Operating Segments and Related Information

Operating Segments

The Company has three reportable operating segments as follows:

Industrial Business Unit

The Industrial business unit develops and manufactures thermal and visible-spectrum imaging camera cores and components that are utilized by third parties to create thermal, industrial, and other types of imaging systems. The segment also develops and manufactures devices that image, measure, and assess thermal energy, gases, and other environmental elements for industrial, commercial, and scientific applications, imaging payloads for Unmanned Aerial Systems ("UAS"), machine vision cameras, people counting and tracking, and thermal imaging solutions for use by consumers in the smartphone and mobile devices markets. Products include thermal imaging cameras, gas detection cameras, firefighting cameras, process automation cameras, and environmental test and measurement devices.

Government and Defense Business Unit

The Government & Defense business unit develops and manufactures enhanced imaging and recognition solutions for a wide variety of military, law enforcement, public safety, and other government customers around the world for the protection of borders, troops, and public welfare. The segment also develops and manufactures sensor instruments and integrated platform solutions for the detection, identification, and suppression of chemical, biological, radiological, nuclear, and explosives ("CBRNE") threats for military force protection, homeland security, and commercial applications. Offerings include airborne, land, maritime, and man-portable multi-spectrum imaging systems, radars, lasers, imaging components, integrated multi-sensor system platforms, CBRNE detectors, nano-class UAS solutions, and services related to these systems.

Commercial Business Unit

The Commercial business unit develops and manufactures cameras, video recording systems, and video management systems for use in commercial and critical infrastructure, electronics and imaging instruments for the recreational and commercial maritime market, intelligent traffic monitoring and signal control systems, and hand-held and weapon-mounted thermal imaging systems for use in a variety of applications. Products include thermal and visible-spectrum security cameras, digital and networked video recorders, and related software and accessories, a full suite of networked marine electronic systems including multi-function helm displays, navigational instruments, autopilots, radars, sonar systems, thermal and visible imaging systems, and communications equipment for boats of all sizes, traffic cameras, sensors and associated traffic management software, and thermal scopes and handheld thermal cameras.

The Company’s chief operating decision maker ("CODM"), its Chief Executive Officer, evaluates each of its segments’ performance and allocates resources based on revenue and segment operating income. Intersegment revenues are recorded at cost and are eliminated in consolidation. The Company and each of its segments employ consistent accounting policies.

Note 18. Operating Segments and Related Information - (Continued)

Operating Segments - (Continued)

The following tables present revenue, operating income, and assets for the three segments. Operating income as reviewed by the CODM is revenue less cost of goods sold and operating expenses, excluding general corporate expenses, amortization of purchased intangible assets, amortization of acquisition-related inventory step-up, loss on sale of a business and restructuring and other charges. Net accounts receivable, inventories and demonstration assets for the operating segments are regularly reviewed by management and are reported below as segment assets. All remaining assets, liabilities, capital expenditures, and depreciation are managed on a Company-wide basis.

Operating segment information is as follows (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Revenue—External Customers:
Industrial	$	188,421		$	164,736		$	359,079		$	319,521
Government and Defense	161,027			145,715			320,358			283,896
Commercial	103,259			123,673			212,888			237,521
	$	452,707		$	434,124		$	892,325		$	840,938
Revenue—Intersegments:
Industrial	$	6,164		$	4,786		$	12,496		$	9,728
Government and Defense	4,573			3,896			6,101			7,163
Commercial	3,601			4,265			8,081			8,065
Eliminations	$	(14,338	)	$	(12,947	)	$	(26,678	)	$	(24,956	)
	$	—		$	—		$	—		$	—
Segment operating income:
Industrial	$	58,096		$	47,047		$	103,550		$	89,865
Government and Defense	45,548			38,153			91,730			71,473
Commercial	17,367			15,475			31,839			25,463
	$	121,011		$	100,675		$	227,119		$	186,801

A reconciliation of the Company's consolidated segment operating income to consolidated earnings before income taxes is as follows (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Consolidated segment operating income	$	121,011		$	100,675		$	227,119		$	186,801
Unallocated corporate expenses	(22,488		)	(25,016		)	(57,435		)	(43,241		)
Amortization of purchased intangible assets	(6,099		)	(7,016		)	(12,086		)	(13,751		)
Amortization of acquisition-related inventory step-up	—			—			—			(1,992		)
Loss on sale of business	—			—			(10,178		)	—
Restructuring and other charges	(3,758		)	(2,013		)	(3,262		)	(2,101		)
Consolidated earnings from operations	88,666			66,630			144,158			125,716
Interest and non-operating expenses, net	(5,713		)	(3,090		)	(6,590		)	(6,612		)
Consolidated earnings before income taxes	$	82,953		$	63,540		$	137,568		$	119,104

Unallocated corporate expenses include general corporate expenses, acquisition related costs and executive transition costs.

