Company Note

May 5, 2011
Matt Miksic, Sr Research Analyst
212 284-9335, matt.s.miksic@pjc.com
Piper Jaffray & Co.
Roshni Sacks, Research Analyst
212 284-9334, roshni.r.sacks@pjc.com
Piper Jaffray & Co.

Smith & Nephew

Neutral

Top Line Beat, Best-In-Class Ortho

Reason for Report:

Earnings Announcement
Changes

Previous

Rating
Price Tgt
FY11E Rev (mil)
FY12E Rev (mil)
FY11E EPS
FY12E EPS

Current

--$4,194.5
$4,395.2
$3.98
$4.32

Neutral
$62.00
$4,318.5
$4,500.7
$3.92
$4.28

Price:
52 Week High:
52 Week Low:
12-Month Price Target:

$54.67
$60.35
$41.26
$62.00

14.4x 2012E EPS of $4.28

Shares Out (mil):

Market Cap. (mil):
Avg Daily Vol (000):
Book Value/Share:
Net Cash Per Share:
Debt to Total Capital:
Div (ann):
Est LT EPS Growth:
P/E to LT EPS Growth (FY11):
Est Next Rep Date:
Fiscal Year End:

179.2
$9,796.9
153
$16.75
$0.00
15%
$0.75
9%
1.5x
08/05/2011
Dec

2010A

2011E

2012E

Mar

$995.0A

$1,055.0A

NA

Jun

$959.0A

$1,063.3E

NA

Sep

$941.0A

$1,030.4E

NA

Dec

$1,067.0A

$1,169.8E

NA

FY

$3,962.0A

$4,318.5E

$4,500.7E

CY

$3,962.0A

$4,318.5E

$4,500.7E

2.5x
2.5x

2.3x
2.3x

2.2x
2.2x

Rev (mil)

FY RM
CY RM

EPS

2010A

2011E

2012E

Mar

$0.94A

$0.92A

NA

Jun

$0.85A

$0.95E

NA

Sep

$0.80A

$0.92E

NA

Dec

$1.08A

$1.12E

NA

FY

$3.67A

$3.92E

$4.28E

CY

$3.67A

$3.92E

$4.28E

14.9x
14.9x

13.9x
13.9x

12.8x
12.8x

FY P/E
CY P/E

(SNN - $54.67)

CONCLUSION:
Smith & Nephew edged out ZMH for best in class ortho performance in the quarter
(+1.3% CC vs. +1.2% CC), but strength in Endoscopy (+$19MM) and AWM
(+$10MM) did much of the heavy lifting. Ortho was driven by strong knee growth,
partially offset by continued weakness in BHR. That said, management continues to
invest the upside and came in 2c shy of our above-consensus estimate, but ahead of
Street estimates. We remain Neutral on SNN and are maintaining our $62 PT.
Implications: Investors were pleased with the strength in Knees, Endoscopy and
AWM, particular after a series of relatively weak knee reports from the other
ortho players. We have adjusted our projections, raising forward revenue
projections offset by greater investment in the P&L in 2011, with leverage
coming in 2012 and beyond.
1Q11 Results: EPS were $0.92, vs. $0.94 in 1Q10, below our above consensus
estimate of $0.94 and above consensus of $0.90. Revenues were $1,055 mil, up
6% from last year and up 4% constant currency, $40 mil above our estimate of
$1,011 and $14 mil better than consensus of $1,041. Upside across the board in
Endoscopy (+$19MM), Wound Management (+$10MM), Trauma & Clinical
Therapies (+$11MM) and Recon (+$5MM) drove the upside to revenues in the
quarter.
Guidance: Management re-iterated their view for 2011 for above market growth
in Orthopedic Reconstruction, Endoscopy sports medicine and Advanced Wound
Management and consistent improvement in Orthopedic Trauma
INVESTMENT RECOMMENDATION:
Our $62 PT is based on 14.4x (unchanged) our 2012E EPS of $4.28.
RISKS TO ACHIEVEMENT OF TARGET PRICE:
(1) Greater than expected pressure on volumes or pricing; (2) Failure to execute on
EIP.
COMPANY DESCRIPTION:
Smith & Nephew manufactures and markets implants and instruments for
orthopaedic joint reconstruction and products related to Endoscopy and wound care.

Piper Jaffray does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider
this report as only a single factor in making their investment decisions. This report should be read in conjunction with
important disclosure information, including an attestation under Regulation Analyst certification, found on pages 12 - 14 of
this report or at the following site: http://www.piperjaffray.com/researchdisclosures.

Smith & Nephew plc

Page 1 of 14

Company Note
May 5, 2011
Additional details and take-aways:
WW Knees: $224 mil, up 5% CC, $4 mil above our estimate
US Knee sales were $113 mil (+$4MM), up 10%, above our estimate of up 6% going into the quarter. Sales in the US were well above
those reported in the market, which were tracking down approximately 3%. OUS Knee sales were $111 mil (-$1MM), down 1% CC,
below our OUS CC estimate of +2%.
Growth in knees during the quarter was driven by strong demand for Visionaire custom knee cutting blocks and the Verilast total knee
implant which resulted in share gains from all the other major competitors. Unlike all the other competitors, whose knee revenues were
around 150 bps below expectations, SNN's knees were above our estimates.
WW Hips: $184 mil, down 2% CC, $2 mil above our estimate
US Hip sales were $78 mil (-$2MM), down 4%, below our expectation of a 2% decline. OUS Hip sales of $106 mil (+$3MM), down
1% CC, were approximately in-line with our estimate of a 1% decline. Overall hip growth was below the 1% market growth seen so
far during the quarter.
Strong sales of traditional hips continued to be negatively impacted by weak BHR sales, which accounted for approx 14% of WW hip
sales. These declines were offset by strong performance of the R3 cup and Oxinium head. SNN expects this pressure to continue until
the furor over metal-on-metal implants settles down.
Across orthopaedics, SNN experienced an approximate 2% like for like price reduction offset by positive mix, similar to that seen in
the previous quarter.
With >90% of the ortho market reported, market on track for a 100bps sequential slowdown to -0.5%
Following SNN's report, approximately 90% of the orthopaedics market has reported results for 1Q11 and the results thus far generally
reflect steady performance in hips offset by weaker than expected performance in knees. The weakness in knees, particularly in US
knees, is split between share losses for JNJ, SYK, and ZMH while SNN gained share. Similarly, the performance in US hips is split
between the losses for metal-on-metal players, such as Biomet, SNN and JNJ, and corresponding gains for the metal-on-poly players,
such as SYK and ZMH. The difference is also reflected in total recon performance in the quarter, with SYK, SNN and ZMH
outperforming the market while Biomet and JNJ's performance was in-line to below the market so far. Thus far, total WW CC market
growth for hips and knees is tracking around 50 bps below our estimate for the quarter (-0.5% vs. -0.1%) and down approx 100 bps
sequentially. Highlights from the companies that have reported are as follows:
SNN: Combined hip and knee growth ("recon") of ~1% was in-line with our expectations and 170 bps above Q4 (+1% CC vs. flat).
WW CC hip and knee growth was -2% and 5%, versus our expectations of -5% and 4%, respectively.
ZMH: Combined hip and knee growth ("recon") of 1.2% was 150 bps above our expectations, however it represented a 20 bp
slowdown from Q4 (up 1.4%), driven primarily by knees. WW CC hip and knee growth was +5% and -2%, versus our expectations
of +1% and -1%, respectively.
SYK: Combined hip and knee growth ("recon") was 240 bps below our expectations and 470 bps lower than Q4 (down 0.2% CC vs.
4.5%). WW CC hip and knee growth was 2% and -2%, versus our expectations of 3% and 2%, respectively.
JNJ: WW recon growth of -3% CC, 160 bps higher than its Q4 performance and 120 bps below our estimates. WW CC hip and
knee growth was -2% and -4%, versus our expectation of -3% and -2%, respectively.
Biomet: WW CC recon growth of -0.6%, down ~240 bps sequentially and 45 bps below our estimate. WW CC hip and knee growth
was 0% and -1%, versus our expectations of a decline of 1% and 0%, respectively.
WW Trauma: $116 mil, +6% CC year over year, $6 mil above our estimate
Trauma sales in the US were $64 mil, up 7% CC and $4 mil above our estimate. Outside the US, sales were $52 mil, up 5% CC and $2
mil ahead of our estimate. Management believes that the gains in the US were driven by operational improvements within the segment.
WW Clinical Therapies: $55 mil, +2% CC year over year, $5 mil above our estimate
Clinical Therapy sales in the US were $47 mil, up 10% and $6 mil above our estimate. Management commented that Exogen, the
company's ultrasonic bone healing system, performed strongly in the quarter with clinical data driving growth but was offset by
continued pressure in Supartz.
WW Endoscopy: $233 mil, +6% CC year over year, $19 mil above our estimate
In the US, sales of endoscopy products grew 1% constant currency to $92 mil, $7 mil above our estimate. Outside the US, sales of
Smith & Nephew plc

