NOTE 14 – 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 September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues
Domestic and Canada RCS	$	634,682		$	631,668		$	1,917,521		$	1,878,451
International RCS		174,603			187,735			536,244			570,609
All other		73,489			70,741			239,141			206,886
Total	$	882,774		$	890,144		$	2,692,906		$	2,655,946
Gross Profit
Domestic and Canada RCS	$	276,700		$	285,552		$	839,713		$	844,940
International RCS		54,965			57,002			169,955			178,633
All other		36,374			33,402			108,785			96,604
Total	$	368,039		$	375,956		$	1,118,453		$	1,120,177
Intangible amortization
Domestic and Canada RCS	$	21,944		$	26,184		$	65,534		$	73,906
International RCS		5,917			4,982			16,846			22,484
All other		2,044			1,962			6,095			5,921
Total	$	29,905		$	33,128		$	88,475		$	102,311
Adjusted EBITA ^(a)
Domestic and Canada RCS	$	185,027		$	194,512		$	568,893		$	571,562
International RCS		15,644			17,942			54,045			53,588
All other		(24,808	)		(20,741	)		(93,605	)		(60,982	)
Total	$	175,863		$	191,713		$	529,333		$	564,168

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

In thousands
	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Adjusted EBITA ^(a)	$	175,863		$	191,713		$	529,333		$	564,168
Intangible amortization expense (see Note 11)		(29,905	)		(33,128	)		(88,475	)		(102,311	)
Acquisition and integration expenses (see Note 3)		(16,435	)		(21,427	)		(59,993	)		(68,870	)
Litigation and professional service expenses ^(b)		(16,481	)		(1,481	)		(324,531	)		(5,445	)
Restructuring, plant conversion and other related expenses, and contract exit expenses (see Note 4)		(4,049	)		(10,597	)		(11,568	)		(24,475	)
Asset impairment charges and loss on disposal of assets held for sale (see Notes 3 and 4)		(14,898	)		(4	)		(28,075	)		(4	)
Change in fair value of contingent consideration (see Note 10)		(492	)		(559	)		(893	)		2,085
Income from operations	$	93,603		$	124,517		$	15,798		$	365,148

(a)

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

(b)

Litigation and professional service 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 Income (Loss) (see Note 5 – Business Transformation and Professional Fees). The litigation and professional service expenses for the nine months ended September 30, 2017 include a pre-tax charge of $295.0 million related to the Settlement of the MDL Action (see Note 15 – Legal Proceedings).

The following table shows consolidated revenues by service:

In thousands
	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Regulated Waste and Compliance Services	$	502,358	$	520,390	$	1,525,856	$	1,550,273
Secure Information Destruction Services		204,726		187,090		621,210		562,254
Communication and Related Services		89,049		87,486		285,433		257,984
Manufacturing and Industrial Services		86,641		95,178		260,407		285,435
Revenues	$	882,774	$	890,144	$	2,692,906	$	2,655,946