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RESULTS OF OPERATIONS Our consolidated results of operations were: 2012 $8,657 5,876 471 3,466 123 ��� 75 (36) 407 $1,298 $3.39 Net Sales Gross Profit Research, development & engineering expenses Selling, general & administrative expenses Intangible amortization Property, plant and equipment impairment Restructuring charges Other income (expense) Income taxes Net Earnings Diluted Net Earnings per share 2011 $8,307 5,496 462 3,150 122 ��� 76 ��� 341 $1,345 $3.45 Percentage Change 2012/2011 2011/2010 4.2 13.5 6.9 9.2 1.9 17.3 10.0 16.4 0.8 110.3 ��� (100.0) (1.3) ��� ��� (100.0) 19.4 (25.2) (3.5) 5.7 (1.7) 8.2 2010 $7,320 5,034 394 2,707 58 124 ��� (22) 456 $1,273 $3.19 Our geographic and segment net sales were: Net Sales 2011 2012 Percentage Change 2012/2011 2011/2010 Constant Constant Currency Currency Reported Reported 2010 Geographic sales: United States International Total net sales Segment sales: Reconstructive MedSurg Neurotechnology and Spine Total net sales $ 5,658 2,999 8,657 3,823 3,265 1,569 8,657 $ $ $ $ $ $ $ 5,269 3,038 8,307 $ 3,710 3,160 1,437 8,307 $ $ $ 4,793 2,527 7,320 7.4 (1.3) 4.2 7.4 1.9 5.4 9.9 20.2 13.5 9.9 13.4 11.1 3,549 2,803 968 7,320 3.1 3.3 9.2 4.2 4.4 4.2 10.5 5.4 4.5 12.7 48.5 13.5 1.5 11.2 46.4 11.1 Net sales increased 4.2% in 2012 after increasing 13.5% in 2011. In 2012 net sales grew by 5.6% as a result of increased unit volume and changes in product mix and 1.2% due to acquisitions, and were negatively impacted by 1.4% due to changes in price and 1.2% due to the unfavorable impact of foreign currency exchange rates on net sales. In constant currency, net sales in 2012 increased by 5.4%. In 2011 net sales grew by 6.1% as a result of increased unit volume and changes in product mix, 2.4% due to the favorable impact of foreign currency and 6.8% due to acquisitions, and were negatively impacted by 1.8% due to changes in price. In constant currency, net sales in 2011 increased by 11.1%. The increase in consolidated net sales for 2012 was primarily due to higher shipments of Neurotechnology, Instruments, Trauma and Extremities, Spine and reprocessed and remanufactured medical devices; these gains were partially offset by slowness in the European markets. The increase in consolidated net sales for 2011 was primarily due to sales growth through acquisitions, higher United States shipments of MedSurg products and higher international shipments of MedSurg products and Neurotechnology and Spine products. In the United States net sales increased 7.4% in 2012 after increasing 9.9% in 2011. In constant currency, international sales increased 1.9% in 2012, compared to 13.4% in 2011. The following geographical sales growth information by segment is provided to supplement the net sales information presented above: Year Ended December 31, 2012 Year Ended December 31, 2011 Percentage Change U.S. 2012 2011 Percentage Change International As Reported U.S. As Reported Constant Currency As Reported Constant Currency 0.4 3.0 6.2 3.1 1.5 4.0 8.4 4.4 5.2 6.0 18.0 9.2 (4.5) (2.4) (3.5) (4.3) (2.3) 0.4 0.4 (1.4) 6.2 2.9 (4.3) 3.3 7.3 3.9 (3.7) 4.2 9.1 2.6 (7.8) 3.4 (0.4) 3.7 11.1 3.0 3.1 7.1 14.8 6.5 1,187 1,080 722 3,160 2011 2010 As Reported Constant Currency As Reported International As Reported Constant Currency Reconstructive Hips Knees Trauma and Extremities Total Reconstructive $ 1,233 $ 1,228 1,356 1,316 989 931 3,823 3,710 $ 1,228 $ 1,154 1,316 1,306 931 845 3,710 3,549 6.4 0.8 10.2 4.5 2.9 (1.5) 6.5 1.5 2.1 (2.3) 10.2 0.9 11.2 6.8 10.2 9.3 3.8 0.1 3.4 2.3 1,085 985 583 2,803 9.4 9.6 23.8 12.7 7.4 7.9 22.8 11.2 9.4 7.5 25.5 12.6 9.5 15.4 16.7 13.2 2.9 9.1 11.5 6.9 MedSurg Instruments Endoscopy Medical Total MedSurg 1,261 1,111 691 3,265 1,187 1,080 722 3,160 727 842 687 750 5.8 12.3 6.9 13.9 9.2 19.0 (1.7) 3.9 1.7 7.6 687 750 648 320 6.0 134.4 4.0 132.3 2.5 78.6 14.4 283.6 7.6 275.7 1,569 1,437 9.2 10.5 13.8 1.7 5.3 1,437 968 48.5 46.4 28.1 99.6 92.4 Neurotechnology and Spine Spine Neurotechnology Total Neurotechnology and Spine Reconstructive net sales in 2012 increased 3.1% from 2011, primarily due to a 5.6% increase in unit volume and changes in product mix and 0.9% due to acquisitions. Net sales were negatively impacted by 2.2% due to changes in price and 1.3% due to the 12 Dollar amounts in millions except per share amounts or as otherwise specified