Page 2 of 14

Company Note
May 5, 2011
$141 mil increased 9% CC and came in $12 mil ahead of our estimate. Growth in this category was driven by new products in
shoulder repair and the near-completion of a transition to direct sales in the US. Emerging market sales were up 12% driving OUS
growth. Capital revenues declined to 12% of endoscopy revenues.
Advanced Wound Management: $232 mil, 6% CC, $10 mil above our estimate
US AWM sales were $41 mil, up 6%, $6 mil below our estimate. OUS sales of $191 mil, up 8% CC, were $15 mil ahead of our
estimate. Sales in the US were impacted by a headwind from distributor stocking in 4Q10 prior to price increases. Sales in Europe
were driven by new product launches, including the launch of the company's new NPWT abdominal kit launched in late 2010. In total
NPWT continued 4% to the total wound care growth of 6%. Going forward, management expects continued growth of the company's
NPWT franchise to drive above market growth in AWM.
P&L: Operating margins were 190 bps below our estimate from lower spending
Higher than expected R&D (-$0.02) and SG&A (-$0.11) expense combined with a higher share count (-$0.01) were partially offset by
higher sales and COGS (+$0.11) and higher non-op income (+$0.01) to deliver $0.02 miss to our EPS estimate. Gross margin of
73.9% was 50 basis points lower than last year and fell 70 bps short of our estimate. Operating margins of 22.8% were down 230 bps
from the same quarter last year and 190 bps below our estimates.
Guidance
Management re-iterated their view for 2011 for above market growth in Orthopedic Reconstruction, Endoscopy sports medicine and
Advanced Wound Management and consistent improvement in Orthopedic Trauma
Changes to our Model
We have made changes to our model based on the results in the quarter and the outlook going forward. For 2011, we are raising our
revenue estimates by $124 mil to $4,318 mil, which represents year over year growth of 9%. We are lowering our 2011 EPS estimates
by $0.07 to $3.92.
For the outer years (2012-2014), we are raising our revenue estimates by $106 mil, $95 and $91 mil respectively. On the earnings line,
for the outer years (2012-2014), we are lowering our estimates by $0.05, $0.03, and $0.03, respectively.
Exhibit 1 - Valuation Scenario Analysis

Valuation
Scenario

Upside

Base
Case

Downside

Est.
Perf.

$70

$62

$55

28%

13%

0%

Key Assumptions

Key
Driver

2011*
Assump

1) Hip growth improves driven by new products and the

pull-through of other hip systems

Hip
Growth

2.2%

2) Knee growth stays above-market growth, driven by new

products

Knee
Growth

9.4%

3) Better than expected operating leverage

Op Mgn

25.1%

1) Hip growth grows in-line with the market

Hip
Growth

0.7%

2) Knee growth above the market, new products offset

continued deferrals among younger patients

Knee
Growth

7.9%

3) Modest year-over-year improvements in operating

margins

Op Mgn

23.7%

1) Hip growth remains under pressure due to declines in

resurfacing, pricing and competition

Hip
Growth

-0.8%

2) Knee growth falls below market growth

Knee
Growth

6.4%

3) Slower volumes and Impact of economic slowdown put

pressure on operating margins

Op Mgn

22.5%

EPS
2011E

EPS
2012E

EPS
CAGR
('10-'15)

P/E

P/E Rel
to S&P

DCF

$4.20

$4.66

10.4%

15.0x

1.18x

$74

$3.92

$4.28

8.6%

14.4x

1.13x

$63

$3.64

$3.91

6.8%

14.0x

1.10x

$53

Source: Piper Jaffray Estimates, FirstCall, FactSet

* Assumption reflects US growth for hips, knees

Smith & Nephew plc

Page 3 of 14

Company Note
May 5, 2011
Exhibit 2. Margin Review

Quarterly Margin Review

($MM)

Sales
COGS
Gross Mgn
R&D
% of Sales
SG&A
% of Sales
Op. Income
Op. Mgn
Tot Non Op
% of Sales
Net Income
% of Sales
Tax
Shares
EPS

1Q11 Actual
1Q11
Actual Y/Y Chg.
1,055.0
275.0
73.9%

1Q11 Est.
1Q11
Y/Y
Est.
Chg.

6.0% 1,010.8

1.6%

44.2

8.3%

1.1%

18.2

-50 bp

256.8

74.6% +12.8 bp

40.0

14.3%

34.4

3.8%

+30 bp

3.4%

499.0
47.3%
241.0
22.8%
-3.0
-0.3%
164.0
15.5%

Var.
From
Est.

