Good day ladies and gentlemen, and welcome to the Stryker Conference Call. My name is Kathie and I'll be your coordinator for today. At this time all participants will be in a listen-only mode. We will be conducting a question and answer session towards the end of this conference. [Operator Instructions]. The company has asked that I read the following statements. Certain statements made in today's conference call may constitute forward-looking statements. They will be based upon management's current expectations and will be subject to various risks and uncertainties that could cause the company's actual results to differ materially from those expressed or implied in such statements. In addition to factors that may be discussed in this call, such factors include but are not limited to, pricing pressures generally, including cost containment measures that could adversely affect the price of or demand for the company's products, regulatory actions, unanticipated issues arising in connection with the clinical studies and otherwise that affect United States Food and Drug Administration approval of new products; changes in reimbursement levels from the third-party payers, a significant increase in product liability claims, change in economic conditions that adversely affect the level of demand for the company's products, change in foreign exchange markets, change in financial markets and change in the competitive environment. Additional information concerning these and other factors are contained in the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q. Today's conference call will also include a discussion of adjusted net earnings from continuing operations for the comparative quarter and six months ended June 30, 2007. Further discussion in a non-GAAP financial measure including a GAAP reconciliation apparent in the company's Form 8-K filed today with the United States Securities and Exchange Commission, which may be accessed from For Investors page on the company's website at www.stryker.com. I would like to now turn the call over to your host for today Mr. Stephen P. MacMillan, President and Chief Executive Officer. Sir, you may proceed.

Thank you, Kathie and good afternoon, everyone. And welcome to Stryker's second quarter 2008 earnings report. With me today are Dean Bergy, our Vice President and Chief Financial Officer; and Katherine Owen, Vice President of Corporate Strategy and Investor Relations. We had a few challenges in the quarter and, as always, there will be a few things to focus but our unique set of businesses delivered strong results once again, posting our 30th straight quarter of double-digit sales growth. While favorable calendar and currency helped in the quarter by adding over 4 points of growth to our top line, overall reported sales growth was 17%, and earnings were, again, up over 20%. With strong performances from our international businesses, our growth was remarkably balanced on a geographic basis, with both the U.S. and international businesses up about 12.5% operationally in the quarter. This represents significant upticks in our European, Pacific and Latin America businesses. And total reported international growth was up 25% in the quarter. Internationally, all five of our Orthopaedic Implants businesses, hips, knees, spine, trauma and CMF, delivered accelerating growth rates and exceeded 20% combined sales growth on a reported basis. MedSurg also had another impressive quarter, posting over 20% reported growth and up 18% operationally. Our international expansion efforts continued to pay off as reported MedSurg growth was up a remarkable 37% in the quarter and 25% operationally. Our U.S. businesses also continued to be strong up over 15% in the quarter. Thus, we continue to be optimistic about our long-term prospects of the growth in MedSurg. We now turn to update on quality and compliance. We have been actively engaged in discussions with FDA, as we work to remediate our existing warning letters but also it's to harmonize and strengthen our compliance systems across the Corporation. While a highly decentralized organization helps drive exceptional commercial success over the years, it has also made it more difficult to deliver the consistent company-wide compliant systems which FDA expects. The magnitude of the upward [ph] ahead of us is big. And earlier this year, we began a major revamping of our approach to our quality and compliance systems. And it will take time, money, and management focus, throughout the organization. We would expect costs of this effort to be at least $50 million per year, for the next few years and will likely result in the addition of several hundred new people around the world. So, what should you make of all of this? It's pretty simple. We have a lot of work to do, but we are channeling our can-be-spirit to the area of compliance and attacking it like we attack all challenges with focus and energy. And from a position of financial strength, it should allow us to continue to deliver, while also getting stronger. I will now turn it over to Dean, for more details.

