SEGMENT INFORMATION

The Company has numerous operating businesses covering a wide range of dental consumable products and dental technology products primarily serving the professional dental market, and certain healthcare products. Professional dental products represented approximately 92% of net sales for the three months ended March 31, 2018 and March 31, 2017.

The operating businesses are combined into two operating groups, which generally have overlapping geographical presence, customer bases, distribution channels, and regulatory oversight.

These operating groups are considered the Company’s reportable segments as the Company’s chief operating decision-maker regularly reviews financial results at the operating group level and uses this information to manage the Company’s operations. The Company evaluates performance of the segments based on the groups’ net third party sales, excluding precious metal content, and segment adjusted operating income. The Company defines net third party sales excluding precious metal content as the Company’s net sales excluding the precious metal cost within the products sold, which is considered a measure not calculated in accordance with US GAAP, and is therefore considered a non-US GAAP measure. Management believes that the presentation of net sales, excluding precious metal content, provides useful information to investors because a portion of Dentsply Sirona’s net sales is comprised of sales of precious metals generated through sales of the Company’s precious metal dental alloy products, which are used by third parties to construct crown and bridge materials. Due to the fluctuations of precious metal prices and because the cost of the precious metal content of the Company’s sales is largely passed through to customers and has minimal effect on earnings, Dentsply Sirona reports net sales both with and without precious metal content to show the Company’s performance independent of precious metal price volatility and to enhance comparability of performance between periods. The Company uses its cost of precious metal purchased as a proxy for the precious metal content of sales, as the precious metal content of sales is not separately tracked and invoiced to customers. The Company believes that it is reasonable to use the cost of precious metal content purchased in this manner since precious metal dental alloy sale prices are typically adjusted when the prices of underlying precious metals change. The Company’s exclusion of precious metal content in the measurement of net third party sales enhances comparability of performance between periods as it excludes the fluctuating market prices of the precious metal content. The Company also evaluates segment performance based on each segment’s adjusted operating income before provision for income taxes and interest. Segment adjusted operating income is defined as operating income before income taxes and before certain corporate headquarter unallocated costs, restructuring and other costs, interest expense, interest income, other expense (income), net, amortization of intangible assets and depreciation resulting from the fair value step-up of property, plant and equipment from acquisitions. The Company’s segment adjusted operating income is considered a non-US GAAP measure. A description of the products and services provided within each of the Company’s two operating segments is provided below.

Technologies & Equipment

This segment is responsible for the worldwide design, manufacture, sales and distribution of the Company’s Dental Technology and Equipment Products and Healthcare Consumable Products. These products include dental implants, laboratory dental products, CAD/CAM systems, imaging systems, treatment centers, as well as consumable medical device products.

Consumables

This segment is responsible for the worldwide design, manufacture, sales and distribution of the Company’s Dental Consumable Products which include preventive, restorative, instruments, endodontic, and orthodontic dental products.

The following tables set forth information about the Company’s segments for the three months ended March 31, 2018 and 2017. Certain reclassifications have been made to prior years’ data in order to conform to current year presentation:

Third Party Net Sales



	Three Months Ended
(in millions)	2018		2017

Technologies & Equipment	$	508.3	$	479.0
Consumables	447.8		421.5
Total net sales	$	956.1	$	900.5

Third Party Net Sales, Excluding Precious Metal Content



	Three Months Ended
(in millions)	2018		2017

Technologies & Equipment	$	498.0	$	467.9
Consumables	447.8		421.5
Total net sales, excluding precious metal content	945.8		889.4
Precious metal content of sales	10.3		11.1
Total net sales, including precious metal content	$	956.1	$	900.5

Segment Adjusted Operating Income



	Three Months Ended
(in millions)	2018			2017

Technologies & Equipment	$	74.8		$	54.0
Consumables	107.1			116.0
Segment adjusted operating income before income taxes and interest	181.9			170.0

Reconciling items expense (income):
All Other (a)	51.3			36.0
Restructuring and other costs	10.2			3.1
Interest expense	8.6			9.3
Interest income	(0.6		)	(0.7		)
Other expense (income), net	(34.1		)	(1.0		)
Amortization of intangible assets	49.9			45.2
Depreciation resulting from the fair value step-up of property, plant and equipment from business combinations	1.8			1.5
Income before income taxes	$	94.8		$	76.6

(a) Includes the results of unassigned Corporate headquarter costs, inter-segment eliminations and one distribution warehouse not managed by named segments.