NOTE 13 – SEGMENT REPORTING

Our three operating segments are:

•

Domestic and Canada Regulated Waste and Compliance Services (“Domestic and Canada RCS”),

•

Domestic Communication and Related Services (“Domestic CRS”), and

•

International Regulated Waste and Compliance Services (“International RCS”).

Domestic CRS does not meet the quantitative criteria to be a separate reportable segment and therefore is included in All other. Costs related to our corporate headquarter functions are also included in All other.

Our Domestic and Canada and International Regulated Waste and Compliance Services segments include medical waste disposal, pharmaceutical waste disposal, hazardous waste management, sustainability solutions for expired or unused inventory, secure information destruction of documents and e-media, training and consulting through our Steri-Safe® and Clinical Services programs, and other regulatory compliance services.

Our Domestic Communication and Related Services segment consists of inbound/outbound communication, automated patient reminders, online scheduling, notifications, product retrievals, product returns, and quality audits.

Our two reportable segments are:

•

Domestic and Canada RCS, and

•

International RCS.

The following tables show financial information for the Company's reportable segments:

In thousands
	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenues
Domestic and Canada RCS	$	649,106		$	630,652		$	1,282,839		$	1,246,783
International RCS		180,061			194,865			361,641			382,874
All other		88,566			66,104			165,652			136,145
Total	$	917,733		$	891,621		$	1,810,132		$	1,765,802
Gross Profit
Domestic and Canada RCS	$	284,910		$	285,473		$	563,013		$	559,388
International RCS		56,498			60,898			114,990			121,631
All other		40,344			31,270			72,411			63,202
Total	$	381,752		$	377,641		$	750,414		$	744,221
Intangible amortization
Domestic and Canada RCS	$	21,890		$	36,405		$	43,590		$	47,722
International RCS		5,585			12,525			10,929			17,502
All other		2,006			1,979			4,051			3,959
Total	$	29,481		$	50,909		$	58,570		$	69,183
Adjusted EBITA ^(a)
Domestic and Canada RCS	$	197,417		$	192,198		$	383,866		$	377,050
International RCS		18,356			16,715			38,401			35,646
All other		(32,673	)		(16,810	)		(68,797	)		(40,241	)
Total	$	183,100		$	192,103		$	353,470		$	372,455

The following table reconciles the Company's primary measure of segment profitability (EBITA) to income from operations:

In thousands
	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Adjusted EBITA ^(a)	$	183,100		$	192,103		$	353,470		$	372,455
Intangible amortization expenses (see Note 10)		(29,481	)		(50,909	)		(58,570	)		(69,183	)
Acquisition and integration expenses (see Note 3)		(23,738	)		(25,185	)		(43,558	)		(47,443	)
Litigation and professional services expenses ^(b)		(304,430	)		(2,664	)		(308,050	)		(3,964	)
Restructuring, plant conversion and other related expenses, and contract exit expenses (see Note 4)		(5,067	)		(13,637	)		(7,519	)		(13,878	)
Asset impairment charges and loss on disposal of assets held for sale (see Notes 3 and 4)		(12,738	)		—			(13,177	)		—
Change in fair value of contingent consideration (see Note 9)		—			—			(401	)		2,644
Income from operations	$	(192,354	)	$	99,708		$	(77,805	)	$	240,631

(a)

Adjusted EBITA is defined as income from operations exclusive of intangible amortization and other adjusting items reconciled in the table below.

(b)

Litigation and professional services expenses generally consist of legal expenses to defend significant lawsuits and any related settlements as well as certain advisory and consultative services for significant project initiatives which are reflected as part of SG&A on the Condensed Consolidated Statements of (Loss) Income. The litigation and professional services expenses for the three and six months ended June 30, 2017 reflect the pre-tax accrual of $295.0 million contemplated as part of the Proposed MDL Settlement (see Note 14 – Legal Proceedings).

The following table shows consolidated revenues by service:

In thousands
	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Regulated Waste and Compliance Services	$	512,321	$	523,303	$	1,023,498	$	1,029,884
Secure Information Destruction Services		212,409		190,534		416,484		375,164
Communication and Related Services		102,868		82,549		196,384		170,498
Manufacturing and Industrial Services		90,135		95,235		173,766		190,256
Revenues	$	917,733	$	891,621	$	1,810,132	$	1,765,802