Thanks, Steve. I would like to start with the impact of foreign currency on our sales in the quarter. As in the first quarter, foreign currency was very favorable this quarter. The weakening of the U.S. dollar added $65 million to international sales and increased the company's overall sales growth by 4.4%. In the second quarter, the dollar weakened approximately 16% against the euro, and about 13% against the yen, when compared to the prior year. If currency rates hold near June 30th levels, we expect the impact of foreign currency will increase third quarter 2008 sales by about 2.5% to 3% versus the prior year. Now, I'll spend a moment on the impacts of price and volume mix on the top line. Selling prices were up about 0.5% on a worldwide basis in the quarter, the domestic prices up 1%, and the international prices declining slightly as a result of the April 1st, 2008 government reimbursement cuts in Japan. Japanese pricing was off 7% in the quarter. Volume mix growth was 12% in the second quarter. Domestic volume mix growth checked in at 11% in the quarter, and the international volume mix growth was a robust 13% on the heels of a soft first quarter. Now, I'll turn to our business segments, Orthopaedic Implants, represents 59% of our sales. And sales of Orthopaedic Implants increased 15% in the second quarter on a reported basis and 9% operationally. The Orthopaedic Implants business received a slight benefit from one additional comparative selling day in the quarter. And as we go through the growth rates by product line, which are shown in our press release, I will reference the rates as we'll provide more detail on performance in each product category. Hips were up 7% in dollars and 2% in constant currency…

Thanks, Dean. So, as we summarize the quarter it looks like this. Strong sales, earnings and cash flow growth were immediately helped by the calendar, currency, and a little help for our instruments franchise from supply issues at a competitor. These positives allowed us to overcome our own shortfalls in our hip franchise and enabled us to invest significantly in quality and compliance initiatives. These investments gained our gross margins a bit and it delayed some R&D projects as Dean mentioned. But we remain confident in our overall pipeline. Strengthened euro also dented gross margins narrowly but an improved tax rate helped. So all in, we had a few moving parts falling against us, as always, but our broad based set of businesses once again allowed us to deliver on the commitments we established at the start of the year. Looking forward. we continue to feel good about our ability to deliver in the second half while continuing to strengthen our quality and compliance systems. With that, we will now open it to up for questions and remind everyone that we'll take one question from each person with one follow up. So back to you Kathie. Question And Answer

[Operator Instructions]. Your first question comes from the line of David Lowman from Morgan Stanley. Please proceed. David your line is open, you may proceed with your question please.

Thank you. Good evening everyone. Couple of just quick questions, first on the hip side. Can you give us an update on the Cormet launch, where are we with training courses and when we can expect a full rollout?

Sure. The training course has been happening through the second quarter, David. I would tell you to be quite candid. Our organization shifted from playing offence to defense in the first half of the year, as we reeled from the hip recall. And I think we'll expect a steady uptick here in the third quarter and beyond. But again this one continues to go certainly slower than we would have planned at the start of the year

Okay. And then on the gross margin, Dean, can you quantify maybe the components of that 20 to 40 basis point year-over-year decline. What the positives and negatives are in there?

Well, it primarily David is the quality initiatives kicking in. I also mentioned the fact that as you know when we've talked about it before, we have a few components of higher raw material costs. Some of that relates to the price of some of the commodities that we are purchasing, the models that go into some of the products, as well as to some degree, a little bit of the dent from the impact foreign currency in that category. And then also we have some higher shifting costs that are going into that. But from a magnitude standpoint it's primarily the quality initiatives that are going to impact that year-over-year change. And again, if you think about where we would have mainly anticipated this to be in a normal year, we would have expected our margins maybe up 30 to 50 basis points. So all in, we are taking a pretty good whack as we roll into cost of this quality which will have some ongoing impact but should lead us on to better prices in the company as we go forward.

Your next question comes from the line of Mike Weinstein from JP Morgan, please proceed.

Good evening guys.

Hi Mike.

Hi Mike.

Let me just follow up on that last question there. It probably would be helpful Dean, is, if we think about the move from first 30 to 50 to down 20 on gross margin guidance, initial thoughts today. Do you... can you give us a sense of how much of that's quality initiative versus increased material costs, increased shipping costs and the dollar?

Well, again, most of it is quality and we have outlined a number there of at least $50 million. So I think --

In that $50...

Pardon.

And that full 50 shows up in the cost of goods sold line?

Not completely but the majority of it does.

Okay. Let me, just come back to the FDA. You spent a little bit of time on it but I was hoping you could update us on the timing of the reinspections of Cork and Mahwah?

It's still no timings planned and Mike again I think... I know from an investment community standpoint, we love to get those behind us. I would tell you, we're still more focused on making sure that we have those facilities in great shape, and are preparing that way. So there is no timing yet established.

Your next question comes from the line of Raj Denhoy from Thomas Weisel Partners. Please proceed.

Hi, good afternoon guys.

Hi, Raj.

