Geographic and Segment Information Geographic and Segment Information

12 Months Ended

Dec. 31, 2019

Note 20. Geographic and Segment Information

Segment Information

We identify operating segments based on the way we manage, evaluate and internally report our business activities for purposes of allocating resources, developing and executing our strategy, and assessing performance. We have two reportable segments: Cardiovascular and Neuromodulation.

The Cardiovascular segment generates its revenue from the development, production and sale of cardiopulmonary products, heart valves and related products and advanced circulatory support. Cardiopulmonary products include oxygenators, heart-lung machines, autotransfusion systems, perfusion tubing systems, cannulae and other related accessories. Heart valves include mechanical heart valves, tissue heart valves, related repair products and minimally invasive surgical instruments. Advanced circulatory support includes temporary life support product kits that can include a combination of pumps, oxygenators, and cannulae. On June 12, 2019, we acquired the minimally invasive cardiac surgery instruments business from Miami Instruments, which are integrated into our Cardiovascular business franchise as part of our Heart Valves portfolio.

Our Neuromodulation segment generates its revenue from the design, development and marketing of neuromodulation therapy systems for the treatment of drug-resistant epilepsy, DTD and obstructive sleep apnea. Neuromodulation products include the VNS Therapy System, which consists of an implantable pulse generator, a lead that connects the generator to the vagus nerve, and other accessories.

“Other” includes corporate shared service expenses for finance, legal, human resources and information technology and corporate business development and New Ventures.

Net sales of our reportable segments include revenues from the sale of products they each develop and manufacture or distribute. We define segment income as operating income before merger and integration, restructuring and amortization and intangibles.

We operate under three geographic regions: U.S., Europe, and Rest of World. The table below presents net sales by operating segment and geographic region (in thousands):



	Year Ended December 31,
	2019		2018		2017
Cardiopulmonary
United States	$	161,471	$	161,134	$	152,828
Europe	135,632		141,720		133,585
Rest of World	207,613		233,554		210,911
	504,716		536,408		497,324
Heart Valves
United States	18,900		24,709		24,977
Europe	40,548		44,258		42,120
Rest of World	60,559		56,989		71,096
	120,007		125,956		138,193
Advanced Circulatory Support
United States	30,781		18,588		—
Europe	741		580		—
Rest of World	401		293		—
	31,923		19,461		—
Cardiovascular
United States	211,152		204,431		177,805
Europe	176,921		186,558		175,705
Rest of World	268,573		290,836		282,007
	656,646		681,825		635,517
Neuromodulation
United States	335,332		348,980		316,916
Europe	46,262		42,443		34,765
Rest of World	42,953		31,567		23,295
	424,547		422,990		374,976

Other	2,977		2,146		1,784
Totals
United States	546,484		553,411		494,721
Europe ⁽¹⁾	223,183		229,001		210,470
Rest of World	314,503		324,549		307,086
Total ^{(2) (3)}	$	1,084,170	$	1,106,961	$	1,012,277


(1)	Europe sales include those countries in which we have a direct sales presence, whereas European countries in which we sell through distributors are included in Rest of World.


(2)	Net sales to external customers includes $37.7 million, $34.8 million and $30.8 million in the United Kingdom, our country of domicile, for the years ended December 31, 2019, 2018 and 2017, respectively.


(3)	No single customer represented over 10% of our consolidated net sales. No country’s net sales exceeded 10% of our consolidated sales except for the U.S.

The table below presents a reconciliation of segment (loss) income from continuing operations to consolidated (loss) income from continuing operations before tax (in thousands):



	Year Ended December 31,
	2019			2018			2017
Cardiovascular ⁽¹⁾	$	28,460		$	(258,493	)	$	81,412
Neuromodulation ⁽²⁾	83,483			184,674			183,228
Other ⁽³⁾	(204,727		)	(96,724		)	(102,425		)
Total reportable segment (loss) income from continuing operations	(92,784		)	(170,543		)	162,215
Merger and integration expenses	23,457			24,420			15,528
Restructuring expenses	12,254			15,915			17,056
Amortization of intangibles	40,375			37,194			33,144
Operating (loss) income from continuing operations	(168,870		)	(248,072		)	96,487
Interest income	803			847			1,318
Interest expense	(15,091		)	(9,825		)	(7,797		)
Gain on acquisitions	—			11,484			39,428
Impairment of investments	—			—			(8,565		)
Foreign exchange and other (losses) gains	(2,536		)	(1,881		)	267
(Loss) income from continuing operations before tax	$	(185,694	)	$	(247,447	)	$	121,138


(1)	Results for the years ended December 31, 2019 and 2018 include Litigation provision, net of $(0.6) million and $294.0 million, respectively. Refer to “Note 14. Commitments and Contingencies” for additional information.


(2)	Results for the year ended December 31, 2019 include the ImThera impairment of the IPR&D asset of $50.3 million. Refer to “Note 8. Goodwill and Intangible Assets” for additional information.


(3)	Results for the year ended December 31, 2019 include the Caisson impairments of goodwill and the IPR&D asset of $42.4 million and $89.0 million, respectively. Refer to “Note 8. Goodwill and Intangible Assets” for additional information.

Assets by reportable segment as of December 31, 2019 and 2018, was as follows (in thousands):



Assets	2019		2018
Cardiovascular	$	1,546,520	$	1,532,825
Neuromodulation	749,069		731,840
Other	116,208		285,036
Total	$	2,411,797	$	2,549,701

Capital expenditures by segment were as follows (in thousands):



	Year Ended December 31,
Capital Expenditures	2019		2018		2017
Cardiovascular	$	20,779	$	27,621	$	18,985
Neuromodulation	3,415		1,728		2,504
Other	3,783		7,630		7,010
Discontinued operations	—		1,018		5,608
Total	$	27,977	$	37,997	$	34,107

Geographic Information

Property, plant, and equipment, net by geographic region as of December 31, 2019 and 2018, was as follows (in thousands):



PP&E	2019		2018
United States	$	61,410	$	68,862
Europe	110,270		112,376
Rest of World	9,674		10,162
Total	$	181,354	$	191,400