9.4%
+150 bp
-3.6%
-230 bp
NM
+30 bp
-1.8%
-120 bp

470.0
46.5%
249.7
24.7%
-6.0
-0.6%
168.2

-1.8%
-10 bp
3.1%
+67 bp
-0.1%
-40 bp
NM
+1.1 bp
0.7%

-70 bp
5.6

(0.02)

+40 bp
29.0

(0.11)

+80 bp
-8.7

(0.03)

-190 bp
-3.0

0.01

(0.01)

-$0.02

(0.02)

179

178

$ 0.94

0.7%

Lower interest expense

-4.2

0 bp

-60 bp

Investments in orthopaedics to improve efficiencies were partially

offset by improvements in endoscopy and wound margins

+30 bp

-110 bp

31.0%

-2.3%

(0.07)

-15 bp

-60 bp

Comments

0.18 Strength in knees, endoscopy and AWM

16.6%

31.0%

$ 0.92

Approx.
Contrib.
to EPS

bp = basis points
Source: Company reports, Piper Jaffray Equity Research

Smith & Nephew plc

Page 4 of 14

Company Note
May 5, 2011
Exhibit 3. Revenue Summary

Review of 1Q11 Results by Major Division

($MM)
1Q11 Actual
Y/Y
Chg.

CC
Chg.

184

1%

-2%

Sales
Hips
US

1Q11 Est.

Var.
From

1Q11

Y/Y
Chg.

CC
Chg.

Est.
($MM)

CC Mkt
Grwth

182

0%

-2%

0%

Comments
Below market growth due to continued impact of BHR
BHR sales = 14% of hip revs

Sales

78

-4%

-4%

80

-2%

-2%

-2

-1%

OUS

106

4%

-1%

103

1%

-1%

0%

Knees

224

7%

5%

220

5%

4%

0%

US

113

10%

10%

109

6%

6%

1%

OUS

111

3%

-1%

112

4%

2%

-1

0%

11

-8%

-8%

12

2%

1%

-1

US

-18%

-18%

3%

3%

-1

OUS

-1%

-1%

2%

0%

Trauma

116

8%

6%

110

3%

3%

Other Recon

30yr claim with Verilast is driving above market growth

Driven by focus on operational delivery

US

64

7%

7%

60

0%

0%

OUS

52

11%

5%

50

6%

4%

55

2%

2%

50

-8%

-8%

47

10%

10%

41

-4%

-4%

-29%

-29%

-21%

-23%

-1

171

6%

6%

160

-1%

-2%

11

111

8%

8%

101

-2%

-2%

10

60

3%

3%

59

1%

-1%

233

8%

6%

214

-1%

-2%

19

Arthroscopy up 8%, Repair up double digits, Resection up single digits

92

2%

1%

85

-6%

-6%

Transition to direct sales nearly complete

141

12%

9%

129

2%

0%

12

Strong growth in emerging markets

232

9%

6%

222

4%

3%

10

Segment growth well above the market

Clinical Therapies
US
OUS
Trauma & Clinical Ther.
US
OUS
Endoscopy
US
OUS
Wound Management

Exogen growth strengthened, Supartz under pressure

41

5%

6%

47

19%

19%

-6

NPWT drove 4% of overal 6% growth

191

10%

8%

176

1%

-1%

15

Pressure on non-NPWT revenues in Europe

Total US

439

4%

4%

427

1%

1%

12

Pricing pressure remained steady, largely offset by mix

Total OUS

616

7%

4%

584

2%

0%

32

Lower sales in Japan decreased revenues by ~$3 mil

Total WW

1,055

6%

4%

1,011

2%

0%

44

US
OUS

Source: Company reports, Piper Jaffray Equity Research

Smith & Nephew plc

Page 5 of 14

Company Note
May 5, 2011
Exhibit 4. Model Changes

Changes to Our Estimates

Revised Revenue Estimates
($MM)
Hips

Knees

Total Recon

Trauma

Clinical Therapies

Endoscopy

Wound Management

Total Sales

2011E

Y/Y

2012E

Y/Y

2013E

Y/Y

Revised

718

4%

737

3%

764

4%

Prior

712

3%

738

4%

774

5%

Revised

873

8%

904

4%

945

5%

Prior

861

7%

908

5%

958

5%

Revised

1,635

6%

1,686

3%

1,757

4%

Prior

1,619

5%

1,694

5%

1,781

5%

Revised

470

8%

492

5%

516

5%

Prior

454

5%

472

4%

492

4%

Revised

239

7%

252

5%

263

4%

Prior

224

1%

226

1%

230

2%

Revised

948

11%

982

4%

1,028

5%

Prior

887

4%

930

5%

983

6%

Revised

1,026

12%

1,089

6%

1,160

7%

Prior

1,010

11%

1,073

6%

1,143

7%

Revised

4,318

9%

4,501

4%

4,724

5%

Prior

4,194

6%

4,395

5%

4,629

5%

Comments
Slightly slower hip growth in 2011 and beyond due to
MoM softness

Higher knee sales in 2011 on results, outlook

Improvements in trauma continuing

Slightly higher NPWT sales, slight improvements in

in infection management, exude management

Revised P&L Estimates

2011E
Gross Mgn

SG&A

R&D

EPS

2012E

Y/Y

2013E

Y/Y

Comments

73.9%

-40 bp

74.3%

+40 bp

74.8%

+40 bp

Prior

74.7%

+30 bp

75.1%

+40 bp

75.5%

+40 bp

Revised

2,001

10%

2,058

3%

2,134

4% Higher SG&A spending per results and commentary

Prior

1,924

5%

1,998

4%

2,086

4%

166

10%

171

3%

184

Revised
Prior

Op Mgn

Y/Y

Revised

8% Higher R&D spending per guidance

157

4%

167

6%

181

8%

Revised

23.7%

NM

24.8%

NM

25.7%

NM

Prior

25.1%

NM

25.8%

NM

26.5%

NM

Revised

3.92

7%

4.28

9%

4.67

9%

Prior

3.98

9%

4.32

8%

4.70

9%

Source: Piper Jaffray Research

Smith & Nephew plc

Page 6 of 14

Financial Models

Smith & Nephew plc

Page 7 of 14

Piper Jaffray
Matt Miksic (212) 284-9335
matt.s.miksic@pjc.com
5/5/2011
Smith & Nephew PLC (ADS)
Quarterly Income Statement Analysis, 2006A2016E
($MM)
Sales
COGS
Gross Profit
SG&A
R&D
Amort. of Intang.
Non-recur Charges
Op Inc.
Net Int Exp (Inc)
Other Non-Op Income (Exp)
Total Non-Op Income (Exp)
Pre Tax Inc.
Tax Rate, Pro Forma
Inc. Tax Provision
Net Income
Net (losses) disc ops
Non-recur Chgs, After tax
Net Income, GAAP
EPS
EPS, GAAP
Stock Based Comp