What if I could ask a little bit about the hip business in general. I know it's... you've mentioned that, the inventories have now been restored in the marketplace, but that growth rate, particularly, on domestic side is still a pretty anemic. Could you just maybe give us a little bit of clarity as to when you expect that to accelerate, and how you expect to overcome some of the competitive hips you might have taken there, get back some of that business?

Yes, we think we will get it going again by about 2015 --

At the rate we're going?

It's going to be probably slow, slow coming back here in the second half of the year. The sales forces took a hip, and you don't get that business back and that momentum back. I think, to be quite honest, they're also very caught up in our incredible growth in our knee business right now. It's easy to go to hip, so, I'd remind everybody that our other seven franchises all grew in excess of 15%. And there is a lot of momentum in knees right now. I'll tell you the... if you look at the knee marketplace, we think it's a much more dynamic marketplace right now in terms of surgery schedules and everything else. And candidly with the success of Triathlon, with the PKR, and our Partially Knee Resurfacing, and our Triathlon revision system, it's a little bit easier for our sales force to be focused on knees right now. And it's going to take a little bit of time I think before they get fully back and excited about hips again.

Sure. Yes, the knee business we're sure isn't lost. But it's interesting to know because, I guess, we don't necessarily assume that there is going to be a lot of competitive change, quarter-in quarter-out, in orthopaedics. But it sounds from some of your comments that you maybe have actually lost some competitive share here in hips and that maybe it's not just the one-off procedure, but surgeons may have moved to other competitors devices in order to satisfy their needs. Is that, in fact, the cases what's happened?

Yes, I think if you look at certainly J&J numbers, they had a great hip quarter. And I think we have a lost a little bit of business to them. But, it's going to take a little bit of effort to get back. So, I think, that's a very fair observation. We're not thrilled about it. I think we're taking market share in seven of the eight categories, we compete in. Which, I think, just about any company would take, but we've lost a little bit in that one. But, we'll get it back eventually.

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

Good afternoon. Steve, I was intrigued by comment about knees. Do you believe that our knee volumes are up close to the 10% we saw for a while in the United States?

It certainly seems. If you look at the hip market and the knee market right now Bruce. The knee market certainly seems to be a lot more vibrant. And I'd say both in the U.S. and globally. And that's where, we are disappointed with our hip business, but frankly, given the growth in the knee category rate now, I think we'd rather be succeeding and winning the knees, which we are. So, it does seem pretty vibrant.

And just one follow-up. With regards, to the warning letter at the Analyst Day, the potential for a corporate warning letter, at the Analyst Day, you were guardedly more optimistic that, it could be avoided. Or could just comment on your sense of how things are going, and also to the extent that worse comes to worse. Is that $50 million, the number that will pretty much stay in place, in terms of the incremental spend?

Yes, we continue, as we said at the Analyst Day. We are essentially operating the company as if we received a corporate warning letter. When you look at the magnitude of the effort that we're putting into our quality and compliance initiatives, I would tell you if you draw a continuum between, they were completely out of the woods and on one extreme... and were on the verge of getting a corporate warning letter on the other extreme. I'd say we're probably closer to the middle. But if anything would be on the wrong side of that middle still. We still, we've got work to do but we feel we made a lot of progress, in a short period of time, but we still have lot of work to do.

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

Hi, thanks for taking the call.

Sure, Kristen.

Exploring just on, apologies if already addressed this but, obviously with the first quarter with Easter there has been a lot of talk on kind of what that impact was in the first quarter. Any sense on, what you might have seen from a year-over-year comparison, given that Easter was in the second quarter a year ago? And then if could just touch on the instruments can you just justify kind of I guess what were the issues there and to what degree you expect to benefit from your competitors' issue going forward?

Sure. On the Easter we essentially had an extra day this quarter versus a day short, probably all in it was a few percentage points whether it's between 1.5 to 3 points, it's probably been, I think what we factor in.

Yes, I think that's fair. And certainly we saw Europe particularly on the international businesses to be stronger and reconstructive in implant parts of the business in this quarter which is where we got hit last quarter, and would have anticipated that bounce back.

Yes, great. And on instruments I think the Dean, mentioned there were couple of product lines in terms of some of the irrigation stuff that probably benefited a little bit more from some shortages in the market. So, and again where we want to be as honest as we can because that may be not repeat in this quarter next year. And as you know we try to be as critical as we can and instead of blowing a bunch of smoke tell you where we did, they were lucky.

And can you quantify exactly how much you think impacted the gross rate there?

In the grand scheme pretty minor for the full hunt [ph].

