Operating Segments and Related Information

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Operating Segments and Related Information

Operating Segments and Related Information

Operating Segments

The Company has six reportable operating segments as follows:

Surveillance

The Surveillance segment 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. Offerings include airborne, land, maritime, and man-portable multi-spectrum imaging systems, radars, lasers, imaging components, integrated multi-sensor system platforms, and services related to these systems.

Instruments

The Instruments segment develops and manufactures devices that image, measure, and assess thermal energy, gases, and other environmental elements for industrial, commercial, and scientific applications. Products include thermal imaging cameras, gas detection cameras, firefighting cameras, process automation cameras, and environmental test and measurement devices.

Security

The Security segment develops and manufactures cameras, video recording systems, and video management systems for use in commercial, critical infrastructure, and home security applications. Products include thermal and visible-spectrum cameras, digital and networkedvideo recorders, and related software and accessories that enable the efficient and effective safeguarding of assets at all hours of the day and through adverse weather conditions.

OEM & Emerging Markets

The OEM & Emerging Markets segment 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 intelligent traffic monitoring and signal control systems, imaging payloads for Unmanned Aerial Systems ("UAS"), and thermal imaging solutions for use by consumers in the smartphone and mobile devices markets.

Maritime

The Maritime segment develops and manufactures electronics and imaging instruments for the recreational and commercial maritime market. The segment provides a full suite of networked 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.

Detection

The Detection segment 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.

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 six 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, and restructuring charges. 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 are managed on a Company-wide basis.

Note 17.        Operating Segments and Related Information - (Continued)

Operating Segments - (Continued)

Operating segment information is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue—External Customers:
Surveillance	$	146,805		$	136,402		$	394,742		$	373,993
Instruments	91,429			82,673			255,253			240,160
Security	65,660			56,431			160,447			166,872
OEM & Emerging Markets	87,206			62,719			259,418			167,544
Maritime	42,256			40,586			145,909			147,469
Detection	31,356			26,417			89,881			91,391
	$	464,712		$	405,228		$	1,305,650		$	1,187,429
Revenue—Intersegments:
Surveillance	$	10,115		$	5,001		$	18,203		$	13,980
Instruments	929			709			2,916			3,498
Security	2,931			4,267			9,697			10,575
OEM & Emerging Markets	11,456			7,518			29,986			24,528
Maritime	567			656			1,865			2,728
Detection	2			—			3			31
Eliminations	(26,000		)	(18,151		)	(62,670		)	(55,340		)
	$	—		$	—		$	—		$	—
Segment operating income:
Surveillance	$	44,941		$	41,428		$	104,313		$	103,888
Instruments	29,603			27,578			74,376			67,254
Security	6,486			4,784			8,090			7,025
OEM & Emerging Markets	26,931			20,658			77,628			48,100
Maritime	4,466			3,155			19,060			16,482
Detection	8,883			6,999			24,644			25,556
	$	121,310		$	104,602		$	308,111		$	268,305

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Consolidated segment operating income	$	121,310		$	104,602		$	308,111		$	268,305
Unallocated corporate expenses	(25,492		)	(16,514		)	(68,733		)	(49,186		)
Amortization of purchased intangible assets	(7,102		)	(4,329		)	(20,854		)	(12,464		)
Amortization of acquisition-related inventory step-up	—			—			(1,992		)	—
SkyWatch product quality accrual	(1,088		)	(2,000		)	(3,088		)	(2,000		)
Restructuring charges	(542		)	(910		)	(642		)	(1,217		)
Consolidated earnings from operations	87,086			80,849			212,802			203,438
Interest and non-operating expense, net	(2,553		)	(5,641		)	(9,165		)	(12,757		)
Consolidated earnings before income taxes	$	84,533		$	75,208		$	203,637		$	190,681

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

Note 17.        Operating Segments and Related Information - (Continued)

Operating Segments - (Continued)

	September 30,		December 31,
	2017		2016
Segment assets (accounts receivable, net and inventories):
Surveillance	$	290,353	$	283,324
Instruments	132,642		114,681
Security	95,063		93,174
OEM & Emerging Markets	141,212		144,862
Maritime	65,276		61,494
Detection	34,001		25,856
	$	758,547	$	723,391

	September 30,		December 31,
	2017		2016
Segment goodwill:
Surveillance	$	259,400	$	152,383
Instruments	153,677		147,595
Security	111,883		102,983
OEM & Emerging Markets	255,490		252,647
Maritime	102,384		97,860
Detection	48,012		47,938
	$	930,846	$	801,406

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 September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
United States	$	250,755	$	229,350	$	696,612	$	647,938
Europe	91,529		71,949		265,842		240,656
Asia	56,416		42,639		170,061		133,877
Middle East/Africa	26,437		41,889		86,826		98,231
Canada/Latin America	39,575		19,401		86,309		66,727
	$	464,712	$	405,228	$	1,305,650	$	1,187,429

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

			December 31, 2016
	September 30, 2017		(as reclassified)
United States	$	686,191	$	676,007
Europe	485,216		490,089
Canada/Latin America	253,051		235,921
Other foreign	8,560		7,789
	$	1,433,018	$	1,409,806

Note 17.        Operating Segments and Related Information - (Continued)

Operating Segments - (Continued)

Major Customers

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
United States government	$	117,797	$	112,735	$	345,856	$	298,476