5
47
9,7
19
3
88
,95
1
38
6,5
49
4
39
,93
0
39
5,4
78
3
70
,37
4
Fre
e C
ash
Flo
w (N
OP
LA
T - N
et In
vestm
en
t)5
10
,71
4.6
5
51
5,1
21
.28
7
84
,61
4.7
5
72
8,4
34
.58
1
,11
2,0
07
.32
1
,28
5,3
34
.00
1
,41
4,8
22
.98
1
,61
2,5
41
.13
1
,79
4,5
73
.76
EC
ON
OM
IC P
RO
FIT
Invested
Cap
ital (Begin
nin
g)1
,98
2,1
28
2
,08
3,6
13
2
,44
9,8
92
2
,82
2,3
77
3
,30
2,0
96
3
,69
1,0
47
4
,07
7,5
96
4
,51
7,5
27
4
,91
3,0
05
RO
IC3
0.9
%4
2.3
%4
7.2
%4
2.8
%4
5.5
%4
5.3
%4
5.5
%4
4.4
%4
4.1
%
WA
CC
8.0
7%
8.0
7%
8.0
7%
8.0
7%
8.0
7%
8.0
7%
8.0
7%
8.0
7%
8.0
7%
EP
(Investe
d C
ap
ital*(R
OIC
-WA
CC
))4
52
,33
4
71
3,3
49
9
59
,50
7
98
0,5
18
1
,23
4,6
32
1
,37
4,1
87
1
,52
5,8
80
1
,64
3,6
64
1
,76
8,6
96
NO
N-O
PE
RA
TIN
G A
SS
ET
S
Cash
on
Han
d4
91
,20
04
16
,60
02
90
,50
03
26
,60
15
48
,35
76
14
,93
36
89
,92
97
57
,54
58
21
,00
8
"No
rmal" C
ash2
53
,49
0
28
3,0
96
3
30
,02
8
37
7,6
49
4
30
,85
2
48
3,1
62
5
42
,08
7
59
5,2
14
6
45
,07
8
Excess Cash
23
7,7
11
1
33
,50
4
(39
,52
8)
(5
1,0
48
)
11
7,5
05
1
31
,77
1
14
7,8
42
1
62
,33
1
17
5,9
30
Sho
rt-Term In
vestmen
ts5
65
,30
09
98
,20
02
,12
0,3
00
2,4
03
,22
22
,74
1,7
84
3,0
74
,66
73
,44
9,6
45
3,7
87
,72
74
,10
5,0
40
Lon
g-Term In
vestmen
ts0
00
00
00
00
No
n-O
peratin
g Assets
80
3,0
11
1,1
31
,70
42
,08
0,7
73
2,3
52
,17
42
,85
9,2
89
3,2
06
,43
93
,59
7,4
87
3,9
50
,05
84
,28
0,9
70
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
21
Stry
ker C
orp
.W
AC
C8
.07
%
Valu
atio
n C
alc
ula
tions
CV
Gro
wth
Rate
3.0
0%
Fis
cal Y
ears
Endin
g D
ecem
ber 3
1C
V R
OIC
44.0
7%
Co
st o
f Eq
uity
8.0
9%
20
08
E2
00
9E
20
10
E2
01
1E
20
12
EC
V
DC
F M
od
el
FCF
72
8,4
35
1
,11
2,0
07
1
,28
5,3
34
1
,41
4,8
23
1
,61
2,5
41
3
9,8
30
,45
3
PV
(FCF)
67
4,0
68
9
52
,21
4
1,0
18
,48
9
1,0
37
,42
3
1,0
94
,15
3
27
,02
6,0
52
PV
(FCF)
31
,80
2,4
00
$
+ P
V(N
on
-Op
er)
2,0
80
,77
3$
- PV
(Deb
t)1
13
,73
6$
- PV
(ESOP
)8
49
,92
7$
- PV
(Op
er Leases)
11
3,7
36
$
PV
(Equ
ity)3
2,8
05
,77
5$
Shares O
utst.
41
1,0
00
Targ
et P
rice
79.8
2$
As o
f Last FY End
Targ
et P
rice
81.8
4$
As o
f4
/27
/20
08
(grow
th at co
st of cap
ital)
EP
Mo
del
RO
IC4
2.8
1%
45
.45
%4
5.3
0%
45
.49
%4
4.4
5%
44
.07
%
EP9
80
,51
8
1,2
34
,63
2
1,3
74
,18
7
1,5
25
,88
0
1,6
43
,66
4
34
,91
7,4
48
PV
(EP)
90
7,3
38
1
,05
7,2
18
1
,08
8,8
96
1
,11
8,8
56
1
,11
5,2
71
2
3,6
92
,44
4
PV
(EP)
28
,98
0,0
23
$
Invested
Cap
ital2
,82
2,3
77
$
PV
(Op
eration
s)3
1,8
02
,40
0$
+ P
V(N
on
-Op
er)
2,0
80
,77
3$
- PV
(Deb
t)1
13
,73
6$
- PV
(ESOP
)8
49
,92
7$
- PV
(Op
er Leases)
11
3,7
36
$
PV
(Equ
ity)3
2,8
05
,77
5$
Shares O
utst.