Yes, I think that's fair. I mean they did have an exceptional quarter. So and I think as I said there was probably a little bit of the bonus of that demand for those products. So those products are going to probably remain off the market for a while. For our competitor I think this quarter is probably getting the most benefit.

Maybe a percent or two of growth for that business.

Yes, maybe, a couple more than that but --

Yes,few percents... probably a few percentage points Kirsten on the instruments franchise for the total Corporation, clearly less than a percent.

You next question comes from the line of Michael Matson from Wachovia Capital Markets.

Hi, it was kind of interested in the comment that you made earlier in the call or that Steve made early in the call about the $50 million per year, we need to continue for the next few years. And this year you're tapering down your R&D spending. I understand that, that was sort of by design that was something you intended heading into the year. But just looking out for the next few years, if you are spending the $50 million a year, how are you going to continue to be able to deliver some nice margin expansion? And are there other things that will start to roll off next year, such as the monitoring fees and things like that?

Yes. The first part of the answer is we're going to continue to grow really fast on the top-line, which I think we're improving our ability to be pretty good at. And just simply put that $50 million next year off from a much bigger base you'll get some automatic leverage there. And regarding as we continue to go forward... there should be some costs particularly Dean mentioned some of the legal costs and everything else being up significantly higher. We would certainly hope that some of those to start to roll off.

Okay. And then I was wondering if you could give us a little more detail on your hip resurfacing product. I guess Corin put out an announcement that you are taking any more orders from them until I guess the end of year something. And I just wanted to know is that reflective of a further slowdown in the sales there or less uptick than you expected or is that just a reflection of the delay in the training heading into the year?

It'sdelayed training but overall it's... we're just a slower out of the gate. It has not been as easy for us when the sales force have been so far distracted. And I think we'd be wiser to keep expectations lower here rather than faster Mike.

Your next question comes from the line of Doug Schenkel from Cowen and Company.

Good afternoon.

Hi, Doug.

Even adjusting for FX, and actually looks like your OUS. hip number rebounded, I would say almost materially more than it did in the U.S. Any unique supply dynamics, specific to Trident or surgeon management approaches that you took that may have helped to get business back more so, OUS than domestically?

Great question, Doug. I would tell you, probably in some of our key markets outside the U.S., we did a better job of shielding the surgeons from supply issues throughout. I would say we made some prioritization calls and shifted around certain countries to make sure that we protected our higher volume surgeons international and frankly are more profitable surgeons in some of the international markets. And I give our international leaders a lot of credit. They made some tougher choices than what they would have done historically and I think it did allow us to bounce back a little bit quicker.

Great. And just one follow up: in Q1, you suggested that the Trident challenges, you're facing may have actually hindered what was a pretty strong knee number in Q1. And I think that was attributed to just the fact that as you've talked about on today's call that it is a distraction to the sales force. Any thoughts on how this dynamic played out in Q2?

I think in Q2 as we started to get at least supply back on the hips, it allowed the sales reps to at least not to spending all of their time as logistics coordinators, and allowed to get probably back into surgeries and with the up-tick and the launches of that Triathlon PKR and that the revision system, they probably started to put a little more of their time and energy back into selling those products, but I think it's kind of less of a proud one on hips and they went back to knees, which they were having a lot of fun with, but still they are not yet having fun selling hips again.

I do think we do suspect that our main product trauma business in the U.S. a little bit with some of the folks that have that in their bag is full line reps, potentially some of that focus issue, but we certainly think we are in good shape as we go on into the third quarter now.

Yes, that's great additional point.

Ladies and gentlemen, as the reminder: please limit your questions to one question with one follow up. Your next question comes from the line of Michael Jungling from Merrill Lynch. Please proceed.

Thank you for taking my questions. I have two questions; first in the gross margin: given the investments making quality control that measures the... will the gross margin be balanced to below 70% over the intermediate term? And I'm not just referring to the next two quarters, but perhaps a little bit more beyond that. And then secondly on trauma, what is the constant currency trauma approach rate if you exclude military sales, and also while we've now seen three quarters of deceleration in constant currency sales growth? Thank you.

Sure, Michael. I lost the first point.

The first question, Michael, I'm not sure I fully understood, gross--

The gross margin; yes, they probably will stay under 70.

It's under 70%.

Yes.

Yes, they would be.

They will be. And in terms of--

And that's also for next year?

Yes. Yes, because a lot of the cost has rolled through.

