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20 Dollar amounts in millions except per share amounts or as otherwise specified Stryker Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS Years Ended December 31 2013 2012 2011 Net sales $ 9,021 $ 8,657 $ 8,307 Cost of sales 2,977 2,781 2,811 Gross profit 6,044 5,876 5,496 Research, development and engineering expenses 536 471 462 Selling, general and administrative expenses 4,066 3,466 3,150 Intangible asset amortization 138 123 122 Restructuring charges 48 75 76 Total operating expenses 4,788 4,135 3,810 Operating income 1,256 1,741 1,686 Other income (expense), net (44) (36) — Earnings before income taxes 1,212 1,705 1,686 Income taxes 206 407 341 Net earnings $ 1,006 $ 1,298 $ 1,345 Net earnings per share of common stock: Basic net earnings per share of common stock $ 2.66 $ 3.41 $ 3.48 Diluted net earnings per share of common stock $ 2.63 $ 3.39 $ 3.45 Weighted-average shares outstanding—in millions: Basic 378.6 380.6 386.5 Net effect of dilutive employee stock options 3.5 2.4 3.0 Diluted 382.1 383.0 389.5 Anti-dilutive shares excluded from the calculation of net effect of dilutive employee stock options — 6.4 7.8 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31 2013 2012 2011 Net earnings $ 1,006 $ 1,298 $ 1,345 Unrealized gains (losses) on securities, net of tax (expense) benefit of $1, ($1) and $1, respectively (4) 4 (2) Unfunded pension gains (losses), net of tax (expense) benefit of ($15), $25 and ($8), respectively 20 (69) 12 Unrealized gains on designated hedges, net of tax expense of $4, $0 and $0, respectively 7 — — Foreign currency translation adjustments 80 50 (20) Total other comprehensive income (loss) 103 (15) (10) Comprehensive income $ 1,109 $ 1,283 $ 1,335 See accompanying notes to Consolidated Financial Statements.