UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010March 31, 2011

OR

EXCHANGE ACT OF 1934

For the transition period from            to            

Commission file number: 0-9165

STRYKER CORPORATION

(Exact name of registrant as specified in its charter)

(269) 385-2600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     YES  ¨    NO  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

397,120,134388,004,426 shares of Common Stock, $.10 par value, as of OctoberMarch 31, 2010.2011.

PART I. – FINANCIAL INFORMATION

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

Stryker Corporation and Subsidiaries

(in millions, except per share amounts)

See accompanying notes to Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

Stryker Corporation and Subsidiaries

(in millions, except per share amounts)

See accompanying notes to Condensed Consolidated Financial Statements.

3

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (Unaudited)

Stryker Corporation and Subsidiaries

(in millions, except per share amounts)

See accompanying notes to Condensed Consolidated Financial Statements.

In February 20102011 Stryker Corporation (the Company) declared a quarterly dividend of $0.15$0.18 per share payable April 30, 201029, 2011 to shareholders of record at the close of business on March 30, 2010. In June 2010 the Company declared a quarterly dividend of $0.15 per share payable July 30, 2010 to shareholders of record at the close of business on June 30, 2010. In September 2010 the Company declared a quarterly dividend of $0.15 per share payable October 29, 2010 to shareholders of record at the close of business on September 30, 2010.31, 2011.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Stryker Corporation and Subsidiaries

(in millions)

See accompanying notes to Condensed Consolidated Financial Statements.

5

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Stryker Corporation and Subsidiaries

September 30, 2010March 31, 2011

NOTE 1

BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the nine monthsthree month ended September 30, 2010March 31, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2010.2011. The balance sheet at December 31, 20092010 has been derived from the audited Consolidated Financial Statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

Recently Adopted Accounting Standards: The Company adopted the amended provisions of theImprovement to Financial Reporting by Enterprises Involved with Variable Interest EntitiesRevenue Recognition for Multiple-Deliverable Revenue Arrangements Topic of the Financial Accounting Standard Board (FASB) Accounting Standard Codification (Codification) on January 1, 2010. The topic requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (VIE) and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. There was no impact to the Condensed Consolidated Financial Statements as a result of the adoption of this topic of the FASB Codification.

The Company adopted the provisions of theFair Value Measurements and Disclosures Topic“Improving Disclosures About Fair Value Measurements” of the FASB Codification on January 1, 2010. This topic requires companies to make new disclosures about recurring and nonrecurring fair value measurements, including significant transfers into and out of Level 1 and Level 2 fair value measurements, and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. The enhanced disclosures about recurring and nonrecurring fair value measurements are included in Note 2 to the Condensed Consolidated Financial Statements.

Recently Issued Accounting Standards: In 2009 the FASB amended the provisions of theRevenue Recognition for Multiple-Deliverable Revenue Arrangements Topicof the FASB Codification.2011. This topic amends prior guidance and requires an entity to apply the relative selling price allocation method in order to estimate the selling price for all units of accounting, including delivered items, when vendor-specific objective evidence or acceptable third-party evidence does not exist. These provisions are effective for revenue arrangements entered into or which contain material modifications in fiscal years beginning on or after June 15, 2010, applied prospectively. There was no impact to the Condensed Consolidated Financial Statements as a result of the adoption of this topic of the FASB Codification.

The Company is currently reviewingadopted the effectamended provisions of this newtheFair Value Measurements and Disclosures Topic “Improving Disclosures About Fair Value Measurements” of the FASB Codification related to the reconciliation of fair value measurement using significant unobservable inputs (Level 3) on January 1, 2011. This topic requires companies to separately disclose information on itspurchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. The enhanced disclosures within the Level 3 fair value reconciliation are included in Note 2 to the Condensed Consolidated Financial Statements.

Reclassifications: Certain prior year amounts have been reclassified to conform to the presentation used in 2011. As more fully discussed in Note 13, the Company has reorganized its operations into three reportable business segments. Accordingly, the Company has restated prior period segment information to conform to the current period presentation. In addition, the effect on net earnings from inventory stepped up to fair value at acquisition has been disclosed separately on the Company’s Condensed Consolidated Statements of Cash Flows.

NOTE 2

FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash, cash equivalents, marketable securities, accounts receivable, other investments, accounts payable, debt and foreign currency exchange contracts. The Company’s estimates of fair value for financial instruments approximate their carrying amounts as of September 30, 2010March 31, 2011 and December 31, 2009.

6

2010.

Pursuant to the requirements of theFair Value Measurements and Disclosures Topicof the FASB Codification, the Company’s financial assets and liabilities measured at fair value on a recurring basis are classified and disclosed in one of the following three categories:

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The following describes the methods the Company uses to estimate the fair value of the Company’s financial assets and liabilities:

Cash and cash equivalents:

The Company considers the carrying values of these financial instruments to approximate fair value because of the short period of time between origination of the instruments and their expected realization.