I mean last year our gross margin for the year was $68.9 million, and we're now projecting that to be down 20 to 40 basis points; and with that $50 million or components that built on the gross margin going forward, even if we get a normal expansion, we're still going to be below $70 million.

We haven't really been at $70 million company.

Right.

We've been constantly marching up overtime and now that that march up is going to plateau here a little bit. Regarding, trauma, Michael, we've had just unbelievable growth in the United States for a number of quarters that's finally... that just the comparables of 25%, 28% on top of each other, on top of each other clearly getting tougher, and so we're probably starting to see some of the slowdown combined with what Dean said. Some of our full line, people will do recommend trauma. We're little distracted, and we certainly saw the slowdown in the U.S. Internationally, our trauma business, last couple of quarters compared to that the overall global rate slows down, because the U.S. has slowed down a little bit. I've remind you by the way 13% trauma growth in the U.S. still not too chivvy.

Right. And then military sales had no impact at that number, it's the same with and without, Michael.

Thank you.

Great.

Your next question comes from the line of Joanne Wuensch from BMO Capital Market. Please proceed.

Thank you. First question has to do with the tax rate; it's 27.2%. Is that the rate we should think about for the remainder of the year and then on a go-forward basis?

Joanne, I think the tax rate is going to have a little bit of volatility. And then I guess what I would tell you is we are 27.6% through six months. I think we are comfortable with rates kind of anywhere in the range of 27.5% to 28% as we look at the remaining quarters of the year.

Okay, and it looks like you did not repurchase any shares in the quarter. Is that the right read, and if so, why not?

Yes, that is the right read, and we had... as you know, to put one these problems in place, you can't have material inside information, we had certain things that we were looking at and going on and we're not in a position to initiate that buyback yet.

Okay. So many question that could come after that. I'll wrap it up just then with sources of... sorry uses of cash, or are you still looking at acquisitions then?

Acquisitions and initiating the buyback.

And initiating a buyback. Okay. Thank you, very much.

Sure. Thanks, Joanne.

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

Good afternoon Steve, hi Dean.

Hi.

Hi, Rick.

Couple of questions; particularly outstanding international MedSurg results. If I am seeing it correctly second quarter gross rates accelerating over first quarter year-over-year numbers, maybe you can give us a little more color on what's happening there and some of the initiatives that are driving that and the sustainability.

Sure, it's largely been just greater focus in a lot of our key countries outside the U.S. where we've been putting more dedicated sales people in. Particularly, really for instruments and endoscopy businesses. And what we've always recognized is we've had good products there. We just frankly haven't had many sales people on the ground in some of the markets and it's been started to build that out. And that's where we continue to think there is a some runway ahead of us there.

And back to U.S. I've had some possible supply measure discussions lately that quite pleasantly have been indicating that Stryker bids seem to be getting share of some folks, who were total hill run hospitals they've built a new wing and they're putting in Stryker. Again, can you help me with any perspective on something new effecting dynamics there and maybe just as part of that update us on the perpetual question these days of that capital equipment spending, in general.

Sure. we continue to feel great about our medical business; pure and simple. We have, we think a great team of people there and a great steady flow of new products, and a lot of the new products that may have mentioned to you, a lot of what we are focusing on our beds and stretchers that can be easier for the OR staff, and frankly help productivity in the hospitals with some greater software components very few of them and everything else. And we have a new bed that we're just launching right now that's being very well received. So, we continue to feel very good about that ability of that business to grow well above the market rate. We're very proud of that division.

The next question comes from the line of Mack Mitsic [ph] from Piper Jaffray. Please proceed.

Hi Steve, hi Dean, thanks for taking the question.

Hi, Mack.

So, one question just on sort of the sequential differences and in Q1 to Q2, with all the expectations around Easter, having some kind of positive impact on Q2, and a negative impact on Q1, the recall in Q1. It looks like some of your businesses and I guess I'm looking at knees even through they're still great, they did come down from Q1. I looked at a couple of other your businesses like even beds or some of the others, which are strong, but they are all kind of down. And I'm just wondering with the billing date differences, are some of those moving in ways that you didn't expect quarter-to-quarter. And are you seeing any, is there anything out that gets you worried about the environment?

There is nothing that has us worried about the environment. I think, our instruments business in the U.S. grew faster in the quarter, I think our medical business

Yes, I mean in our--

Grew faster in the quarter.

Yes, I mean our knee business grew faster in the quarter too. So, I think a lot of those businesses actually did pick up.

