Segments, Concentrations and Geographic Information

6 Months Ended

Jun. 30, 2019

Segments, Concentrations and Geographic Information

16. Segments, Concentrations and Geographic Information

Segments

The internal reporting structure used by our Chief Operating Decision Maker (“CODM”) to assess performance and allocate resources determines the basis for our reportable operating segments. Our CODM is our Chief Executive Officer, and he evaluates operations and allocates resources based on a measure of income from operations. Our operations are organized in two reporting segments that are aligned with key product types and end markets served, Power Transmission Technologies (“PTT”) and Automation & Specialty (“A&S”):

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Power Transmission Technologies - PTT. This segment includes the following key product offerings:

Couplings, Clutches & Brakes. Couplings are the interface between two shafts, which enable power to be transmitted from one shaft to the other. Clutches in this segment are devices that use mechanical, hydraulic, pneumatic, or friction type connections to facilitate engaging or disengaging two rotating members. Brakes are combinations of interacting parts that work to slow or stop machinery. Products in this segment are generally used in heavy industrial applications and energy markets.

Electromagnetic Clutches & Brakes. Products in this segment include brakes and clutches that are used to electronically slow, stop, engage or disengage equipment utilizing electromagnetic friction type connections. Products in this segment are used in industrial and commercial markets including agricultural machinery, material handling, motion control, and turf & garden.

Gearing. Gears are utilized to reduce the speed and increase the torque of an electric motor or engine to the level required to drive a particular piece of equipment. Gears produced by the Company are primarily utilized in industrial applications.

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Automation & Specialty – A&S. This segment includes the following key brands:

Kollmorgen: Provides rotary precision motion solutions, including servo motors, stepper motors, high performance electronic drives and motion controllers and related software, and precision linear actuators. These products are used in advanced material handling, aerospace and defense, factory automation, medical, packaging, printing, semiconductor, robotic and other applications.

Portescap: Provides high-efficiency miniature motors and motion control products, including brush and brushless DC motors, can stack motors and disc magnet motors. These products are used in medical, industrial power tool and general industrial equipment applications.

Thomson: Provides systems that enable and support the transition of rotary motion to linear motion. Products include linear bearings, guides, glides, lead and ball screws, industrial linear actuators, clutch brakes, precision gears, resolvers and inductors. These products are used in factory automation, medical, mobile off-highway, material handling, food processing and other niche applications.

Jacobs Vehicle Systems (JVS): Provides heavy-duty diesel engine brake systems and valve actuation mechanisms for the commercial vehicle market, including compression release, bleeder and exhaust brakes, including the “Jake Brake” engine braking system. These products are primarily used in heavy duty Class 8 truck applications.

The segment information presented below for the prior periods has been reclassified to conform to the new presentation of our two reporting segments. The prior year reporting segments consisted of Couplings, Clutches & Brakes; Electromagnetic, Clutches, & Brakes; and Gearing and were aggregated into the PTT segment.

Segment financial information and a reconciliation of segment results to unaudited condensed consolidated results are as follows:

	Quarters Ended						Year to Date Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
Net Sales:
Power Transmission Technologies	$	234.9		$	237.3		$	469.8		$	477.7
Automation & Specialty		233.3			—			482.4			—
Inter-segment eliminations		(1.7	)		—			(2.9	)		—
Net sales	$	466.5		$	237.3		$	949.3		$	477.7
Income from operations:
Segment earnings:
Power Transmission Technologies	$	31.9		$	33.2		$	60.8		$	61.5
Automation & Specialty		31.8			—			72.4			—
Corporate expenses (1)		(3.4	)		(4.6	)		(4.2	)		(12.2	)
Restructuring costs		(3.2	)		(0.6	)		(5.5	)		(1.5	)
Income from operations	$	57.1		$	28.0		$	123.5		$	47.8
Other non-operating (income) expense:
Loss on settlement of pension plan		—			—			—			5.1
Net interest expense		18.6			2.1			38.4			3.9
Other non-operating (income), net		0.4			(0.3	)		1.5			(0.4	)
Total non-operating (income) expense	$	19.0		$	1.8		$	39.9		$	8.6
Income before income taxes		38.1			26.2			83.6			39.2
Provision for income taxes		9.1			7.2			19.4			11.2
Net income	$	29.0		$	19.0		$	64.2		$	28.0

(1)

Certain expenses are maintained at the corporate level and not allocated to the segments. These include various administrative expenses related to the Company’s corporate headquarters, depreciation on capitalized software costs, non-capitalizable software implementation costs and acquisition related expenses.

Selected information by segment (continued)

	Quarter Ended				Year to Date Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Depreciation and amortization:
Power Transmission Technologies	$	8.3	$	8.4	$	16.7	$	17.0
Automation & Specialty		23.2		—		46.2		—
Corporate		0.7		0.9		1.4		1.7
Total depreciation and amortization	$	32.2	$	9.3	$	64.3	$	18.7

					June 30, 2019		June 30, 2018
Total assets:
Power Transmission Technologies					$	1,089.2	$	884.0
Automation & Specialty						3,170.3		—
Corporate(2)						98.3		22.6
Total assets					$	4,357.8	$	906.6

(2)	Corporate assets are primarily cash and cash equivalents, tax related asset accounts, certain capitalized software costs, and property, plant and equipment.

Net sales to third parties by geographic region are as follows:

	Net Sales
	Quarter Ended				Year to Date Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
North America (primarily U.S.)	$	269.8	$	119.0	$	542.8	$	244.7
Europe excluding Germany		79.9		42.5		161.7		86.6
Germany		56.8		48.8		119.0		98.2
Asia and other		60.0		27.0		125.8		48.2
Total	$	466.5	$	237.3	$	949.3	$	477.7

Net sales to third parties are attributed to the geographic regions based on the country in which the shipment originates. Amounts attributed to the geographic regions for property, plant and equipment are based on the location of the entity, which holds such assets.