Note 18. Operating Segments and Related Information - (Continued)

Operating Segments - (Continued)



	June 30,		December 31,
	2018		2017
Operating segment assets:
Net accounts receivable, inventories and demonstration assets:
Industrial	$	279,060	$	287,439
Government and Defense	303,170		332,044
Commercial	143,355		136,942
	$	725,585	$	756,425
Goodwill⁽¹⁾:
Industrial	386,753		—
Government and Defense	290,908		—
Commercial	226,188		—
	$	903,849	—
Total operating segment assets	$	1,629,434	$	756,425

Assets not allocated:
Cash, cash equivalents and restricted cash	$	507,942	$	519,090
Assets held for sale, net	—		67,344
Prepaid expenses and other current assets	52,307		44,360
Property and equipment, net	252,478		263,996
Deferred income taxes	22,574		21,001
Goodwill⁽¹⁾	—		909,811
Intangible assets, net	154,958		168,130
Other assets	$	85,382	$	59,869
Total assets	$	2,705,075	$	2,810,026

___________

(1) Due to the realignment of the Company's business operations effective as of January 1, 2018, goodwill as of December 31, 2017 is presented as an asset not allocated to the operating segments in this table. See Note 10. "Goodwill" for additional information and goodwill by operating segments as of January 1, 2018.

Revenue and Long-Lived Assets by Geographic Area

Information related to revenue by significant geographical location, determined by the end customer, is as follows (in thousands):



	Three Months Ended June 30, 2018								Six Months Ended June 30, 2018
	Industrial		Government and Defense		Commercial		Total		Industrial		Government and Defense		Commercial		Total
United States	$	89,259	$	102,798	$	41,478	$	233,535	$	175,555	$	197,931	$	85,493	$	458,979
Europe	32,610		18,701		41,678		92,989		68,153		35,903		86,455		190,511
Asia	49,655		13,696		9,339		72,690		83,711		32,049		18,303		134,063
Middle East/Africa	4,873		24,088		6,448		35,409		8,538		51,270		12,008		71,816
Canada/Latin America	12,024		1,744		4,316		18,084		23,122		3,205		10,629		36,956
	$	188,421	$	161,027	$	103,259	$	452,707	$	359,079	$	320,358	$	212,888	$	892,325

Note 18. Operating Segments and Related Information - (Continued)

Revenue and Long-Lived Assets by Geographic Area - (Continued)



	Three Months Ended June 30, 2017								Six Months Ended June 30, 2017
	Industrial		Government and Defense		Commercial		Total		Industrial		Government and Defense		Commercial		Total
United States	$	77,212	$	87,806	$	59,007	$	224,025	$	154,187	$	179,039	$	112,630	$	445,856
Europe	31,086		20,495		39,460		91,041		64,344		32,578		77,391		174,313
Asia	39,170		11,968		8,583		59,721		72,395		23,989		17,261		113,645
Middle East/Africa	7,423		19,613		8,212		35,248		9,754		37,838		12,798		60,390
Canada/Latin America	9,845		5,833		8,411		24,089		18,841		10,452		17,441		46,734
	$	164,736	$	145,715	$	123,673	$	434,124	$	319,521	$	283,896	$	237,521	$	840,938

Long-lived assets by significant geographic locations are as follows (in thousands):



	June 30,		December 31,
	2018		2017
United States	$	711,292	$	797,816
Europe	461,800		343,208
Other foreign	223,575		260,782
	$	1,396,667	$	1,401,806

Major Customers

Revenue derived from major customers is as follows (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
United States government	$	120,244	$	111,824	$	239,199	$	228,059