In the U.S.?

Largely, we have this, we've been seeing for a while that trauma is fine, would eventually be slowing down.

Right.

After... spine is going to get 30% growth quarter last year. So, We had been modeling all year long, frankly that the trauma and spine would slow down a little bit. Knees would hopefully maintain and hips would pick up a little bit. Obviously, the recall on hips has pushed us back there. And that MedSurg would continue to truck along. I think all in, it's a very much what we feel that we have.

So, you still feel pretty strongly coming into the second quarter here. You talked... I heard the comments early about knees. It sounds like you are just seeing a lot of positive procedure activity out there in your major markets.

We are.

I think certainly in knees, we have expanded the triathlon franchise here. Adding the TS provision system, obviously, has had great results in the first quarter. And now the PKR is starting to pick up as well. So, I think we certainly feel good about those two additions helping to continue nice momentum that we have had in knees for a long time.

Yes.

Your next question comes from the line of Lawrence Keusch from Goldman Sachs. Please proceed. Lawrence Keusch - Goldman Sachs & Co.: Hi, good afternoon guys.

Hi, Larry.

Hi, Larry. Lawrence Keusch - Goldman Sachs & Co.: Just, so Steve, two questions; I will just ask them and then you can fire back. Obviously, I was just trying to understand what's going on with surgical volumes and it feels like things are fine. But if you look across, let's keep it to the U.S., across the U,S., are you seeing any change in any of the geographic areas either accelerating, because people are afraid of losing their jobs and they are trying to get procedures done or decelerating in any way. Just trying to get a feel if that's tracking any differently as you work through the quarters here. And than the second question I don't want to put words in your mount, and that's why I want to make sure I do understand this. From your prior comments regarding where you are with the FDA and the inspections and sort of the challenges in front of you on that, it almost feels like you're not quite as optimistic as you were at the Analyst Day. And so I just want to make sure that something didn't happen since that meeting that makes you feel little bit less positive on getting this result quickly or am I just reading way too much into that? So I just wanted to ask that as well.

Sure. The first one on the geographic within the U.S., we have not noticed any significant things, Larry. We can always follow up, but that level of the... there has been nothing that's jumped out at our level on that. Regarding the second part, I think as you think about FDA, where I was feeling certainly that we made progress when we saw you all in May. And I continue to feel that is I feel better than I did in January. But I also don't want that to perceived as hey, everything is hunky-dory. We're completely out of the woods. So there is probably a slight nuance there that I might have thought... people might have read maybe touch more positivism in May. But we continue to feel we're working at. We feel like we've made a lot of progress, we feel we've impressed the FDA that we've made a lot of progress. But the ball is still ultimately in their court and there is a lot of work to be done. I think what we wanted to be clear about and as we feel that and the more and more realize there is a lot that we have to do, and I just don't want people to kind of declare victory and go home. Lawrence Keusch - Goldman Sachs & Co.: Right, that still breaks a little bit here.

Yes, hopefully that frames it that I'm not very different, but the perception of work might have been, I think was potentially if anything... it was just a touch more positive probably even as we saw the stock run up a bit. The analyst meeting, I realize was probably a touch more optimistic than we might have been feeling, but we do feel very good about the progress, but know it's a journey. Lawrence Keusch - Goldman Sachs & Co.: Okay. No events had incurred you again just to comment on.

Nothing has changed in that new bag. Lawrence Keusch - Goldman Sachs & Co.: Got you. Okay. Terrific, thank you for that clarification.

I would love to have something to knock me completely to the other end of the spectrum, and I just can't give you that yet Lawrence Keusch - Goldman Sachs & Co.: Got you; thanks very much, Steve.

Thanks Larry.

Your next question comes from the line of Tao Levy from Deutsche Bank. Please proceed.

Good afternoon. I have just a quick clarification; first the 20 to 40 basis points that you've talked about in gross margin, Dean; is that looking at the full year '08 versus '07, or is that just looking at the back half quarter-over-quarter... year-over-year in the back half quarterly?

That's intended to talk about the full year impact.

So, looking at '08--

Yes, comparing to the 68.9% that was our full year gross margin for last year.

Okay. To bring that down $20 million to $40 million, when we annual... when we get to the full year '08 in our models?

Yes.

Okay. And with... in terms of FDA, how close are you to being comfortable and calling them into either Cork or Mahwah [ph]. And is there we talking three months time, six months time? Or have you already done it?

