Caso 2 Excel 1

Stryker Corporation: Capital Budgeting
Harvard Business School Case 9-208-046

Courseware 9-208-702
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Exhibit 1 Selected Historical & Operating Data (US$ millions except as noted)
2006 2005 2004 2003 2002

Net sales 5,405.6 4,871.5 4,262.3 3,625.3 3,011.6
Gross profit 3,556.9 3,153.0 2,748.5 2,310.1 1,897.9
RD&E expenditures 324.6 284.7 214.9 183.0 143.9
SG&A expenditures 2,061.7 1,853.5 1,683.5 1,439.9 1,186.8
Intangibles amortization 43.6 48.8 47.8 45.4 28.9
Purchased in-process R&D 52.7 15.9 120.8
Restructuring & other special charges 17.2
Operating income 1,074.3 950.1 681.5 641.8 521.1
Other income (expense) 29.5 4.5 (3.4) (18.8) (40.8)
Income taxes 326.1 311.0 238.1 188.6 151.8
Net earnings 777.7 643.6 440.0 434.4 328.5
Earnings per share, fully diluted ($) $ 1.89 $ 1.57 $ 1.08 $ 1.07 $ 0.81
Dividends per share ($) $ 0.22 $ 0.11 $ 0.09 $ 0.07 $ 0.06

Average number of shares, diluted 411.8 410.8 409.3 406.2 407.7
Cash and marketable securities 1,414.8 1,056.5 349.4 65.9 37.8

Working capital 2,182.8 1,621.3 1,029.1 563.2 443.8
Property, plant & equipment, net 951.7 831.0 700.5 604.7 519.2
Capital expenditures 217.5 271.7 187.8 144.5 139.0
Depreciation & amortization 331.8 289.9 250.9 229.7 186.1
Total assets 5,873.8 4,992.5 4,120.0 3,188.1 2,838.0
Long-term debt, including current portion 14.8 231.6 10.0 26.1 501.7
Shareholders' equity 4,191.0 3,300.2 2,788.2 2,183.9 1,520.7
Return on average equity (%) 20.8 21.1 17.7 23.5 25.3
Number of shareholders (#) 4,091 3,979 3,784 3,084 2,983
Number of employees (#) 18,806 17,265 15,891 14,762 14,045
Source: Stryker Corporation 2006 Annual Report

2001 2000 1999 1998 1997
2,602.3 2,289.4 2,103.7 1,103.2 980.1
1,636.8 1,472.7 1,113.1 630.7 582.1
143.8 123.7 105.6 61.4 57.2
1,000.3 898.0 816.1 376.7 336.4
38.4 34.7 33.9 7.6 7.2
83.3
0.6 (1.0) 18.9 19.0
453.7 417.3 138.6 82.7 181.3
(66.3) (97.8) (117.8) 4.3 11.3
127.4 108.4 7.1 29.5 69.0
255.2 211.1 13.7 57.5 123.6
$ 0.64 $ 0.52 $ 0.03 $ 0.15 $ 0.31
$ 0.05 $ 0.04 $ 0.03 $ 0.03 $ 0.03

406.1 402.3 397.2 392.5 392.5
50.1 54.0 83.5 138.6 351.1

459.7 379.6 440.8 666.2 433.7
444.0 378.1 391.5 429.5 163.9
161.9 80.7 76.4 51.3 35.2
172.0 168.6 162.8 53.2 49.5
2,439.4 2,441.4 2,586.3 2,878.1 986.4
722.6 1,012.5 1,287.4 1,503.0 78.1
1,072.0 865.5 677.3 675.3 614.1
26.3 27.4 2.0 8.9 21.6
2,886 2,904 2,929 3,061 3,127
12,839 12,084 10,925 10,974 5,691
Exhibit 2 Consolidated Financial Statements (US$ millions)
Year ended Dec 31

Income Statements 2006 2005
Net sales $ 5,405.6 $ 4,871.5
Cost of sales 1,848.7 1,718.5
Gross profit 3,556.9 3,153.0
RD&E expenses 324.6 284.7
SG&A expenses 2,061.7 1,853.5
Amortization of intangibles 43.6 48.8
In-process R&D 52.7 15.9
2,482.6 2,202.9
Operating income 1,074.3 950.1
Other income (expense) 29.5 4.5

Earnings before taxes 1,103.8 954.6
Income taxes 326.1 311.0
Net earnings $ 777.7 $ 643.6
December 31,
Balance Sheets 2006 2005
Cash and marketable securities $ 1,414.8 $ 1,056.5
Accounts receivable 907.0 770.3
Inventories 677.6 563.5
Deferred income taxes 417.2 383.1
Prepaid expenses 117.7 96.7
Total current assets 3,534.3 2,870.1
Property, plant & equipment, net 951.7 831.0

Other assets 1,387.8 1,291.4
Total assets 5,873.8 4,992.5
Accounts payable 252.2 206.5

Accrued compensation 285.9 252.9
Income taxes payable 208.2 207.3
Dividends payable 89.7 44.6
Accrued expenses and other 500.7 490.1
Current maturities of LTD 14.8 47.4
Total current liabilities 1,351.5 1,248.8
Long-term debt - 184.2