Available-for-sale marketable securities:

The Company’s Level 2 available-for-sale marketable securities primarily include U.S. agency debt securities, foreign government debt securities, asset backed debt securities, corporate debt securities and certificates of deposit. The Company’s Level 2 available-for-sale marketable securities values are determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. The Company’s Level 3 available-for-sale marketable securities include corporate debt securities. The Company’s Level 3 available-for-sale marketable securities valuations are based on the income approach, specifically, discounted cash flow analyses that utilize significant inputs based on the Company’s estimates and assumptions. Using this approach, estimates for timing and amount of cash flows and expected holding periods of the securities are used and the expected future cash flows are calculated over the expected life of each security and are discounted to a single present value using an estimated market required rate of return.

Trading marketable securities:

The Company’s Level 1 trading marketable securities consist of mutual funds and are valued using a market approach, based on quoted prices for the specific mutual fund from transactions in active exchange markets.

Auction Rate Securities (ARS) RightsForeign currency exchange contracts:

The Company values foreign currency exchange contracts using a market approach based on foreign currency exchange rates obtained from active markets. The estimated fair value of forward currency exchange contracts represents the measurement of the contracts at month-end spot rates as adjusted by current forward points. At March 31, 2011, the fair value carrying amount of the Company’s forward currency exchange contracts assets and liabilities were $5.4 million and $0.1 million, respectively.

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The following tables summarize the valuation of the Company’s financial instruments by the aforementioned pricing categories (in millions):

In June 2010 the Company exercised the ARSAuction Rate Securities (ARS) Rights agreement (ARS Rights) it had entered into in 2008 with UBS Financial Services Inc. (UBS), one of its investment providers, whereby the Company received the right to sell its ARS at par value to UBS at any time during the period from June 30, 2010 through July 2, 2012. Pursuant to this agreement, the Company redeemed its entire remaining outstanding ARS investment of $139.9 million par value in the second quarter of 2010. Prior to the exercise of the ARS Rights, the Company had applied the fair value option to its ARS Rights pursuant to the provisions of theFair Value Option for Financial Assets and Financial Liabilities Topic of the FASB Codification. As a result of this election, in the nine months ended September 30, 2010, the Company recorded a loss of $17.0 million in other income (expense) to recognize the change in fair value estimate of its ARS Rights. This loss was offset by a corresponding gain in the fair value estimate of the related ARS investment.value.

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Foreign currency exchange contracts:

The Company values foreign currency exchange contracts using a market approach based on foreign currency exchange rates obtained from active markets. The estimated fair value of forward currency exchange contracts represents the measurement of the contracts at month-end spot rates as adjusted by current forward points. At September 30, 2010, the fair value carrying amount of the Company’s forward currency exchange contracts assets and liabilities were $11.5 million and $0.2 million, respectively.

The following tables summarize the valuation of the Company’s financial instruments by the aforementioned pricing categories (in millions):

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The following tables present a rollforward of the assets measured at fair value on a recurring basis using unobservable inputs (Level 3) (in millions):

9

The following tables present a summary of the Company’s marketable securities (in millions):

10

The cost and estimated fair value of available-for-sale marketable securities at September 30, 2010,March 31, 2011, by contractual maturity, are as follows (in millions):

The gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2010,March 31, 2011, are as follows (in millions):

The unrealized losses on the Company’s investments in corporate and asset backed and U.S agency debt securities wereare primarily caused by increases in interest yieldsrates as a result of continued challenging conditions in the global credit markets. While many of these investments have been downgraded by rating agencies since their initial purchase, less thanonly 1% of the Company’s investments in corporate and asset-backed debt securities had a credit quality rating of less than single A (per Standard & Poor’s or Fitch). Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2010.March 31, 2011.

The unrealized losses on the Company’s investments in foreign government debt securities were also caused by interest rate increases. Because the decline in market value is attributable to changes in interest rates and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2010.March 31, 2011.

Pursuant to the Company’s investment policy, all individual marketable security investments must have a minimum credit quality of single A (per Standard & Poor’s or Fitch) or A2 (per Moody’s Corporation) at the time of acquisition, while the overall portfolio of marketable securities must maintain a minimum average credit quality of double AAA (per Standard & Poor’s or Fitch) or Aa (per Moody’s Corporation). In the event of a rating downgrade below the minimum credit quality subsequent to purchase, the marketable security investment is evaluated to determine the appropriate action to take to minimize the overall risk to the Company’s marketable security investment portfolio.

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As of September 30, 2010,March 31, 2011, only 1% of the Company’s investments in marketable securities had a credit quality rating of less than single A (per Standard & Poor’s or Fitch) and A2 (per Moody’s Corporation). As of September 30, 2010,March 31, 2011, only 1% of the Company’s investments in marketable securities were held in asset backed debt securities. The majority of the Company’s asset backed debt securities relates to investments in U.S. agency-issued mortgage backed securities, where the recovery of the full amount by the investor is guaranteed by the issuing Federal agency.

11

The Company’s interest and marketable securities income, which is included in other income (expense), for the nine months ended September 30, 2010 and 2009, were $37.2 million and $38.8 million, respectively, and for the three months ended September 30,March 31, 2011 and 2010, and 2009, were $11.6$6.6 million and $8.7$13.1 million, respectively.