2006

2007A

2008A

2009A

1Q10A

2Q10A

3Q10A

4Q10A

2010A

1Q11A

2Q11E

3Q11E

4Q11E

2011E

2012E

2013E

2014E

2015E

2,779.0
730.0
2,049.0
1,347.0
120.0
(34.0)
582.0
(10.0)
6.0
16.0
598.0
27.8%
166.0
432.0
(28.0)
404.0

3,369.0
925.0
2,444.0
1,596.0
142.0
(213.0)
706.0
30.0
6.0
(24.0)
682.0
29.6%
202.0
480.0
(164.0)
316.0

3,801.0
1,043.0
2,758.0
1,830.0
152.0
(148.0)
776.0
66.0
(66.0)
710.0
30.6%
217.0
493.0
(118.0)
375.0

3,772.0
988.0
2,784.0
1,772.0
155.0
(111.0)
857.0
41.0
(12.0)
(53.0)
804.0
27.9%
224.0
580.0
(90.0)
490.0

995.0
254.0
741.0
456.0
35.0
(10.0)
250.0
4.0
(2.0)
(6.0)
244.0
31.6%
77.0
167.0
(8.0)
159.0

959.0
235.0
724.0
459.0
39.0
(19.0)
226.0
3.0
(2.0)
(5.0)
221.0
31.2%
69.0
152.0
(15.0)
137.0

941.0
244.0
697.0
444.0
38.0
(9.0)
215.0
3.0
(2.0)
(5.0)
210.0
31.9%
67.0
143.0
(6.0)
137.0

1,067.0
283.0
784.0
467.0
39.0
(11.0)
278.0
5.0
(4.0)
(9.0)
269.0
28.6%
77.0
192.0
(10.0)
182.0

3,962.0
1,016.0
2,946.0
1,826.0
151.0
(49.0)
969.0
15.0
(10.0)
(25.0)
944.0
30.7%
290.0
654.0
(39.0)
615.0

1,055.0
275.0
780.0
499.0
40.0
(10.0)
241.0
2.0
(1.0)
(3.0)
238.0
31.0%
74.0
164.0
(8.0)
156.0

1,063.3
270.1
793.2
504.0
40.4
248.8
2.4
(1.0)
(3.4)
245.4
31.0%
76.1
169.3
169.3

1,030.4
270.0
760.4
477.1
41.2
242.1
2.3
(1.0)
(3.3)
238.9
31.0%
74.1
164.8
164.8

1,169.8
311.2
858.6
520.6
44.5
293.6
2.1
(1.0)
(3.1)
290.5
31.0%
90.1
200.4
200.4

4,318.5
1,126.2
3,192.3
2,000.6
166.1
(10.0)
1,025.6
8.8
(4.0)
(12.8)
1,012.8
31.0%
314.2
698.6
(8.0)
690.6

4,500.7
1,155.7
3,345.0
2,058.0
171.0
1,115.9
6.0
(4.0)
(10.0)
1,105.9
31.0%
342.8
763.0
763.0

4,724.1
1,191.8
3,532.3
2,134.2
184.2
1,213.8
2.9
(4.0)
(6.9)
1,206.9
31.0%
374.1
832.8
832.8

4,980.6
1,231.6
3,749.0
2,230.2
199.2
1,319.6
(0.6)
(4.0)
(3.4)
1,316.1
31.0%
408.0
908.1
908.1

5,264.8
1,280.9
3,983.9
2,331.1
215.9
1,437.0
(4.4)
(4.0)
0.4
1,437.4
31.0%
445.6
991.8
991.8

0.94
0.89

0.85
0.77

0.80
0.77

2.29
2.14

2.56
1.68

2.76
2.10

3.28
2.77

1.08
1.02

3.67
3.45

0.92
0.87

0.95
0.95

0.92
0.92

1.12
1.12

3.92
3.87

4.28
4.28

4.67
4.67

5.09
5.09

5.56
5.56

14.0

23.0

20.0

19.3

5.0

6.0

5.8

6.1

22.9

6.5

6.6

6.2

6.8

26.1

26.9

27.9

29.3

30.7

FD Shares
Basic Shares

188.9
188.2

187.7
186.8

178.8
177.9

177.1
176.5

178.2
177.2

178.2
177.4

177.8
176.8

178.2
177.2

178.1
177.2

179.2
178.0

178.2
177.2

178.2
177.2

178.2
177.2

178.5
177.4

178.5
177.5

178.5
177.5

178.5
177.5

178.5
177.5

Growth Rates:
Sales
COGS
Gross Profit
SG&A
R&D
Op Inc.
EPS, Cont. Ops

2006
8.9%
9.9%
8.5%
8.6%
-1.6%
10.6%
7.1%

2007A
21.2%
26.7%
19.3%
18.5%
18.3%
21.3%
12.0%

2008A
12.8%
12.8%
12.8%
14.7%
7.0%
9.9%
7.7%

2009A
-0.8%
-5.3%
0.9%
-3.2%
2.0%
10.4%
18.8%

1Q10A
15.0%
14.4%
15.2%
6.8%
6.1%
36.6%
43.0%

2Q10A
3.6%
-0.8%
5.1%
3.8%
11.4%
6.6%
11.0%

3Q10A
2.8%
1.2%
3.4%
4.2%
-5.0%
3.4%
-3.7%

4Q10A
0.1%
-1.7%
0.8%
-2.1%
-17.0%
9.4%
5.9%

2010A
5.0%
2.8%
5.8%
3.0%
-2.6%
13.1%
12.1%

1Q11A
6.0%
8.3%
5.3%
9.4%
14.3%
-3.6%
-2.3%

2Q11E
10.9%
14.9%
9.6%
9.8%
3.6%
10.1%
11.4%

3Q11E
9.5%
10.6%
9.1%
7.4%
8.5%
12.6%
15.0%

4Q11E
9.6%
10.0%
9.5%
11.5%
14.0%
5.6%
4.4%

2011E
9.0%
10.8%
8.4%
9.6%
10.0%
5.8%
6.6%

2012E
4.2%
2.6%
4.8%
2.9%
3.0%
8.8%
9.2%

2013E
5.0%
3.1%
5.6%
3.7%
7.7%
8.8%
9.1%

2014E
5.4%
3.3%
6.1%
4.5%
8.1%
8.7%
9.1%

2015E
5.7%
4.0%
6.3%
4.5%
8.3%
8.9%
9.2%

Margins:
Cost of Goods Sold
Gross Margin
SG&A
R&D
SBC as % of Op Ex
Op Margin
Pro Forma Net Margin

