Business Segments

The company operates in four primary business segments: NA/HME, IPG, Europe and Asia/Pacific. Both the NA/HME and IPG segments operate in the Americas. The NA/HME segment sells each of the three primary product categories, which includes: lifestyle, mobility and seating, and respiratory therapy products. IPG sells long-term care medical equipment, health care furnishings and accessory products. Europe and Asia/Pacific sell product categories similar to those of NA/HME and IPG. The accounting policies of each segment are the same as those described in the summary of significant accounting policies for the company’s consolidated financial statements. Intersegment sales and transfers are based on the costs to manufacture plus a reasonable profit element.

Segment performance is measured and resources are allocated based on a number of factors, with the primary profit or loss measure being segment operating profit (loss). Segment operating profit

(loss) represents net sales less cost of products sold less selling general and administrative expenses. Segment operating profit (loss) excludes unallocated corporate general and administrative expenses not allocated to the segments and intersegment sales and profit eliminations, which are included in All Other. In addition, segment operating profit (loss) further excludes charges related to restructuring activities, asset impairments and gain on sale of business (as applicable).

Segment operating income (loss), is used by the CODM for purposes of making decisions about allocating resources to a segment and assessing its performance. In addition, this metric is reviewed by the company’s Board of Directors regarding segment performance and is a key metric in the performance management assessment of the company's employees.



(in thousands)	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Revenues from external customers
Europe	$	138,896		$	128,485		$	270,210		$	247,993
NA/HME	79,867			77,689			159,649			161,951
IPG	13,704			15,320			28,591			31,693
Asia/Pacific	13,685			12,023			24,762			23,603
Consolidated	$	246,152		$	233,517		$	483,212		$	465,240
Intersegment revenues
Europe	$	4,877		$	3,738		$	8,734		$	7,413
NA/HME	23,804			21,050			47,307			43,145
IPG	229			975			318			1,743
Asia/Pacific	5,254			3,896			10,914			7,756
Consolidated	$	34,164		$	29,659		$	67,273		$	60,057
Restructuring charges before income taxes
Europe	$	108		$	514		$	401		$	1,204
NA/HME	(11		)	3,928			86			6,170
Asia/Pacific	247			545			258			896
Consolidated	$	344		$	4,987		$	745		$	8,270
Operating income (loss)
Europe	$	5,171		$	7,077		$	11,765		$	12,177
NA/HME	(8,420		)	(12,395		)	(16,558		)	(21,821		)
IPG	1,163			1,472			2,761			3,370
Asia/Pacific	1,570			(118		)	2,542			(548		)
All Other	(5,901		)	(6,735		)	(11,674		)	(11,245		)
Charge expense related to restructuring activities	(344		)	(4,987		)	(745		)	(8,270		)
Consolidated operating loss	(6,761		)	(15,686		)	(11,909		)	(26,337		)
Net gain (loss) on convertible debt derivatives	21			(1,051		)	124			(150		)
Net Interest expense	(6,828		)	(4,596		)	(13,541		)	(9,026		)
Loss before income taxes	$	(13,568	)	$	(21,333	)	$	(25,326	)	$	(35,513	)

Net sales by product, are as follows (in thousands):



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Europe
Lifestyle	$	69,621	$	64,128	$	137,612	$	125,932
Mobility and Seating	58,411		53,526		110,184		100,458
Respiratory Therapy	6,480		6,634		13,242		13,750
Other(1)	4,384		4,197		9,172		7,853
	$	138,896	$	128,485	$	270,210	$	247,993
NA/HME
Lifestyle	$	31,573	$	31,045	$	62,207	$	63,294
Mobility and Seating	31,063		27,170		60,228		54,061
Respiratory Therapy	16,959		18,826		36,691		43,309
Other(1)	272		648		523		1,287
	$	79,867	$	77,689	$	159,649	$	161,951
Institutional Products Group
Continuing Care	$	13,704	$	15,320	$	28,591	$	31,693

Asia/Pacific
Mobility and Seating	$	8,448	$	7,108	$	15,339	$	13,716
Lifestyle	2,736		2,637		5,001		4,873
Continuing Care	447		671		734		1,846
Respiratory Therapy	522		306		646		649
Other(1)	1,532		1,301		3,042		2,519
	$	13,685	$	12,023	$	24,762	$	23,603

Total Consolidated	$	246,152	$	233,517	$	483,212	$	465,240

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(1)	Includes various services, including repair services, equipment rentals and external contracting.