NOTE 3

DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES

The Company follows the provisions of theDerivatives and Hedging Topic of the FASB Codification, which requires the Company to recognize all derivatives on its Condensed Consolidated Balance Sheets at fair value.

The Company enters into forward currency exchange contracts to mitigate the impact of currency fluctuations on transactions denominated in nonfunctional currencies, thereby limiting risk to the Company that would otherwise result from changes in exchange rates. These currency exposures principally relate to intercompany receivables and payables arising from intercompany purchases of manufactured products. The duration of the forward currency exchange contracts corresponds to the anticipated period the intercompany receivables and payables remain outstanding. The Company does not designate these contracts as hedges; therefore, all forward currency exchange contracts are recorded at their fair value each period, with resulting gains and losses included in other income (expense) in the Condensed Consolidated Statements of Earnings as an offset to the gains and losses recognized on the intercompany receivables and payables. For the nine months and three months ended September 30, 2010,March 31, 2011, recognized foreign currency transaction losses included in other income (expense) in the Condensed Consolidated Statements of Earnings were $0.9 million and $0.7 million, respectively.was $1.3 million. For the nine months and three months ended September 30, 2009,March 31, 2010, recognized foreign currency transaction lossesgains included in other income (expense) in the Condensed Consolidated Statements of Earnings were $1.0 million and $0.4 million, respectively.was $1.3 million.

At September 30, 2010,March 31, 2011, the Company had outstanding forward currency exchange contracts to purchase $448.6$469.6 million and sell $617.6$785.2 million of various currencies (principally U.S. dollars and euros) with original maturities ranging from 18 to 9493 days. The maximum length of time over which the Company is limiting its exposure to the reduction in value of nonfunctional receivables and payables through foreign currency exchange contracts is through December 31, 2010.June 30, 2011.

At September 30, 2010,March 31, 2011, the fair value carrying amount of the Company’s forward currency exchange contracts assets and liabilities was $11.5$5.4 million and $0.2$0.1 million, respectively, and was included as a component of prepaid expenses and other current assets and accrued expenses and other liabilities, respectively, in the Condensed Consolidated Balance Sheets. The estimated fair value of forward currency exchange contracts represents the measurement of the contracts at month-end spot rates as adjusted by current forward points. The Company is exposed to credit loss in the event of nonperformance by counterparties on its outstanding forward currency exchange contracts but does not anticipate nonperformance by any of its counterparties.

NOTE 4

COMPREHENSIVE EARNINGS

The Company follows theComprehensive Income Topic of the FASB Codification in accounting for comprehensive earnings and its components. The comprehensive earnings for the nine months ended September 30, 2010 and 2009 were $930.2 million and $963.2 million, respectively, and for the three months ended September 30,March 31, 2011 and 2010 and 2009 were $599.3$570.2 million and $366.6$215.7 million, respectively.

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NOTE 5

INVENTORIES

Inventories were as follows (in millions):

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NOTE 6

ACQUISITIONS

Business and product line acquisitionsOn January 3, 2011, the Company completed in the nine months ended September 30, 2010 for $62.2 million included the acquisition of assets usedof the Neurovascular division of Boston Scientific Corporation (Neurovascular) in an all cash transaction for $1.45 billion, with an additional $50.0 million payment to produce the Sonopet Ultrasonic Aspirator control consoles, handpieces and accessories from Mutoh Co., Ltd. and Synergetics USA, Inc. These acquisitions, which are expected to enhancebe made upon completion of certain milestones. The acquisition of Neurovascular substantially enhances the Company’s product offerings within its Orthopaedic Implantspresence in the neurotechnology market, allowing it to offer a comprehensive portfolio of products in both neurosurgical and MedSurg Equipment segments, did not have a materialneurovascular devices. The effect onof the Neurovascular acquisition is included in the Company’s condensed consolidated net sales or operating incomeresults of operations beginning January 3, 2011. Pro forma consolidated results of operations for the three and nine months ended September 30, 2010.March 31, 2011 would not differ significantly as a result of this acquisition.

The Neurovascular acquisition described above was accounted for pursuant to the requirements of theBusiness Combinations Topic of the FASB Codification. The assets acquired and liabilities assumed as a result of the acquisitionsNeurovascular acquisition were included in the Company’s Condensed Consolidated Balance Sheet as of the acquisition dates and did not have a material effect on the Company’s Condensed Consolidated Balance Sheet as of those dates.date. The purchase price for each of the acquisitions was primarily allocated to the tangible and identifiable intangible assets acquired based on their estimated fair values on the acquisition dates.date. The fair value assigned to identifiable intangible assets acquired was determined primarily by using the income approach. The excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill. Purchased identifiable intangible assets are amortized on a straight-line basis over their respective estimated useful lives. The estimated useful lives range between 5 and 15 years.

The purchase price in each caseallocation was based upon a preliminary valuation, and the Company’s estimates and assumptions are subject to change within the measurement period as valuations are finalized. The table below represents the allocation of the purchase price to the acquired net assets of the Neurovascular acquisition (in millions):