We just would rather stay way from specific months, because the FDA works to their timetable, we don't want to over promise and over commit, we are just telling you. We are working at, and I know... we know it's an overhang for some people. We are still better off making sure we have it right. And rather that delay out a little bit longer and we get it right, then we haven't come back into some of the classic mistake companies make in these situations is because of the pressure they deal from the outside community. They can try to rush things along and not be ready.

Okay.

So,we have the financial strength, we have the commitment, we'd rather make sure that when they come back and we are in a greater shape as we can be. You know what that means, we've got an over hang for another few months.

And just on the pricing front that specifically the hips and knees, post-DOJ settlement in the quarter, any changes there or things pretty much satisfy [ph]?

Nothing dramatic.

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

Great, thanks, good evening.

Hi, Bill.

Hi, Bill.

Couple of questions for you guys. First just in terms with restrictions on the stock buyback, is that still in place?

We've not yet initiated it.

Butis it still in place? I mean can we start initiating once we're through the quite-period for the conference call?

I think we prefer not to comment on that, Bill.

Okay, that's fine. And then in term one of the comments you mentioned on the on set was that with everything going on for compliance in the systems needed that it was taking time, money and management efforts. I mean, can you quantify that in terms of how much is this kind of taking away from your daily business?

It's... it clearly is on the minds of a lot of our managers. It's core to a lot of our operational folks. But it's also something that will make us better, so it's also not going to afford as running the business, it's part of what need to do and it's part of what we are doing.

Your next question comes from the line of Jeff Johnson from Robert Baird. Please proceed. Jeff Johnson - Robert W. Baird & Co.: Good evening guys. Thanks for taking the call.

Hi, Jeff. Jeff Johnson - Robert W. Baird & Co.: Hey, how are you? Couple of things here; Steve, I apologize in advance, you answered this about six different ways already, but you ended your comment a few seconds ago about this overhang maybe remaining for a few more months. Is it a fair read then that at least sometime in '08 is still somewhat on the table for having maybe Cork re-inspected?

Maybe, but I don't know. This is where Jeff, when you guys keeps trying to pin for specific answers, the answer is we don't know. Jeff Johnson - Robert W. Baird & Co.: Yes, I understood. I did... it's somewhat of an unfair question.

Yes, sorry. Jeff Johnson - Robert W. Baird & Co.: Given your previous comments, but you did end it with another few months.

Months could be... three months or 57 months, as-- Jeff Johnson - Robert W. Baird & Co.: Yes,

We are not in control. Jeff Johnson - Robert W. Baird & Co.: Fair enough. And then Steve, going back to your comments regarding tone coming out of the analyst meeting. It also seem that you guys had pretty high conviction there that the next few years EPS wise still looked doable at the 20% level in that. Yet today we are talking about the $50 million maybe continuing in that level the next few years. Do you still have high conviction or should we at all maybe change our thinking on your tone at the analyst meeting regarding that aspect?

We still feel good about the fundamentals of the business. We also know what's ahead of us now in terms of probably this road. And borrowing anything unforeseen over and above we've been able to absorb some pretty big body blows this year and not walk away from our guidance in a market, when I think a lot of other folks obviously have had to do that. So I think we continue to feel good, but we also want to communicate it. It puts more pressure on the organization, there is no doubt. Jeff Johnson - Robert W. Baird & Co.: Fair enough, that's all I've got guys. Thanks.

Sure. Thanks, Jeff.

You have follow-up question from the line of Mike Weinstein from JPMorgan. Please proceed.

Hey Mike. Welcome back.

Thanks. I didn't know we are going to get back in queue, I guess it's a gift.

Sorry, there you go.

But you're really put up. Steve, I think some of the reaction I think we've already getting to fall in the quarter is one: people a little concerned that you sound a little bit less enthusiastic and maybe due to the analyst meeting on in the last call about the date of the business, those we are having to deal with these... the quality systems issues. How do you want people maybe to walk away from here relative to just your outlook for the business and sustainability of the growth.