2006
26.3%
73.7%
48.5%
4.3%
1.0%
20.9%
15.5%

2007A
27.5%
72.5%
47.4%
4.2%
1.3%
21.0%
14.2%

2008A
27.4%
72.6%
48.1%
4.0%
1.0%
20.4%
13.0%

2009A
26.2%
73.8%
47.0%
4.1%
1.0%
22.7%
15.4%

1Q10A
25.5%
74.5%
45.8%
3.5%
1.0%
25.1%
16.8%

2Q10A
24.5%
75.5%
47.9%
4.1%
1.2%
23.6%
15.8%

3Q10A
25.9%
74.1%
47.2%
4.0%
1.2%
22.8%
15.2%

4Q10A
26.5%
73.5%
43.8%
3.7%
1.2%
26.1%
18.0%

2010A
25.6%
74.4%
46.1%
3.8%
1.2%
24.5%
16.5%

1Q11A
26.1%
73.9%
47.3%
3.8%
1.2%
22.8%
15.5%

2Q11E
25.4%
74.6%
47.4%
3.8%
1.2%
23.4%
15.9%

3Q11E
26.2%
73.8%
46.3%
4.0%
1.2%
23.5%
16.0%

4Q11E
26.6%
73.4%
44.5%
3.8%
1.2%
25.1%
17.1%

2011E
26.1%
73.9%
46.3%
3.8%
1.2%
23.7%
16.2%

2012E
25.7%
74.3%
45.7%
3.8%
1.2%
24.8%
17.0%

2013E
25.2%
74.8%
45.2%
3.9%
1.2%
25.7%
17.6%

2014E
24.7%
75.3%
44.8%
4.0%
1.2%
26.5%
18.2%

2015E
24.3%
75.7%
44.3%
4.1%
1.2%
27.3%
18.8%

Smith & Nephew plc

Current disclosure information for this company can be found at http://www.piperjaffray.com/researchdisclosures.

Page 8 of 14

Piper Jaffray
Matt Miksic (212) 284-9335
matt.s.miksic@pjc.com
5/5/2011

Smith & Nephew plc

Quarterly Revenue Model, 2006A - 2014E
2006
Hips
US

'06/
'05

2007

'07/
'06

2008

'08/
'07

2009E

'09/
'08

1Q

2Q

3Q

2010
4Q
1Q

200
179
378

7%
14%
10%
10%

281
283
563

41%
58%
49%
45%

306
381
687

9%
35%
22%
21%

319
361
681

4%
-5%
-1%
1%

8%
15%
12%
6%

-3%
2%
-1%
0%

1%
-3%
-1%
0%

-6%
-5%
-5%
-5%

299
210
509

11%
14%
12%
12%

320
287
645

7%
36%
27%
23%

363
394
757

13%
38%
17%
23%

384
378
762

6%
-4%
1%
2%

11%
17%
14%
9%

2%
4%
3%
3%

5%
2%
4%
6%

9%
-1%
3%
4%

16
17
32

-3%
3%
0%

18 14%
53 220%
71 120%

15
32
46

-18%
-40%
-34%

15
29
44

2%
-9%
-6%

3%
32%
18%

-20%
10%
-5%

-7%
27%
14%

-24%
-39%
-18%

514
405
919

9%
13%
11%
10%

618
622
1,240

20%
54%
35%
31%

684
807
1,491

11%
30%
20%
19%

718
768
1,486

5%
-5%
0%
2%

10%
16%
13%
7%

-1%
3%
1%
0%

3%
1%
2%
3%

Trauma
US
OUS
Total

205
131
336

8%
12%
9%

229
174
403

12%
33%
20%

245
176
421

7%
1%
5%

244
171
415

-1%
-3%
-1%

0%
18%
7%

(1%)
11%
4%

3%
6%
5%

Clinical Therapies
US
OUS
Total

152
23
175

21%
360%
34%

184
31
215

21%
35%
23%

199
46
245

8%
48%
14%

193
42
235

-3%
-9%
-4%

6%
13%
7%

(2%)
-24%
-6%

357
154
497

13%
26%
13%
9%

414
205
618

16%
33%
24%
12%

444
222
533

7%
8%
-14%
7%

436
213
650

-2%
-4%
22%
-2%

2%
17%
7%
4%

-1%
3%
0%
0%

2%
-3%
0%
1%

220
127
245
73

22%
6%
4%
6%

259
140
260
73

18%
10%
6%
0%

294
144
274
91

14%
3%
5%
25%

326 11%
119 -17%
261 -4%
85 -6%

24%
0%
22%
29%

10%
-2%
11%
25%

355
310
665

8%
12%
10%
4%

361
371
732

2%
20%
10%
10%

372
428
800

3%
15%
9%
8%

349
443
791

-6%
3%
-1%
1%

9%
30%
20%
14%

10%
10%
-83%

234
60
0
6
479

18%
11%

256
66

9%
10%

255
66

0%
0%

20 233%
5%
501

39
485

OUS
Total
CC Growth
Knees
US
OUS
Total
CC Growth
Other Recon
US
OUS
Total
Total Recon
US
OUS
Total
CC Growth

Trauma & Clin Thpies

US
OUS
Total
CC Growth

Endoscopy
Repair
Visualization & DOR
Resection
Other
US
OUS
Total
CC Growth

Advanced Wound Management (AWM)

ALLEVYN
198
ACTICOAT
54
DERMAGRAFT and related
4
NPWT
Other
446
US
OUS
Total
CC Growth
Total Revenue
US
OUS
Total
Constant Currency Growth
US
OUS
Total

Smith & Nephew plc

5%

n/a
7%

2Q

3Q

'10/
'09

4Q

2010E
319
369
688

(0%)