41
1,0
00
Targ
et P
rice
79.8
2$
As o
f Last FY End
Targ
et P
rice
81.8
4$
As o
f4
/27
/20
08
(grow
th at co
st of cap
ital)
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
22
Stryker Corp.
Operating and Capital Lease Obligations
Capital Operating
Years Ended December 31 Leases Leases
2008 42
2009 34.3
2010 22.2
2011 10.3
2012 6.7
Thereafter 11.7
Total Minimum Payments 127.2
Less: Interest 13
PV of Minimum Payments 114
Capitalization of Operating Leases
Pre-Tax Cost of Debt 4.62%
Number Years Implied by Year 6 Payment 0
Lease PV Lease
Year Commitment Payment
1 42 40.1
2 34.3 31.3
3 22.2 19.4
4 10.3 8.6
5 6.7 5.3
6 & beyond 11.7 8.9
PV of Minimum Payments 113.7
Real Value 113,736
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
23
S
tryker C
orp
.
VA
LU
AT
ION
OF
OP
TIO
NS
GR
AN
TE
D IN
ES
OP
Tic
ker S
ymbol
SY
K
Curre
nt S
tock P
rice
65.3
0
Ris
k F
ree R
ate
3.7
1%
Curre
nt D
ivid
end Y
ield
0.3
3%
Annualiz
ed S
t. Dev. o
f Sto
ck R
etu
rns
25.0
0%
Avera
ge
Avera
ge
B-S
Valu
e
Range o
fN
um
ber
Exerc
ise
Rem
ain
ing
Optio
no
f Op
tion
s
Outs
tandin
g O
ptio
ns
of S
hare
sP
rice
Life
(yrs
)P
rice
Gran
ted
Range 1
24,8
00
38.9
85.9
03
4.2
7$
8
49
,92
7$
Tota
l24,8
00
38
.98
$
5.9
03
5.4
4$
849,9
27
$
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
24
Stry
ker C
orp
.
Eq
uity
An
aly
sis
2003
2004
2005
2006
2007
2008E
2009E
2010E
2011E
2012E
CV
Net In
com
e4
53
,50
04
65
,70
06
43
,60
07
77
,70
01
,01
7,4
00
1,1
91
,51
61
,42
2,4
36
1,5
95
,13
61
,76
8,9
76
1,9
30
,98
12
,09
2,7
47
Shares O
utstan
din
g for EP
S3
97
,80
04
01
,20
04
03
,70
04
06
,50
04
09
,70
04
12
,75
04
16
,25
04
19
,75
04
23
,25
04
26
,75
04
30
,25
0
Earnin
gs Per Sh
are 1
.14
$
1.1
6$
1
.67
$
1.9
1$
2
.48
$
2.8
7$
3
.40
$
3.7
8$
4
.16
$
4.5
1$
4
.84
$
Pa
yo
ut P
olic
y:
Divid
end
s per Sh
are0
.07
$
0.0
9$
0
.11
$
0.2
2$
0
.33
$
0.4
0$
0
.50
$
0.5
5$
0
.65
$
0.7
5$
0
.85
$
Divid
end
Gro
wth
Rate
28
.57
%2
2.2
2%
10
0.0
0%
50
.00
%2
1.2
1%
25
.00
%1
0.0
0%
18
.18
%1
5.3
8%
13
.33
%
Divid
end
Payo
ut R
atio6
.14
%7
.76
%6
.59
%1
1.5
2%
13
.31
%7
.00
%7
.00
%7
.00
%7
.00
%7
.00
%
Total D
ividen
ds
23
,70
0.0
02
8,0
00
.00
36
,20
0.0
04
4,6
00
.00
89
,70
0.0
01
35
,63
0.0
01
65
,80
0.0
02
09
,00
0.0
02
31
,82
5.0
02
76
,25
0.0
03
21
,37
5.0
0
Re
tain
ed
Earn
ing
s:
Be
ginn
ing R
E1
,86
8,1
00
2,2
97
,60
02
,92
8,2
00
3,4
90
,50
04
,36
4,7
00
5,4
20
,58
66
,67
7,2
22
8,0
63
,35
79
,60
0,5
08
11
,25
5,2
39
Plu
s: Net In
com
e4
53
,50
04
65
,70
06
43
,60
07
77
,70
01
,01
7,4
00
1,1
91
,51
61
,42
2,4
36
1,5
95
,13
61
,76
8,9
76
1,9
30
,98
12
,09
2,7
47
Min
us: To
tal Divid
end
s2
3,7
00
.00
28
,00
0.0
03
6,2
00
.00
44
,60
0.0
08
9,7
00
.00
13
