Segment Information

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

Segment Information

14. 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. 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 inventory step-up and certain other inventory and manufacturing related charges, “Certain claims,” goodwill impairment, intangible asset amortization, “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 share-based payment expense. 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 March 31,				Three Months Ended March 31,
	2015		2014		2015			2014
Americas	$	645.2	$	638.7	$	320.3		$	312.1
Europe		298.9		326.9		110.4			109.9
Asia Pacific		190.3		195.9		96.0			91.6
Total	$	1,134.4	$	1,161.5
Inventory step-up and certain other inventory and manufacturing related charges						(3.9	)		(11.7	)
Intangible asset amortization						(20.4	)		(29.2	)
Special items						(87.0	)		(36.6	)
Global operations and corporate functions						(140.5	)		(136.0	)
Operating profit					$	274.9		$	300.1

Starting in 2015, we have removed intangible asset amortization from our reportable segment operating profit. In prior years, intangible asset amortization resulting from business combination accounting was presented in global operations and corporate functions while intangible asset amortization resulting from other intangible assets was reported in the reportable segment operating profit. The 2014 presentation has been reclassified to conform to the 2015 presentation.

Due to the change in our interim quarter-end closing convention for the majority of our international subsidiaries, net sales for our Europe and Asia Pacific operating segments in the three month period ended March 31, 2015 include sales through March 31, 2015, whereas in the three month period ended March 31, 2014, net sales for those operating segments included sales through March 25, 2014. We have not restated the presentation of the 2014 financial statements to conform to this change of closing convention because the impact of the change is not material to our consolidated results of operations or to the comparisons between the 2015 and 2014 periods.

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

	Three Months Ended March 31,
	2015		2014
Reconstructive
Knees	$	487.3	$	487.9
Hips		312.2		331.7
Extremities		52.2		52.1
		851.7		871.7
Dental		55.8		61.0
Trauma		79.4		79.7
Spine		49.5		48.3
Surgical and other		98.0		100.8
Total	$	1,134.4	$	1,161.5