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11 Dollar amounts in millions except per share amounts or as otherwise specified corporate purposes, including acquisitions, stock repurchases and other business opportunities. In March 2013 we acquired Trauson Holdings Company Limited for a total consideration of $751. With this acquisition we expanded our presence in a key emerging market with a product portfolio and pipeline that is targeted at the large and fast growing value segment of the Chinese orthopaedic market. In 2013 we recorded charges for the Rejuvenate, ABG II and Neptune recalls of $460, net of tax, and other matters that are discussed more fully in Results of Operations below. RESULTS OF OPERATIONS Consolidated results of operations: Percentage Change 2013 2012 2011 2013/2012 2012/2011 Net Sales $9,021 $8,657 $8,307 4.2 4.2 Gross Profit 6,044 5,876 5,496 2.9 6.9 Research, development & engineering expenses 536 471 462 13.8 1.9 Selling, general & administrative expenses 4,066 3,466 3,150 17.3 10.0 Intangibles amortization 138 123 122 12.2 0.8 Restructuring charges 48 75 76 (36.0) (1.3) Other income (expense) (44) (36) — 22.2 — Income taxes 206 407 341 (49.4) 19.4 Net Earnings $1,006 $1,298 $1,345 (22.5) (3.5) Diluted Net Earnings per share $2.63 $3.39 $3.45 (22.4) (1.7) Geographic and segment net sales: Percentage Change 2013/2012 2012/2011 Year Ended December 31 Constant Currency Constant Currency 2013 2012 2011 Reported Reported Geographic sales: United States $ 5,984 $ 5,658 $ 5,269 5.8 5.8 7.4 7.4 International 3,037 2,999 3,038 1.3 6.0 (1.3) 1.9 Total net sales $ 9,021 $ 8,657 $ 8,307 4.2 5.9 4.2 5.4 Segment sales: Reconstructive $ 4,004 $ 3,823 $ 3,710 4.8 6.9 3.1 4.4 MedSurg 3,359 3,265 3,160 2.9 3.8 3.3 4.2 Neurotechnology and Spine 1,658 1,569 1,437 5.6 7.7 9.2 10.5 Total net sales $ 9,021 $ 8,657 $ 8,307 4.2 5.9 4.2 5.4 Net sales increased 4.2% in 2013 after increasing 4.2% in 2012. In 2013 net sales grew by 6.5% as a result of increased unit volume and changes in product mix and 0.8% due to acquisitions and were negatively impacted by 1.4% due to changes in price and 1.6% due to the unfavorable impact of foreign currency exchange rates on net sales. Excluding the impact of acquisitions, net sales increased 5.1% in constant currency. Net sales in 2012 increased 5.6% as a result of 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. Excluding the impact of acquisitions, 2012 net sales increased 4.2% in constant currency. Net sales in 2013 increased primarily due to higher shipments of trauma and extremities products, neurotechnology products, hips and endoscopy products. Net sales in 2012 increased primarily due to higher shipments of neurotechnology products, instruments products, trauma and extremities products, spine products and reprocessed and remanufactured medical devices; these gains were partially offset by slowness in the European markets. In the United States net sales increased 5.8% in 2013 after increasing 7.4% in 2012. In constant currency, International sales increased 6.0% in 2013 after increasing 1.9% in 2012. Supplemental geographical sales growth information Year Ended December 31, 2013 Year Ended December 31, 2012 Percentage Change Percentage Change U.S. International U.S. International 2013 2012 As Reported Constant Currency As Reported As Reported Constant Currency 2012 2011 As Reported Constant Currency As Reported As Reported Constant Currency Reconstructive Knees 1,371 1,356 1.1 % 2.6 % 3.4 % (3.3 )% 1.1 % 1,356 1,316 3.0 % 4.0 % 6.0 % (2.4 )% 0.4 % Hips 1,272 1,233 3.2 % 6.0 % 7.2 % (1.4 )% 4.5 % 1,233 1,228 0.4 % 1.5 % 5.2 % (4.5 )% (2.3 )% Trauma and Extremities 1,116 989 12.8 % 15.1 % 18.4 % 7.2 % 11.8 % 989 931 6.2 % 8.4 % 18.0 % (3.5 )% 0.4 % TOTAL RECONSTRUCTIVE 4,004 3,823 4.8% 6.9% 7.9% 0.5 % 5.5% 3,823 3,710 3.1 % 4.4 % 9.2 % (4.3)% (1.4)% MedSurg Instruments 1,269 1,261 0.6 % 1.9 % 0.7 % 0.6 % 5.1 % 1,261 1,187 6.2 % 7.3 % 9.1 % (0.4 )% 3.1 % Endoscopy 1,167 1,111 5.0 % 6.0 % 6.6 % 1.3 % 4.6 % 1,111 1,080 2.9 % 3.9 % 2.6 % 3.7 % 7.1 % Medical 710 691 2.8 % 3.1 % 3.4 % 0.3 % 2.0 % 691 722 (4.3 )% (3.7 )% (7.8 )% 11.1 % 14.8 % TOTAL MEDSURG 3,359 3,265 2.9% 3.8% 3.6% 0.8 % 4.3% 3,265 3,160 3.3 % 4.2 % 3.4 % 3.0 % 6.5 % Neurotechnology and Spine Neurotechnology 915 842 8.7 % 11.4 % 11.2 % 5.1 % 11.8 % 842 750 12.3 % 13.9 % 19.0 % 3.9 % 7.6 % Spine 743 727 2.1 % 3.4 % 1.8 % 2.9 % 7.2 % 727 687 5.8 % 6.9 % 9.2 % (1.7 )% 1.7 % TOTAL NEUROTECHNOLOGY AND SPINE 1,658 1,569 5.6% 7.7% 6.4% 4.3 % 10.0% 1,569 1,437 9.2 % 10.5 % 13.8 % 1.7 % 5.3 %