410
396
806

7%

81

78

76

84

102
183

89
167

81
157

97
181

103

96

96

115

107
210

98
194

87
183

104
219

2011
4Q

1Q

2Q

3Q

-4%
4%
1%
-2%

0%
9%
5%
-2%

2%
10%
6%
0%

5%
7%
6%
2%

5%
6%
5%

10%
3%
7%
5%

11%
11%
11%
5%

5%
12%
8%
2%

6%
9%
7%
4%

13 (10%)
31
5%
44
0%

-18%
-1%
-8%

2%
12%
8%

3%
7%
6%

9%
4%
4%

2%
1%
1%

7
12

6
11

7
10

10
11

2%
-4%
-1%
-1%

189
216
405

179
193
372

175
175
350

200
211
411

742
796
1,538

3%
4%
3%
3%

3%
4%
3%
2%

6%
10%
8%
2%

4%
11%
7%
1%

(1%)
9%
4%

60
47
107

60
46
106

62
44
106

62
54
116

245
190
435

0%
11%
5%

7%
11%
8%

4%
16%
9%

0% (10%)
-40% -25%
-7% -12%

43
11
54

48
9
57

49
6
55

49
8
57

189 (2%)
34 (19%)
223 -5%

10%
-29%
2%

-5%
3%
-2%
-2%

103
58
161

108
55
163

111
49
160

111
62
173

433
224
657

-1%
5%
1%
1%

11%
-19%
4%
1%

3%
-12%
1%
10%

89
25
79
23

93
27
64
22

89
25
67
20

93
31
75
34

363
108
285
98

3%
15%
10%
10%

-2%
6%
3%
4%

-5%
5%
1%
3%

90
126
216

86
120
205

83
118
201

94
138
232

14%
10%

6%
4%

-6%
2%

-2%
-2%

64
13

64
17

64
18

95%
-3%

38%
21%

80%
12%

85% 110%
8%
5%

11
125

16
136

4Q

2011E

78

78

106
184

97
175

77

88

89
167

104
192

321
397
718

113

107

101

122

111
224

108
215

97
198

114
235

'11/
'10

'12/
'11

2013E

'13/
'12

2014E

'14/
'13

332
405
737

3%
2%
3%
3%

347
417
764

5%
3%
4%
4%

360
433
794

4%
4%
4%
4%

469
435
904

6%
1%
4%
4%

497
448
945

6%
3%
5%
5%

522
465
988

5%
4%
5%
5%

13 (5%)
32 5%
45
2%

13
33
46

2%
3%
3%

13
34
48

3%
4%
4%

14
36
50

3%
4%
4%

5%
8%
6%
1%

814
872
1,686

5%
2%
3%
3%

858
899
1,757

5%
3%
4%
4%

896
935
1,831

4%
4%
4%
4%

443
430
873

1%

2012E

7%
4%
-1%

8%
9%
8%
4%

7
12

7
11

11
11

6%
8%
7%
3%

195
224
419

189
213
402

181
194
375

211
228
439

4%
14%
8%

5%
10%
7%

64
52
116

63
53
116

65
50
114

65
59
124

257 5%
214 13%
470
8%

269
222
492

5%
4%
5%

283
234
516

5%
5%
5%

300
248
547

6%
6%
6%

4%
3%
4%

13%
9%
13%

12%
8%
11%

47
8
55

50
9
59

55
6
61

55
8
64

207 10%
32 (6%)
239
7%

222 7%
30 (5%)
252
5%

233
30
263

5%
(1%)
4%

240
30
270

3%
0%
3%

8%
3%
6%
6%

4%
14%
7%
3%

8%
13%
10%
6%

8%
10%
9%
6%

111
60
171

113
62
175

120
56
176

120
68
188

464 7%
246 10%
710
8%
5%

491
253
744

6%
3%
5%
5%

516
264
779

5%
4%
5%
5%

539
278
817

5%
5%
5%
5%

11%
(9%)
9%
15%

11%
7%
3%
13%

15%
13%
10%
15%

14%
11%
11%
14%

12%
9%
9%
10%

98
27
82
26

106
30
71
25

101
28
75
22

104
33
81
37

410 13%
118 10%
308 8%
110 13%

423
123
321
115

3%
4%
4%
4%

444
128
337
119

5%
4%
5%
4%

471
133
357
125

6%
4%
6%
5%

353
502
854

1%
13%
8%
8%

2%
12%
8%
6%

1%
22%
13%
6%

2%
20%
13%
5%

3%
15%
10%
6%

92
141
233

87
146
232

85
142
226

97
159
256

2%
360
588 17%
948 11%
5%

369
613
982

2%
4%
4%
4%

383
645
1,028

4%
5%
5%
5%

407
679
1,086

6%
5%
6%
6%

69
19

261
68

2%
3%

2%
2%

9%
9%

9%
9%

9%
7%

65
14

70
19

70
20

75
20

280
72

289
74

3%
2%

300
76

4%
3%

315
79

5%
4%

19
130

25
148

71
538

82%
11%

65%
8%

45%
4%

35%
7%

27%
8%

18
135

23
141

25
139

32
159

99 39%
575 7%

123 25%
603 5%

150
633

22%
5%

180
671

20%
6%

41
191
232

46
207
254

36
217
253

63
224
287

4%
186
840 14%
1,026 12%
5%

221 19%
3%
868
1,089
6%
6%

265
896
1,160

20%
3%
7%
7%

317
929
1,246

20%
4%
7%
7%

439
435
421
491
616
628
609
679
1,055 1,063 1,030 1,170

1,786 5%
2,532 12%
4,318
9%

1,894
2,606
4,501

6%
3%
4%

2,021
2,703
4,724

7%
4%
5%

2,160
2,821
4,981

7%
4%
5%

157
622
779

13%
11%
12%
5%

159
684
843

1%
10%
8%
7%

160
686
845

1%
0%
0%
3%

10%
21%
19%
11%

7%
5%
5%
5%

9%
6%
6%
8%

19%
0%
4%
3%

39
174
213

41
177
218

44
186
230

54
197
251

178
734
913

12%
7%
8%
7%

5%
10%
9%
6%

12%
17%
16%
6%

-19%
17%
10%
0%

16%
14%
14%
9%

1,365
1,414
2,779

8%
9%
-4%

1,550
1,819
3,369

14%
29%
21%

1,658
2,141
3,801

7%
18%
13%

1,663
2,107
3,771

0%
-2%
-1%

8%
21%
15%

1%
6%
4%

2%
3%
3%

0%
0%
0%

421
574
995

414
545
959

413
529
941

459
608
1,067

1,707
2,256
3,962

3%
7%
5%

4%
7%
6%

5%
15%
11%

2%
15%
9%

7%
12%
10%

0%
2%
1%

8%
10%
9%

1%
6%
4%

2%
5%
4%

0%
0%
0%

3%
6%
5%

4%
4%
4%

5%
3%
4%

2%
3%
3%

7%
4%
5%

7%
-4%
6%

3Q

-3%
4%
3%
-1%

14%
21%
10%

2Q

7
11

139
559
698

8%
0%
7%

1Q

776
859
1,635

7%
7%

5%
3%
3%

6%
3%
4%

7%
4%
5%

7%
4%
5%

Page 9 of 14

Piper Jaffray
Matt Miksic (212) 284-9335
matt.s.miksic@pjc.com
5/5/2011

Smith & Nephew PLC (ADS)

Quarterly Balance Sheet Analysis, 2006A2014E
($MM)

4Q06

4Q07

4Q08

4Q09

4Q10

2011E

2012E

2013E

2014E

2015E

Assets
Cash & Short-Term Investments
Net Receivables
Inventories
Other Current Assets
Total Current Assets