Other liabilities 331.3 259.3
Shareholders' equity 4,191.0 3,300.2
Total liabilities & equity $ 5,873.8 $ 4,992.5
Source: Stryker Corporation 2006 Annual Report

Source:
Adjusted price per share ($) Exhibit 3
$0
$10
$20
$30
$40
$50
$60
$70
Capital IQ
1/1/1997
6/1/1997
11/1/1997
4/1/1998
9/1/1998
2/1/1999
Stryker Monthly Stock Prices
7/1/1999
12/1/1999
5/1/2000
10/1/2000
3/1/2001
8/1/2001
1/1/2002
Date
6/1/2002
11/1/2002
4/1/2003
Stryker Adjusted Stock Price
9/1/2003
2/1/2004
7/1/2004
12/1/2004
5/1/2005
10/1/2005
3/1/2006
8/1/2006
1/1/2007
Date Adjusted Closing Price
1/2/1997 7.06
2/3/1997 7.06
3/3/1997 6.06
4/1/1997 8.01
5/1/1997 8.49
6/2/1997 8.49
7/1/1997 9.5
8/1/1997 9.73
9/2/1997 10.64
10/1/1997 9.06
11/3/1997 9.59
12/1/1997 9.13
1/2/1998 9.05
2/2/1998 10.03
3/2/1998 11.49
4/1/1998 11.03
5/1/1998 9.99
6/1/1998 9.4
7/1/1998 10.64
8/3/1998 7.87
9/1/1998 8.33
10/1/1998 10.28
11/2/1998 10.35
12/1/1998 13.51
1/4/1999 11.38
2/1/1999 11.56
3/1/1999 12.37
4/1/1999 15.01
5/3/1999 14.6
6/1/1999 14.75
7/1/1999 14.97
8/2/1999 14.14
9/1/1999 12.54
10/1/1999 15.15
11/1/1999 13.97
12/1/1999 17.14
1/3/2000 15.57
2/1/2000 14.4
3/1/2000 17.17
4/3/2000 17.71
5/1/2000 18.62
6/1/2000 21.55
7/3/2000 21.15
8/1/2000 22.07
9/1/2000 21.15
10/2/2000 23.21
11/1/2000 26.25
12/1/2000 24.95
1/2/2001 22.3
2/1/2001 27.7
3/1/2001 25.77
4/2/2001 29.25
5/1/2001 28.34
6/1/2001 27.06
7/2/2001 29.59
8/1/2001 27.05
9/4/2001 26.09
10/1/2001 27.74
11/1/2001 27.09
12/3/2001 28.84
1/2/2002 29.02
2/4/2002 30.39
3/1/2002 29.81
4/1/2002 26.44
5/1/2002 26.96
6/3/2002 26.44
7/1/2002 25.01
8/1/2002 27.85
9/3/2002 28.46
10/1/2002 31.18
11/1/2002 30.56
12/2/2002 33.23
1/2/2003 29.82
2/3/2003 32.28
3/3/2003 33.98
4/1/2003 33.17
5/1/2003 33.33
6/2/2003 34.34
7/1/2003 37.88
8/1/2003 37.52
9/2/2003 37.28
10/1/2003 40.15
11/3/2003 40.1
12/1/2003 42.15
1/2/2004 44
2/2/2004 44
3/1/2004 43.9
4/1/2004 49.06
5/3/2004 50.43
6/1/2004 54.54
7/1/2004 47.29
8/2/2004 44.92
9/1/2004 47.68
10/1/2004 42.73
11/1/2004 43.63
12/1/2004 47.94
1/3/2005 48.83
2/1/2005 49.34
3/1/2005 44.32
4/1/2005 48.24
5/2/2005 48.34
6/1/2005 47.26
7/1/2005 53.74
8/1/2005 54.2
9/1/2005 49.11
10/3/2005 40.81
11/1/2005 43.02
12/1/2005 44.25
1/3/2006 49.7
2/1/2006 46.04
3/1/2006 44.16
4/3/2006 43.58
5/1/2006 43.72
6/1/2006 41.94
7/3/2006 45.33
8/1/2006 47.84
9/1/2006 49.39
10/2/2006 52.08
11/1/2006 51.65
12/1/2006 55.11
1/3/2007 61.94

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Stryker Corporation: Capital Budgeting

Harvard Business School Case 9-208-046

2006 2005 2004 2003 2002

Net earnings 777.7 643.6 440.0 434.4 328.5

Dividends per share ($) $ 0.22 $ 0.11 $ 0.09 $ 0.07 $ 0.06

Cash and marketable securities 1,414.8 1,056.5 349.4 65.9 37.8

Source: Stryker Corporation 2006 Annual Report

255.2 211.1 13.7 57.5 123.6

$ 0.64 $ 0.52 $ 0.03 $ 0.15 $ 0.31

$ 0.05 $ 0.04 $ 0.03 $ 0.03 $ 0.03

50.1 54.0 83.5 138.6 351.1

Exhibit 2 Consolidated Financial Statements (US$ millions)

Year ended Dec 31

Other income (expense) 29.5 4.5

Property, plant & equipment, net 951.7 831.0

Accounts payable 252.2 206.5

Long-term debt - 184.2

Source: Stryker Corporation 2006 Annual Report

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