Segment Information

9 Months Ended

Sep. 30, 2012

Segment Information

12. Segment Information

We design, develop, manufacture and market orthopaedic reconstructive implants, biologics, dental implants, spinal implants, trauma products and related surgical products which include surgical supplies and instruments designed to aid in surgical procedures and post-operation rehabilitation. We also provide other healthcare-related services. Revenue related to these services currently represents less than 1 percent of our total net sales. We manage operations through three major geographic segments – the Americas, which is comprised principally of the U.S. and includes other North, Central and South American markets; Europe, which is comprised principally of Europe and includes the Middle East and African markets; and Asia Pacific, which is comprised primarily of Japan and includes other Asian and Pacific markets. This structure is the basis for our reportable segment information discussed below. Management evaluates reportable segment performance based upon segment operating profit exclusive of operating expenses pertaining to share-based payment expense, inventory step-up, “Certain claims,” goodwill impairment, “Special items,” and global operations and corporate functions. Global operations and corporate functions include research, development engineering, medical education, brand management, corporate legal, finance, and human resource functions, U.S., Puerto Rico and Ireland-based manufacturing operations and logistics and intangible asset amortization resulting from business combination accounting. Intercompany transactions have been eliminated from segment operating profit.

Net sales and segment operating profit are as follows (in millions):

	Net Sales				Operating Profit
	Three Months Ended September 30,				Three Months Ended September 30,
	2012		2011		2012			2011
Americas	$	583.5	$	582.1	$	291.0		$	293.2
Europe		245.6		252.5		65.5			75.0
Asia Pacific		196.4		196.9		75.3			69.2
Total	$	1,025.5	$	1,031.5
Share-based compensation						(13.9	)		(14.4	)
Inventory step-up						(0.5	)		(1.8	)
Special items						(36.9	)		(8.0	)
Global operations and corporate functions						(131.1	)		(146.6	)
Operating profit					$	249.4		$	266.6

	Net Sales				Operating Profit
	Nine Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012			2011
Americas	$	1,832.2	$	1,820.4	$	927.8		$	906.6
Europe		851.6		876.4		254.7			289.6
Asia Pacific		607.4		587.7		232.0			216.2
Total	$	3,291.2	$	3,284.5
Share-based compensation						(41.7	)		(46.1	)
Inventory step-up						(2.5	)		(9.6	)
Certain claims						—			(50.0	)
Special items						(101.1	)		(47.0	)
Global operations and corporate functions						(422.3	)		(436.8	)
Operating profit					$	846.9		$	822.9

Net sales by product category are as follows (in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Reconstructive
Knees	$	407.4	$	416.7	$	1,338.7	$	1,349.8
Hips		308.5		315.6		993.0		997.9
Extremities		39.7		36.0		127.0		119.6
		755.6		768.3		2,458.7		2,467.3
Dental		54.7		55.1		176.4		184.6
Trauma		74.5		69.3		223.9		208.5
Spine		49.8		55.2		155.4		168.5
Surgical and other		90.9		83.6		276.8		255.6
Total	$	1,025.5	$	1,031.5	$	3,291.2	$	3,284.5