346.0
680.0
619.0
1,645.0

170.0
898.0
837.0
1,905.0

145.0
961.0
879.0
1,985.0

192.0
946.0
933.0
2,071.0

207.0
1,024.0
923.0
2,154.0

468.4
1,052.4
1,023.1
216.0
2,759.9

779.8
1,109.3
1,049.9
432.0
3,371.0

1,125.7
1,177.5
1,082.7
648.0
4,033.9

1,510.1
1,255.2
1,118.9
864.0
4,748.2

1,935.1
1,341.5
1,163.6
1,080.0
5,520.2

Net Property, Plant & Equipment

Other Assets
Goodwill
Other Intangibles
LT Investments
Other Assets
Total Assets

635.0
951.0
831.0
10.0
110.0
3,231.0

743.0
1,802.0
1,198.0
449.0
20.0
135.0
4,450.0

725.0
1,798.0
1,189.0
376.0
19.0
214.0
4,508.0

753.0
1,741.0
1,093.0
412.0
20.0
216.0
4,565.0

787.0
1,792.0
1,101.0
426.0
19.0
246.0
4,733.0

823.8
1,792.0
1,101.0
426.0
19.0
246.0
5,375.7

875.9
1,792.0
1,101.0
426.0
19.0
246.0
6,038.9

950.4
1,792.0
1,101.0
426.0
19.0
246.0
6,776.3

1,052.2
1,792.0
1,101.0
426.0
19.0
246.0
7,592.5

1,187.3
1,792.0
1,101.0
426.0
19.0
246.0
8,499.5

119.0
419.0
227.0
51.0
816.0

1,442.0
545.0
204.0
80.0
2,271.0

115.0
607.0
192.0
54.0
968.0

45.0
596.0
167.0
55.0
863.0

57.0
617.0
203.0
37.0
914.0

57.0
687.9
203.0
37.0
984.9

57.0
722.0
203.0
37.0
1,019.0

57.0
761.1
203.0
37.0
1,058.1

57.0
803.7
203.0
37.0
1,100.7

57.0
853.6
203.0
37.0
1,150.6

Long-Term Debt
Deferred Taxes & Invest Tax Credit
Minority Interest
Other Liabilities
Total Liabilities

15.0
35.0
191.0
1,057.0

36.0
63.0
264.0
2,634.0

1,358.0
46.0
437.0
2,809.0

1,090.0
31.0
402.0
2,386.0

642.0
69.0
335.0
1,960.0

642.0
69.0
335.0
2,030.9

642.0
69.0
335.0
2,065.0

642.0
69.0
335.0
2,104.1

642.0
69.0
335.0
2,146.7

642.0
69.0
335.0
2,196.6

Common Equity
Common Stock
Capital Surplus
Retained Earnings
Unadjusted Retained Earnings
Accum Other Comprehensive Inc (Loss)
Deferred Compensation
Other Stockholders' Equity Adjustments
Treasury Stock
Total Shareholders' Equity

2,174.0
189.0
329.0
1,657.0
1,657.0
1.0
2,174.0

1,816.0
190.0
356.0
1,907.0
1,811.0
96.0
637.0
1,816.0

1,956.0
190.0
375.0
1,957.0
1,956.0
1.0
823.0
1,699.0

2,179.0
190.0
382.0
2,401.0
2,338.0
63.0
794.0
2,179.0

2,773.0
191.0
396.0
2,964.0
2,848.0
116.0
778.0
2,773.0

3,344.8
191.0
409.2
3,522.6
3,406.6
116.0
778.0
3,344.8

3,973.9
191.0
409.2
4,153.7
4,037.7
116.0
780.0
3,973.9

4,672.2
191.0
409.2
4,854.4
4,738.4
116.0
782.4
4,672.2

5,445.8
191.0
409.2
5,630.6
5,514.6
116.0
785.0
5,445.8

6,302.9
191.0
409.2
6,490.4
6,374.4
116.0
787.6
6,302.9

Total Liabilities & Shareholders' Equity

3,231.0

4,450.0

4,508.0

4,565.0

4,733.0

5,375.7

6,038.9

6,776.3

7,592.5

8,499.5

Liabilities & Shareholders' Equity

Debt in Current Liabilities
Accounts Payable
Income Taxes Payable
Other Current Liabilities
Total Current Liabilities

Working Capital Ratios

Days Sales Outstanding
Inventory Turnover
Days Payable Outstanding
Short-term Debt
Long-term Debt
Total Debt
Net Debt
Total Capitalization
Debt/Total Capitalization
Book Value per Share
NOA

Smith & Nephew plc

84.2
1.18
214.8
119.0
15.0
134.0
-212.0
2189.0
0.7%

84.3
1.11
187.6
1442.0
36.0
1478.0
1308.0
1852.0
1.9%

88.0
1.19
198.8
115.0
1358.0
1473.0
1328.0
3057.0
44.4%

90.0
1.06
219.2
45.0
1090.0
1135.0
943.0
3269.0
33.3%

87.7
1.10
214.9
57.0
642.0
699.0
492.0
3415.0
18.8%

87.7
1.10
219.9
57.0
642.0
699.0
230.6
3986.8
16.1%

88.7
1.10
224.9
57.0
642.0
699.0
-80.8
4615.9
13.9%

89.7
1.10
229.9
57.0
642.0
699.0
-426.7
5314.2
12.1%

90.7
1.10
234.9
57.0
642.0
699.0
-811.1
6087.8
10.5%

91.7
1.10
239.9
57.0
642.0
699.0
-1236.1
6944.9
9.2%

11.5
1962

9.7
3124

9.5
3027

12.3
3122

15.6
3265

18.7
3575

22.3
3893

26.2
4245

30.5
4635

35.3
5067

Page 10 of 14

Piper Jaffray
Matt Miksic (212) 284-9335
matt.s.miksic@pjc.com
5/5/2011

Smith & Nephew PLC (ADS)

Statement of Cash Flows, Quarterly, 2006A - 2014E
($MM)

2006

2007

2008

2009

2010

2011E

2012E

2013E

2014E

2015E

550.0
166.0
14%
(130.0)
586.0

469.0
228.0
37%
(138.0)
559.0

564.0
275.0
21%
(145.0)
694.0

670.0
312.0
13%
(217.0)
(38.0)
727.0

895.0
288.0
-8%
(216.0)
967.0

690.6
325.4
13%
(216.0)
800.0

763.0
364.5
12%
(216.0)
911.5

832.8
404.6
11%
(216.0)
1,021.4

908.1
449.1
11%
(216.0)
1,141.2

991.8
498.5
11%
(216.0)
1,274.3

(217.0)
(30.0)
(37.0)
(150.0)

9.0
(130.0)
(35.0)
(84.0)
(11.0)

(8.0)

(108.0)

369.0
58%

438.0
19%

12.0
(140.0)
(54.0)
(117.0)
31.0
566.0
29%

719.0
27%

859.0
19%

(57.6)
(28.4)
(100.1)
70.9
742.5
-14%

(49.6)
(56.9)
(26.8)
34.1
861.9
16%

(61.9)
(68.2)
(32.8)
39.1
959.5
11%

(71.4)
(77.8)
(36.2)
42.5
1,069.8
12%

(81.1)
(86.2)
(44.7)
49.9
1,193.3
12%

Investing
Capital Expenditures
% Growth
Acquisitions & Investments
Sale of Property & Investments
Other Investing Activities
Net Cash Flow - Investing

