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STRYKER CORPORATION 2016 Form 10-K Dollar amounts in millions except per share amounts or as otherwise specified. 17 Stryker Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS 2016 2015 2014 Net sales $ 11,325 $ 9,946 $ 9,675 Cost of sales 3,830 3,344 3,319 Gross profit $ 7,495 $ 6,602 $ 6,356 Research, development and engineering expenses 715 625 614 Selling, general and administrative expenses 4,137 3,610 3,547 Recall charges, net of insurance proceeds 158 296 761 Amortization of intangible assets 319 210 188 Total operating expenses $ 5,329 $ 4,741 $ 5,110 Operating income $ 2,166 $ 1,861 $ 1,246 Other income (expense), net (245) (126) (86) Earnings before income taxes $ 1,921 $ 1,735 $ 1,160 Income taxes 274 296 645 Net earnings $ 1,647 $ 1,439 $ 515 Net earnings per share of common stock: Basic net earnings per share of common stock $ 4.40 $ 3.82 $ 1.36 Diluted net earnings per share of common stock $ 4.35 $ 3.78 $ 1.34 Weighted-average shares outstanding: Basic 374.1 376.6 378.5 Effect of dilutive employee stock options 4.4 4.3 4.3 Diluted 378.5 380.9 382.8 Anti-dilutive shares excluded from the calculation of dilutive employee stock options were de minimis in all periods. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 2016 2015 2014 Net earnings $ 1,647 $ 1,439 $ 515 Other comprehensive (loss) income, net of tax Marketable securities — (3) 3 Pension plans (13) 17 (55) Unrealized gains (losses) on designated hedges 20 (9) 6 Financial statement translation (129) (390) (440) Total other comprehensive loss, net of tax $ (122) $ (385) $ (486) Comprehensive income $ 1,525 $ 1,054 $ 29 See accompanying notes to Consolidated Financial Statements.