SEGMENT AND GEOGRAPHIC INFORMATION

The operating businesses are combined into two operating groups, which generally have overlapping geographical presence, customer bases, distribution channels, and regulatory oversight. Certain reclassifications have been made to prior years’ data in order to conform to current year presentation. During the quarter ended September 30, 2017, the Company realigned reporting responsibilities for multiple businesses, as a result of a retirement of one of the Company’s then Chief Operating Officers, into three operating segments. Furthermore, as a result of changes in the senior management level during the quarter ended December 31, 2017, the Company realigned reporting responsibilities into two operating segments. The segment information below reflects the revised fourth quarter organizational structure for all periods shown. No goodwill was reallocated and no change in the number of reporting units as a result of the change in segments.

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 includes responsibility for the worldwide design, manufacture, sales and distribution of the Company’s Dental Technology and Equipment Products and Healthcare Consumable Products. These products includes 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 table sets forth information about the Company’s segments for the years ended December 31, 2017, 2016 and 2015.



Third Party Net Sales
(in millions)	2017		2016		2015

Technologies & Equipment	$	2,200.8	$	2,050.5	$	1,112.7
Consumables	1,792.6		1,694.8		1,561.6
Total net sales	$	3,993.4	$	3,745.3	$	2,674.3



Third Party Net Sales, Excluding Precious Metal Content
(in millions)	2017		2016		2015

Technologies & Equipment	$	2,160.3	$	1,986.4	$	1,019.9
Consumables	1,792.6		1,694.6		1,561.6
Total net sales, excluding precious metal content	$	3,952.9	$	3,681.0	$	2,581.5
Precious metal content of sales	40.5		64.3		92.8
Total net sales, including precious metal content	$	3,993.4	$	3,745.3	$	2,674.3



Depreciation and Amortization
(in millions)	2017		2016		2015

Technologies & Equipment	$	257.5	$	218.1	$	75.9
Consumables	57.5		52.6		38.9
All Other (a)	1.4		1.0		8.1
Total	$	316.4	$	271.7	$	122.9


(a)	Includes amounts recorded at Corporate headquarters.



Segment Operating Income (Loss)
(in millions)	2017			2016			2015

Technologies & Equipment	$	411.0		$	355.7		$	159.1
Consumables	487.1			445.3			443.2
Segment adjusted operating income before income taxes and interest	$	898.1		$	801.0		$	602.3

Reconciling Items (income) expense:
All Other (a)	189.0			162.8			116.9
Restructuring and other costs	425.2			23.2			64.7
Goodwill Impairment	1,650.9			—			—
Interest expense	38.3			35.9			55.9
Interest income	(2.4		)	(2.0		)	(2.2		)
Other expense (income), net	5.3			(20.1		)	(8.2		)
Amortization of intangible assets	189.1			155.3			43.7
Depreciation resulting from the fair value step-up of property, plant and equipment from business combinations	6.2			5.0			1.8
Income before income taxes	$	(1,603.5	)	$	440.9		$	329.7

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



Capital Expenditures
(in millions)	2017		2016		2015

Technologies & Equipment	$	98.6	$	73.7	$	22.1
Consumables	37.6		42.2		39.1
All Other (a)	8.1		9.1		10.8
Total	$	144.3	$	125.0	$	72.0

(a) Includes capital expenditures of Corporate headquarters.



Assets
(in millions)	2017		2016

Technologies & Equipment	$	8,130.6	$	9,667.0
Consumables	1,965.1		1,445.1
All Other (a)	278.8		443.7
Total	$	10,374.5	$	11,555.8

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

Geographic Information

The following table sets forth information about the Company’s operations in different geographic areas for the years ended December 31, 2017, 2016 and 2015. Net sales reported below represent revenues for shipments made by operating businesses located in the country or territory identified, including export sales. Property, plant and equipment, net, represents those long-lived assets held by the operating businesses located in the respective geographic areas.