5,6
30
.00
16
5,8
00
.00
20
9,0
00
.00
23
1,8
25
.00
27
6,2
50
.00
32
1,3
75
.00
End
ing R
E (com
pu
ted
)4
29
,80
02
,30
5,8
00
2,9
05
,00
03
,66
1,3
00
4,4
18
,20
05
,42
0,5
86
6,6
77
,22
28
,06
3,3
57
9,6
00
,50
81
1,2
55
,23
91
3,0
26
,61
1
End
ing R
E (as repo
rted)
1,8
68
,10
02
,29
7,6
00
2,9
28
,20
03
,49
0,5
00
4,3
64
,70
05
,42
0,5
86
6,6
77
,22
28
,06
3,3
57
9,6
00
,50
81
1,2
55
,23
91
3,0
26
,61
1
ES
OP
Ex
erc
ise
As
su
mp
tion
:
Ad
ditio
nal Sh
ares Issued
3,5
00
3,5
00
3,5
00
3,5
00
3,5
00
3,5
00
3,5
00
Average Strike
Price
38
.98
42
.13
45
.54
49
.22
53
.20
57
.50
62
.15
Co
st of Eq
uity
8.0
9%
8.0
9%
8.0
9%
8.0
9%
8.0
9%
8.0
9%
8.0
9%
Total Eq
uity R
aised1
36
,43
01
47
,46
21
59
,38
51
72
,27
31
86
,20
22
01
,25
82
17
,53
2
ES
OP
Ba
lan
ce A
ssu
mp
tion
:
ESOP
Balan
ce (Begin
nin
g)2
4,2
00
25
,40
02
4,8
00
25
,68
22
6,5
33
27
,35
42
8,1
47
28
,91
2
Op
tion
Shares G
rante
d4
,80
03
,50
03
,50
03
,50
03
,50
03
,50
03
,50
03
,50
0
Op
tion
Shares Exe
rcised(3
,10
0)
(3,6
00
)(1
,75
0)
(1,7
50
)(1
,75
0)
(1,7
50
)(1
,75
0)
(1,7
50
)
Op
tion
Shares Fo
rfeited(5
00
)(5
00
)(8
68
)(8
99
)(9
29
)(9
57
)(9
85
)(1
,01
2)
ESOP
Balan
ce (End
ing)
25
,40
02
4,8
00
25
,68
22
6,5
33
27
,35
42
8,1
47
28
,91
22
9,6
50
Sh
are
Bala
nc
e E
stim
ate
:
Be
ginn
ing Sh
ares Ou
tstand
ing
39
9,4
00
40
2,5
00
40
5,2
00
40
7,9
00
41
1,0
00
41
4,5
00
41
8,0
00
42
1,5
00
42
5,0
00
42
8,5
00
Stock O
ptio
ns Exce
rcised
4,8
00
3,5
00
3,5
00
3,5
00
3,5
00
3,5
00
3,5
00
3,5
00
Treasury Sto
ck Rep
urch
ased $
(76
,10
2)
(38
7,7
47
)(9
34
,26
3)
(1,2
76
,70
0)
(1,5
06
,05
3)
(1,8
64
,84
7)
Assu
med
Stock P
rice6
5.3
07
0.5
77
6.2
68
2.4
18
9.0
69
6.2
4
Shares R
epu
rchased
(1,1
65
)(5
,49
5)
(12
,25
1)
(15
,49
2)
(16
,91
1)
(19
,37
7)
End
ing Sh
ares Ou
tstand
ing
39
9,4
00
40
2,5
00
40
5,2
00
40
7,9
00
41
1,0
00
41
4,5
00
41
8,0
00
42
1,5
00
42
5,0
00
42
8,5
00
43
2,0
00
We
ighte
d A
verage Shares O
utstan
din
g4
12
,75
0
41
6,2
50
4
19
,75
0
42
3,2
50
4
26
,75
0
43
0,2
50
Henry Fund Research
THE UNIVERSITY OF IOWA
Henry B. Tippie School of Management
25
Rela
tive P
/E A
naly
sis
EP
SE
PS
Tic
ker
Com
pany
Pric
e2008E
2009E
P/E
08
P/E
09
MD
TM
edtro
nic
49.4
2$
$2.5
5
$2.9
6
19.4
16.7
AC
LA
lcon
153.4
9$
$6.4
4
$7.3
7
23.8
20.8
BA
XB
axte
r Intl In
c61.9
9$
$3.2
3
$3.6
5
19.2
17.0
BD
XB
ecto
n D
ickin
son &
Co
88.2
0$
$4.3
6
$4.8
8
20.2
18.1
SN
NS
mith
& N
ephew
63.7
2$
$3.0
2
$3.5
9
21.1
17.7
Z
MH
Zim
mer H
old
ings In
c.
74.6
0$
$4.2
2
$4.8
0
17.7
15.5
Avera
ge
20.2
17.6
SY
KS
tryker C
orp
.65.3
0$
2.8
8
3.4
3
22.7
19.0
Imp
lied
Valu
e:
Rela
tive P
/E (E
PS
08)
$ 5
8.2
8
Rela
tive P
/E (E
PS
09)
60.5
2$
* Pric
es q
uote
d a
s o
f 4/2
5/0
8