Sure. The outlook for the business, we continue to feel great. If you look through the number of questions we've got today, virtually all of them have been on hips. And they've ignored the most of them, the seven franchises as the crude over 15%. We continued to think, you look at our reporting growth, this was just 12.5% local currency growth in the quarter. I don't think there is a lot of companies putting numbers up that are that good, and we feel very good. We feel great about our organizations, we feel great about the fundamental businesses. We have a challenge with the FDA, and we are trying to moderate and manage the expectations on that. I'd say, Mike, back to your point and I try to make it sort of the earlier, I think somebody might have received us as being potentially further clear coming out of the analyst meeting that maybe we fully intended. And I just... I want to make sure that as you know with us we don't like surprising people, and we don't like just being out... we're not out pumping our stock, we are out running the business, and just want to be careful that people aren't running around say hey, there is absolutely... they're completely clear, because we're not. Again we feel great about where we're headed; certainly feel better than we did at the start of the year, but no, we have a lot of work ahead of us. So, hopefully that clears it up a little--

I mean there is actually one last one, because unfortunately this has been a... get more attention than you intended tomorrow.

Yes.

All of the little back on forth on... you guys haven't repurchased stock and because you've had been things you've been considering. Similar discussion on that's going to prompt everybody to walk way from your wondering whether you guys are about to execute it and transaction is significant, maybe you want to spend just 30 seconds on, and how you guys, the M&A and what criteria, do you put in place to think about any deal?

Sure, let's try to be as honest as we can here. We looked at a couple of things in the quarter that likely that we walked away from, but they were significant enough. But it might have kept us from wanting to initiate the buyback, or being able to do the buyback. So... but it... nothing... you shouldn't expect that we're about to go out and do some major acquisition or anything. But there were some pretty obvious properties on the market; in the quarter that you can probably surmise that we might have been taking a peek at. But, yes, it shouldn't be a, hey, Stryker is about to do a big deal.

And the final question comes from line of Michael Matson from Wachovia Capital Markets.

Hi, thanks for letting me get on with the follow-up question. I apologize; it is another hip question.

We feel bad enough on that [ph].

But, I guess, just in general with your hip business aside from the recall and everything. How much of the problems have been execution versus product related. And is it safe to assume that you've got things in the pipeline new products in the hip area that can maybe reignite the growth aside from resurfacing? And then just your thoughts on metal-on-metal, because some of the competitors that like the PU and so forth that are doing well, I think that's part of the reason?

Mike, that's a great question. And actually for first hip question I've got asked tonight. The quickest way we can read, we can accelerate growth in our hip franchise is to go metal-on-metal. I'd say we are still not completely comfortable with the science there. And we may have our heads in the sand. But, I think, it's important for people to remember, we try to run this company for the long haul, and we are not going to just the take the easy way out sometimes to accelerate our growth. We are looking at as you also know this could be our fifth straight year of single digit hip growth whilst we have fifth straight year of very strong overall top-line growth for the corporation as a whole you can expect that we have other things in the pipeline. I would tell you, there are some things that we probably would have hoped, would have come out this year that because of the distraction from the hip recall of probably shifted into 2009. But it's a bit of bumper. We clearly... we're finally rebuilding momentum at the end of last year. We are funding the double-digit growth in the fourth quarter. But this is clearly gong to self inflected, but we do have some things that are in the pipeline, but for all the reasons of things get delayed and pushback and various it's again why we don't like to talk too much about what's coming and when they might be coming last year. Because our track record on delivering is never perfect relative to our internal expectations, but I think continues to be certainly strong enough to keep our total company growing at very, very healthy rates.

Okay. And then just one quick follow up on that. Do you have a sense for what the global hip market is growing out on an underlying basis?

We think it's a lot slower then knees right now. And I think until the other folks report, where we are probably not as a completely. But we feel it's definitely growing slower than knees and it's probably slowed down to touch.

Okay. Thanks.

But again, we've have got some self inflicted stuff. We never want to blame the market, but we feel good about knees and good about knee market.

All right, thanks.

Great, thanks Mike. Is that it, Kathie?

That's it, sir. Ladies--

That's great. I'll just close by reminding everybody that again we do to very good about the fundamentals of our business. We've got a lot of good things going. There is always a few things as we mentioned to poke at. We are working with FDA and working within our organization to continue get stronger there. And just want to remind people there is work to be done there. But again, nothing like other challenges that we haven't always faced, and we'll rise to that occasion. But don't expect it to be result in next 30 days is kind of I think what we are saying. Our conference call for our third quarter 2008 operating results will be held on October 16, and Dean and Katherine will lead that call. I will be back on in the January time period when report full year results, and provide our guidance for 2009. So, Dean and Katherine will handle that one. Thank you all very much.

Ladies and gentlemen, thank you for your participation in today's conference. You may now disconnect. Have a wonderful day.