(in millions)	United States		Germany		Sweden		Other Foreign		Consolidated

2017
Net sales	$	1,376.5	$	493.3	$	52.4	$	2,071.2	$	3,993.4
Property, plant and equipment, net	202.0		331.5		103.4		239.1		876.0

2016
Net sales	$	1,383.0	$	617.0	$	53.2	$	1,692.1	$	3,745.3
Property, plant and equipment, net	192.5		244.1		82.5		280.7		799.8

2015
Net sales	$	1,027.4	$	472.8	$	42.3	$	1,131.8	$	2,674.3
Property, plant and equipment, net	178.5		92.1		92.3		195.9		558.8

Product and Customer Information

The following table presents net sales information by product category:



	December 31,
(in millions)	2017		2016		2015

Dental consumables products	$	1,769.7	$	1,770.3	$	1,671.1
Dental technology and equipment products	1,895.7		1,658.6		687.7
Healthcare consumable products	328.0		316.4		315.5
Total net sales	$	3,993.4	$	3,745.3	$	2,674.3

Dental Consumable Products

Dental consumable products consist of value added dental supplies and small equipment used in dental offices for the treatment of patients. It also includes specialized treatment products used within the dental office and laboratory settings including products used in the preparation of dental appliances by dental laboratories.

Dentsply Sirona’s dental supplies include endodontic (root canal) instruments and materials, dental anesthetics, prophylaxis paste, dental sealants, impression materials, restorative materials, tooth whiteners and topical fluoride. Small equipment products include dental handpieces, intraoral curing light systems, dental diagnostic systems and ultrasonic scalers and polishers.

The Company’s products used in the dental laboratories include dental prosthetics, including artificial teeth, precious metal dental alloys, dental ceramics and crown and bridge materials. Dental laboratory equipment products include porcelain furnaces.

Dental Technology and Equipment Products

Dental technology products consist of high-tech state-of-art dental implants and related scanning equipment and treatment software, orthodontic appliances for dental practitioners and specialist and dental laboratories. The product category also includes basic and high-tech dental equipment such as treatment centers, imaging equipment and computer aided design and machining “CAD/CAM” systems equipment for dental practitioners and laboratories. The Company offers the broadest line of products to fully outfit a dental practitioner’s office.

Treatment centers comprise a broad range of products from basic dentist chairs to sophisticated chair-based units with integrated diagnostic, hygiene and ergonomic functionalities, as well as specialist centers used in preventative treatment and for training purposes. Imaging systems consist of a broad range of diagnostic imaging systems for 2D or 3D, panoramic, and intra-oral applications. Dental CAD/CAM Systems are products designed for dental offices and laboratories used for dental restorations, which includes several types of restorations, such as inlays, onlays, veneers, crowns, bridges, copings and bridge frameworks made from ceramic, metal or composite blocks. This product line also includes high-tech CAD/CAM techniques of CEramic REConstruction, or CEREC equipment. This equipment allows for in-office application that enables dentists to produce high quality restorations from ceramic material and insert them into the patient’s mouth during a single appointment. CEREC has a number of advantages compared to the traditional out-of-mouth pre-shaped restoration method, as CEREC does not require a physical model, restorations can be created in the dentist’s office and the procedure can be completed in a single visit.

Healthcare Consumable Products

Healthcare consumable products consist mainly of urology catheters, certain surgical products, medical drills and other non-medical products.

Concentration Risk

For the year ended December 31, 2017, one customer accounted for approximately 15% of consolidated net sales. At December 31, 2017, two customers each accounted for approximately 14% and 15% of the consolidated accounts receivable balance. For the year ended December 31, 2016, two customers accounted for approximately 12% each of consolidated net sales. At December 31, 2016, one customer accounted for 17% of the consolidated accounts receivable balance. For the year ended December 31, 2015, the Company had one customer that accounted for approximately 11% percent of consolidated net sales. At December 31, 2015, there were no customers that accounted for ten percent or more of the consolidated accounts receivable balance. For the years ended December 31, 2017, 2016 and 2015, third party export sales from the U.S. were less than ten percent of consolidated net sales.