(222.0)
10%
(83.0)
537.0
232.0

(218.0)
-2%
(781.0)
6.0
(993.0)

(292.0)
34%
(16.0)
3.0
(305.0)

(314.0)
8%
(29.0)
137.0
(206.0)

(315.0)
0%
8.0
(307.0)

(362.3)
15%
(362.3)

(416.6)
15%
(416.6)

(479.1)
15%
(479.1)

(550.9)
15%
(550.9)

(633.6)
15%
(633.6)

Financing
Cash Dividends
Change in Current Debt
Change in Long-Term Debt
Change in Capital Stock
Other Financing Activity
Other
Net Cash Flow - Financing

(96.0)
(293.0)
16.0
(10.0)
(383.0)

(105.0)
1,078.0
(612.0)
(14.0)
347.0

(109.0)
80.0
(174.0)
5.0
(45.0)
(243.0)

(120.0)
(354.0)
17.0
(12.0)
(469.0)

(132.0)
(376.0)
18.0
(3.0)
(493.0)

(132.0)
13.2
(118.8)

(132.0)
(2.0)
(134.0)

(132.0)
(2.4)
(134.4)

(132.0)
(2.5)
(134.5)

(132.0)
(2.7)
(134.7)

Operating
Operating Profit
Depreciation & Amortization
% Growth
Deferred Taxes & Investment Tax Credit
Other Operating Activities
Gross Cash Flow - Operating
Extraordinaries
Loss(Gain) - Sale Prop, Plant & Equip
Net Chg in Operating Assets & Liabs
Decrease (Inc) in Accounts Rec
Decrease (Inc) in Inventories
Increase (Dec) in Accounts Payable
Increase (Dec) in Accrd Income Tax
Net Change in Other Assets & Liabs
Net Cash Flow - Operating
% Growth

Exchange Rate Effect

Miscellaneous Funds - Pre-FASB 95

5.0
-

8.0
-

Increase (Dec) Cash & ST Investments

223.0

(200.0)

Cash Flow Metrics

Free Cash Flow (FCF)
EBIT
EBIT Margin
EBITDA
EBITDA Margin
ROA
ROE
EBITA
Tax Rate (on EBIT)
NOPAT
Return on Invested Capital

147.0
582.0
20.9%
748.0
26.9%
13.6%
21.3%
582.0
29%
420.4
24%

220.0
706.0
21.0%
934.0
27.7%
12.5%
24.2%
706.0
29%
496.9
25%

Smith & Nephew plc

(5.0)
-

8.0
-

6.0
-

13.0

52.0

65.0

261.4

311.3

346.0

384.4

425.0

380.2
1,025.6
23.7%
1,351.0
31.3%
13.0%
20.9%
1,025.6
31%
707.4
22%

445.3
1,115.9
24.8%
1,480.4
32.9%
12.6%
19.2%
1,115.9
31%
770.0
22%

480.4
1,213.8
25.7%
1,618.4
34.3%
12.3%
17.8%
1,213.8
31%
837.5
22%

518.9
1,319.6
26.5%
1,768.7
35.5%
12.0%
16.7%
1,319.6
31%
910.5
21%

559.7
1,437.0
27.3%
1,935.5
36.8%
11.7%
15.7%
1,437.0
31%
991.5
20%

274.0
776.0
20.4%
1,051.0
27.7%
10.9%
29.0%
776.0
28%
538.8
17%

405.0
857.0
22.7%
1,169.0
31.0%
12.7%
26.6%
857.0
26%
618.2
20%

544.0
969.0
24.5%
1,257.0
31.7%
13.8%
23.6%
969.0
30%
671.3
22%

Page 11 of 14

Company Note
May 5, 2011

Important Research Disclosures

Rating and Price Target History for: Smith & Nephew plc as of 05-04-2011
07/22/08
B:$69

11/07/08
B:$55

02/12/09
B:$52

03/30/09
B:$51

04/30/09
B:$50

07/01/09
OW:50.00

07/01/09
OW:$50

07/01/09
OW:$51

01/06/10
N:$57

02/11/10
N:$58
64
56
48
40
32

Q1

Q2

Q3

Q1

Q2

Q3

Q1

2009
05/07/10
N:$59

07/07/10
N:$53

08/05/10
N:$52

Q2

Q3

11/08/10
N:$53

24

Q1

2010

Q2

2011

02/10/11
N:$62

Created by BlueMatrix

Notes: The boxes on the Rating and Price Target History chart above indicate the date of the Research Note, the rating, and the price target. Each box
represents a date on which an analyst made a change to a rating or price target, except for the first box, which may only represent the first Note written during
the past three years.
Legend:
I: Initiating Coverage
R: Resuming Coverage
T: Transferring Coverage
D: Discontinuing Coverage
S: Suspending Coverage
OW: Overweight
N: Neutral
UW: Underweight
B: Buy (Piper Jaffray discontinued use of the B, N, and S ratings on June 30, 2009)
N: Neutral
S: Sell
AL On/AL Off: Placed on/removed from the Alpha List maintained by Piper Jaffray (AL use discontinued March 2010)
NA: Not Available
UR: Under Review
Distribution of Ratings/IB Services
Piper Jaffray
IB Serv./Past 12 Mos.
Rating

Count

Percent

Count

Percent

BUY [OW]

314

50.50

72

22.93

HOLD [N]

260

41.80

25

9.62

48

7.70

4.17

SELL [UW]

Note: Distribution of Ratings/IB Services shows the number of companies currently in each rating category from which Piper Jaffray and its affiliates received
compensation for investment banking services within the past 12 months. FINRA rules require disclosure of which ratings most closely correspond with
"buy," "hold," and "sell" recommendations. Piper Jaffray ratings are not the equivalent of buy, hold or sell, but instead represent recommended relative
weightings. Nevertheless, Overweight corresponds most closely with buy, Neutral with hold and Underweight with sell. See Stock Rating definitions below.

Smith & Nephew plc

Page 12 of 14

Company Note
May 5, 2011

Important Research Disclosures

Analyst Certification Matt Miksic, Sr Research Analyst
Analyst Certification Roshni Sacks, Research Analyst
The views expressed in this report accurately reflect my personal views about the subject company and the subject security. In addition, no part of my
compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report.

Research Disclosures
Piper Jaffray usually provides bids and offers for the securities of Smith & Nephew plc and will, from time to time, buy and sell Smith & Nephew plc
securities on a principal basis.
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An industry outlook represents the analyst's view of the industry represented by the stocks in the analyst's coverage group. A Favorable
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expects the fundamentals and/or valuations of the industry to deteriorate meaningfully over the investment time horizon.

Smith & Nephew plc

Page 13 of 14

Company Note
May 5, 2011

Other Important Information

The material regarding the subject company is based on data obtained from sources we deem to be reliable; it is not guaranteed as to accuracy and
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Smith & Nephew plc

Page 14 of 14