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ORGANIZATIONALSTRENGTHOnekeyreasonoroursuccessisthedecentralizedmannerinwhichweoperateourbusinesses.DivisionpresidentshavedirectresponsibilityorSalesMarketingRDandBusinessDevelopment.Teyarelaser-ocusedontheircustomersneedsandtheirteamsentrepreneurialspiritdrivessustainedhighgrowth.SpecializedsalesorceswithdriveandpassioncontinuetobeacorestrengthatStryker.Wealsohaveahigh-perormingGlobalQualityandOperationsorganizationthatisontrackwithourprogramtosave500millionincumulativecoststhroughnetworkandsupplychainimprovements.TisincludesanewlycreateddistributioncenterinIndianapolisIndianaandecienciesthroughourVenloNetherlandsdistributioncenter.Ourgoalistocontinuetodeliveryear-over-yearavorablereductionsincostogoodssoldworkingcapitalimprovementso250millionanda30-dayimprovementindaysoinventoryonhand.In2013despitepricingpressureouradjustedgrossmarginexpandedby30basispointsexcludingtheimpactotheMedicalDeviceExciseax.DuringtheyearweullystaedtheStrykerExecutiveLeadershipeamatalentedgroupoindividualswithdeephealthcareexperienceandadiversityobackgroundsandstyles.WeAlsoinDecember2013weannouncedourintenttoacquirePatientSaetyechnologiesInc.whoseproprietarysowarehelpspreventretainedoreignobjectsinpatientswhileintheoperatingroomtherebyimprovingpatientsaetyandreducinghealthcarecosts.TisacquisitionwilloldintotheInstrumentsdivisionandwillcomplementexistingtechnologiesandsolutionsthatimprovecaregiverandpatientsaety.Additionallywecontinuedtostrengthenourqualityprogramwithsuccessulresultsromregulatoryinspectionsandwereceived510kFDAclearancetomarketamodifedNeptune2WasteManagementSystemwhichisanimportantproducttoourcustomersasitreducesharmulexposuretouidsandsmokeintheoperatingroom.STRONGFINANCIALRESULTSWedeliveredconsistentresultsthroughout2013withnetsalesreaching9billiona4.2increaseandouradjusteddilutednetEPSwas4.23persharea3.9increase.BothnetsalesandadjusteddilutednetEPSwereimpactedbyoreignexchangeearningswerealsonegativelyaectedbytheU.S.MedicalDeviceExciseax.AdjustingortheseitemsadjusteddilutednetEPSimprovedbydoubledigitsshowingstrongoperationalleverage.Wealsocontinuedtogeneratehealthyoperationalcashowup14vs.2012whichcontributedtocashequivalentsandmarketablesecuritiesexceedingdebtby1.2billionattheendotheyear.Tisbalancesheetstrengthenabledustocompleteacquisitionsannounceanincreaseinourdividendpershareo15ortheJanuary2014paymentandrepurchase317millionosharesduringtheyear.LETTERFROMTHEPRESIDENTANDCEOTOGETHERWITHOURCUSTOMERSWEAREDRIVENTOMAKEHEALTHCAREBETTER15INCREASEINOURDIVIDENDSTRYKER2013ANNUALREVIEW2