First Quarter Highlights    --  Net sales increased 3.3% on a constant currency basis (2.0% decrease       as reported) to $1,601 million   --  Orthopaedic Implants sales increased 6.2% on a constant currency basis       (0.2% increase as reported)   --  MedSurg Equipment sales decreased 1.0% on a constant currency basis       (5.3% decrease as reported)   --  Net earnings decreased 3.2% from $291 million to $281 million    --  Diluted net earnings per share increased 1.4% from $0.70 to $0.71    

"The unprecedented global economic slowdown clearly impacted our business, yet our diverse set of businesses still delivered underlying sales growth in this very challenging period as six of our eight key product franchises delivered mid-single to low double-digit constant currency revenue growth," commented Stephen P. MacMillan, President and Chief Executive Officer.

Net sales were $1,601 million for the first quarter of 2009, representing a 2.0% decrease compared to net sales of $1,634 million for the first quarter of 2008. On a constant currency basis, net sales increased 3.3% for the first quarter.

Net earnings for the first quarter of 2009 were $281 million, representing a 3.2% decrease compared to net earnings of $291 million for the first quarter of 2008. Diluted net earnings per share for the first quarter of 2009 increased 1.4% to $0.71 compared to $0.70 for the first quarter of 2008.

Sales Analysis

Domestic sales were $1,042 million for the first quarter of 2009, representing an increase of 0.9%, as a result of higher shipments of Orthopaedic Implants partially offset by lower shipments of MedSurg Equipment.

International sales were $559 million for the first quarter of 2009, representing a decrease of 7.0%. The impact of foreign currency comparisons to the dollar value of international sales was unfavorable by $87 million in the first quarter of 2009. On a constant currency basis, international sales increased 7.4% in the first quarter of 2009, as a result of higher shipments of Orthopaedic Implants and MedSurg Equipment.

Worldwide sales of Orthopaedic Implants were $973 million for the first quarter of 2009, representing an increase of 0.2%. On a constant currency basis, sales of Orthopaedic Implants increased 6.2% in the first quarter of 2009, based on higher shipments of reconstructive, trauma, spinal and craniomaxillofacial implant systems.

Worldwide sales of MedSurg Equipment were $628 million for the first quarter of 2009, representing a decrease of 5.3%. On a constant currency basis, sales of MedSurg Equipment decreased 1.0% in the first quarter of 2009, as higher shipments of surgical equipment and surgical navigation systems were offset by lower sales of endoscopic, communications and digital imaging systems and patient handling and emergency medical equipment.

Income Taxes

The Company's effective income tax rate for the first quarter of 2009 was 27.3%, as compared to effective income tax rates for the first quarter of 2008 and year ended December 31, 2008 of 28.1% and 27.4%, respectively.

In April 2009 the U.S. Internal Revenue Service (IRS) issued two notices of proposed tax adjustments to the Company's previously filed 2003, 2004 and 2005 income tax returns related to income tax positions the Company has taken for its cost sharing arrangements with two wholly owned entities operating in Ireland. The Company believes it followed the applicable tax law and Treasury regulations and will vigorously defend these income tax positions. If the IRS were ultimately to prevail with respect to its proposed tax adjustments, such adjustments could have a material unfavorable impact on the Company's income tax expense and net earnings in future periods.

Outlook for 2009

As a result of the continued weaker demand for certain MedSurg Equipment products as well as consideration of slowing elective procedures for certain Orthopaedic Implant products, the Company is reducing its guidance for 2009.

The Company now projects that diluted net earnings per share for 2009 will be in the range of $2.90 to $3.10, an increase of 2% to 10% over adjusted diluted net earnings per share of $2.83 in 2008. The financial forecast for 2009 anticipates a constant currency net sales increase in the range of 2% to 5%.