Operating Segments and Related Information

Operating Segments

In August 2017, the Company announced a realignment of its business which resulted in reducing the number of operating segments from six to three effective as of January 1, 2018. The Company's three reportable operating segments are 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 and 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.


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

Operating Segments - (Continued)

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 segment’s 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.

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 expense, excluding general corporate expenses, acquisition related costs, executive transition costs, amortization of purchased intangible assets, amortization of acquisition-related inventory step-up, costs associated with the SkyWatch product remediation, restructuring charges, and the loss on sale of business. Accounts receivable and inventories for operating segments are regularly reviewed by management and are reported below as segment assets. All remaining assets, liabilities, capital expenditures and depreciation for all periods presented below were managed on a Company-wide basis.

Operating segment information is as follows (in thousands):



	Year Ended December 31,
	2018			2017			2016
Revenue—External Customers:
Industrial	$	717,882		$	672,120		$	552,580
Government and Defense	663,436			629,147			616,777
Commercial	394,368			499,167			492,810
	$	1,775,686		$	1,800,434		$	1,662,167
Revenue—Intersegments:
Industrial	$	19,482		$	21,747		$	19,874
Government and Defense	11,409			11,283			10,344
Commercial	20,056			14,942			17,277
Eliminations	(50,947		)	(47,972		)	(47,495		)
	$	—		$	—		$	—
Segment operating income:
Industrial	$	216,880		$	199,903		$	156,749
Government and Defense	199,702			179,160			176,749
Commercial	57,399			56,066			52,659
	$	473,981		$	435,129		$	386,157


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

Operating Segments - (Continued)

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



	Year Ended December 31,
	2018			2017			2016
Consolidated segment operating income	$	473,981		$	435,129		$	386,157
Unallocated corporate expenses	(106,994		)	(87,184		)	(65,012		)
Amortization of purchased intangible assets	(24,524		)	(27,391		)	(18,266		)
Amortization of acquisition-related inventory step-up	—			(1,992		)	(3,230		)
Restructuring charges	(8,203		)	(625		)	(1,431		)
Loss on sale of business	(13,708		)	(23,588		)	—
Other charges	(1,946		)	(4,388		)	(2,500		)
Consolidated earnings from operations	318,606			289,961			295,718
Interest and non-operating expense, net	(11,503		)	(10,896		)	(19,761		)
Consolidated earnings before income taxes	$	307,103		$	279,065		$	275,957

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



	December 31,
	2018		2017
Operating segment assets:
Net accounts receivable, inventories and demonstration assets:
Industrial	$	266,457	$	287,439
Government and Defense	307,041		332,044
Commercial	137,560		136,941
	$	711,058	$	756,424
Goodwill⁽¹⁾:
Industrial	391,603		—
Government and Defense	284,188		—
Commercial	228,780		—
	$	904,571	—
Total operating segment assets	$	1,615,629	$	756,424

Assets not allocated:
Cash, cash equivalents and restricted cash	$	512,144	$	519,090
Assets held for sale, net	2,032		67,344
Prepaid expenses and other current assets	67,413		44,361
Property and equipment, net	247,407		263,996
Deferred income taxes	100,620		21,001
Goodwill⁽¹⁾	—		909,811
Intangible assets, net	146,845		168,130
Other assets	$	89,152	$	59,869
Total assets	$	2,781,242	$	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 8. "Goodwill" for additional information and goodwill by operating segments as of January 1, 2018.


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

Operating Segments - (Continued)

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



	Year Ended December 31,
	2018								2017
	Industrial		Government and Defense		Commercial		Total		Industrial		Government and Defense		Commercial		Total
United States	$	364,443	$	420,032	$	150,052	$	934,527	$	314,910	$	379,356	$	262,172	$	956,438
Europe	130,901		89,725		156,227		376,853		140,265		92,021		143,188		375,474
Asia	159,150		55,160		40,850		255,160		156,201		36,484		34,362		227,047
Middle East/Africa	18,089		85,726		27,240		131,055		18,183		87,633		21,980		127,796
Canada/Latin America	45,299		12,793		19,999		78,091		42,561		33,653		37,465		113,679
	$	717,882	$	663,436	$	394,368	$	1,775,686	$	672,120	$	629,147	$	499,167	$	1,800,434

Revenue and Long-Lived Assets by Geographic Area

Long-lived assets are comprised of net property and equipment, net identifiable intangible assets, goodwill and other long-term assets. Long-lived assets by significant geographic locations are as follows (in thousands):



	December 31,
	2018		2017
United States	$	720,885	$	797,816
Europe	446,704		343,208
Other foreign	220,386		260,782
	$	1,387,975	$	1,401,806

Major Customers

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



	Year Ended December 31,
	2018		2017		2016
United States government	$	511,094	$	466,304	$	416,341