Segment Information

6 Months Ended

Jun. 30, 2021

Segment Reporting [Abstract]

Segment Information

16.  Segment Information

We design, manufacture and market orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; spine, craniomaxillofacial and thoracic products (“CMFT”); office based technologies; dental implants; and related surgical products.  Our chief operating decision maker (“CODM”) allocates resources to achieve our operating profit goals through four operating segments.  These operating segments, which also constitute our reportable segments, are Americas Orthopedics; EMEA; Asia Pacific; and Americas Spine and Global Dental.  

As a result of changes to our organizational structure in advance of the planned spin off of SpinCo that were effective April 1, 2021, we added an additional operating segment to reflect a change in how our CODM allocates resources to achieve our operating profit goals.  The new operating segment consists of the Americas Spine and Global Dental businesses, which was carved out of the previous Americas and Global Businesses operating segment (subsequently renamed to Americas Orthopedics).  The EMEA and Asia Pacific operating segments still include the spine product category results in those regions and therefore did not change.  

Additionally, starting April 1, 2021 the financial information provided to the CODM from the Americas Orthopedics excluded certain costs related to operations, distribution, quality assurance and regulatory assurance that had previously been reported within this segment.  This group of functions and related costs do not meet the criteria to be a separate operating segment and are now reported within Corporate functions.  

We have reclassified previously reported information related to the change in operating segments and Corporate functions, along with other insignificant changes, to conform to the new presentation.

Our CODM evaluates performance based upon segment operating profit exclusive of operating expenses pertaining to inventory and manufacturing-related charges, intangible asset amortization, goodwill and intangible asset impairment, restructuring and other cost reduction initiatives, quality remediation, acquisition, integration, divestiture and related, litigation, certain European Union Medical Device Regulation (“EU MDR”) expenses, certain R&D agreements, other charges and corporate functions.  Corporate functions include corporate legal, finance, information technology, human resources and other corporate departments as well as certain operations, distribution, quality assurance and regulatory assurance expenses.  Intercompany transactions have been eliminated from segment operating profit.

Our Americas Orthopedics operating segment is comprised principally of the U.S. and includes other North, Central and South American markets for our orthopedic product categories.  This segment also includes research, development engineering, medical education, and brand management for our orthopedic product category headquarter locations.  Our EMEA operating segment is comprised principally of Europe and includes the Middle East and African markets for all product categories except Dental.  Our Asia Pacific operating segment is comprised principally of Japan, China and Australia and includes other Asian and Pacific markets for all product categories except Dental.  The EMEA and Asia Pacific operating segments include the commercial operations as well as regional headquarter expenses to operate in those markets.  The Americas Spine and Global Dental segment is comprised principally of the U.S. and includes other North, Central and South American markets for our spine business, and all geographic markets for our dental business.  This segment also includes research, development engineering, medical education and brand management at the product category headquarter locations as well as other directly attributable distribution and operations expenses.  

Since the Americas Orthopedics segment includes additional costs related to centralized orthopedic product category headquarter expenses, profitability metrics in this operating segment are not comparable to the EMEA and Asia Pacific operating segments.  Similarly, since the Americas Spine and Global Dental segment also includes research, development engineering, medical education, and brand management at the product category headquarter locations as well as other directly attributable distribution and operations expenses, its profitability metrics are not comparable to the other operating segments.  

Our CODM does not review asset information by operating segment.  Instead, our CODM reviews cash flow and other financial ratios by operating segment.

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

	Net Sales				Operating Profit (Loss)
	Three Months Ended				Three Months Ended
	June 30,				June 30,
	2021		2020		2021			2020
Americas Orthopedics	$	1,058.3	$	626.5	$	445.4		$	203.7
EMEA		392.9		204.1		95.2			20.1
Asia Pacific		345.7		264.5		111.4			78.4
Americas Spine and Global Dental		230.0		131.0		40.1			(3.4	)
Total	$	2,026.9	$	1,226.1
Corporate Functions						(162.0	)		(229.0	)
Inventory and manufacturing-related charges						(7.9	)		(1.4	)
Intangible asset amortization						(154.6	)		(147.7	)
Goodwill and intangible asset impairment						(16.3	)		(33.0	)
Restructuring and other cost reduction initiatives						(19.7	)		(28.0	)
Quality remediation						(11.0	)		(9.9	)
Acquisition, integration, divestiture and related						(25.4	)		(2.2	)
Litigation						(3.6	)		(1.3	)
European Union Medical Device Regulation						(10.6	)		(6.1	)
Certain R&D agreements						(65.0	)		-
Other charges						4.5			(11.9	)
Operating profit (loss)					$	220.5		$	(171.7	)

	Net Sales				Operating Profit (Loss)
	Six Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021			2020
Americas Orthopedics	$	2,004.5	$	1,569.5	$	832.5		$	607.0
EMEA		742.0		575.4		181.5			128.9
Asia Pacific		682.6		540.4		231.7			171.0
Americas Spine and Global Dental		445.2		324.6		79.1			22.5
Total	$	3,874.3	$	3,009.9
Corporate Functions						(318.4	)		(393.4	)
Inventory and manufacturing-related charges						(2.0	)		(2.0	)
Intangible asset amortization						(310.1	)		(295.3	)
Goodwill and intangible asset impairment						(16.3	)		(645.0	)
Restructuring and other cost reduction initiatives						(41.6	)		(73.0	)
Quality remediation						(21.2	)		(25.8	)
Acquisition, integration, divestiture and related						(38.8	)		(6.6	)
Litigation						(9.7	)		(81.1	)
European Union Medical Device Regulation						(17.5	)		(17.1	)
Certain R&D agreements						(65.0	)	-
Other charges						1.9			(17.8	)
Operating profit (loss)					$	486.1		$	(627.7	)