Segment Information

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Information

14. Segment Information

We design, manufacture and market orthopaedic reconstructive products; sports medicine, biologics, extremities and trauma products; spine, craniomaxillofacial and thoracic products (“CMF”); office based technologies; dental implants; and related surgical products. We allocate resources to achieve our operating profit goals through seven operating segments. Our operating segments are comprised of both geographic and product category business units. The geographic operating segments are the Americas, which is comprised principally of the U.S. and includes other North, Central and South American markets; EMEA, 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. The product category operating segments are Spine less Asia Pacific, Office Based Technologies, CMF and Dental. The geographic operating segments include results from all of our product categories except those in the product category operating segments. The Office Based Technologies, CMF and Dental product category operating segments reflect those respective product category results from all regions, whereas the Spine less Asia Pacific product category operating segment includes all spine product results excluding those from Asia Pacific.

As it relates to the geographic operating segments, management evaluates 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, manufacturing operations and logistics and share-based payment expense. As it relates to each product category operating segment, research, development engineering, medical education, brand management and other various costs that are specific to the product category operating segment’s operations are reflected in its operating profit results. Due to these additional costs included in the product category operating segments, profitability metrics among the geographic operating segments and product category operating segments are not comparable. Intercompany transactions have been eliminated from segment operating profit.

These seven operating segments are the basis for our reportable segment information provided below. The four product category operating segments are individually insignificant to our consolidated results and therefore do not constitute a reportable segment either individually or combined. For presentation purposes, these product category operating segments have been aggregated. In 2017, due to a change in management responsibilities, the sales and operating profit results of our Spine business in EMEA were combined with the previous Americas Spine operating segment to form the product category operating segment, Spine less Asia Pacific. Prior period reportable segment financial information has been restated to conform to the current presentation.

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

	Net Sales				Operating Profit
	Three Months Ended March 31,				Three Months Ended March 31,
	2017		2016		2017			2016
Americas	$	1,005.3	$	982.8	$	540.7		$	533.9
EMEA		392.7		400.5		130.8			140.6
Asia Pacific		276.6		256.6		102.5			110.2
Product Category Operating Segments		302.7		264.1		73.6			54.6
Global Operations and Corporate Functions		—		—		(211.9	)		(200.2	)
Total	$	1,977.3	$	1,904.0
Inventory step-up and other inventory and manufacturing related charges						(23.2	)		(178.3	)
Intangible asset amortization						(152.0	)		(126.6	)
Special items						(110.1	)		(88.7	)
Operating profit					$	350.4		$	245.5

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

	Three Months Ended March 31,
	2017		2016
Knees	$	701.8	$	703.2
Hips		475.7		467.9
S.E.T		425.1		401.0
Dental		107.8		108.6
Spine & CMF		186.3		141.2
Other		80.6		82.1
Total	$	1,977.3	$	1,904.0

“S.E.T” refers to our Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma product category.