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 September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Revenue—External Customers:
Industrial	$	177,151		$	170,942		$	536,231		$	490,463
Government and Defense	171,955			169,734			492,313			453,630
Commercial	85,792			124,036			298,679			361,557
	$	434,898		$	464,712		$	1,327,223		$	1,305,650
Revenue—Intersegments:
Industrial	$	3,455		$	4,786		$	15,950		$	9,728
Government and Defense	2,327			3,896			8,428			7,163
Commercial	5,845			4,265			13,926			8,065
Eliminations	(11,627		)	(12,947		)	(38,304		)	(24,956		)
	$	—		$	—		$	—		$	—
Segment operating income:
Industrial	$	56,046		$	54,391		$	159,597		$	144,256
Government and Defense	53,878			52,605			145,608			124,078
Commercial	10,441			14,314			42,280			39,777
	$	120,365		$	121,310		$	347,485		$	308,111

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,
	2018			2017			2018			2017
Consolidated segment operating income	$	120,365		$	121,310		$	347,485		$	308,111
Unallocated corporate expenses	(22,427		)	(25,492		)	(79,865		)	(68,733		)
Amortization of purchased intangible assets	(5,824		)	(7,102		)	(17,909		)	(20,854		)
Amortization of acquisition-related inventory step-up	—			—			—			(1,992		)
Loss on sale of business	—			—			(10,178		)	—
Restructuring and other charges	(3,562		)	(1,630		)	(6,823		)	(3,730		)
Consolidated earnings from operations	88,552			87,086			232,710			212,802
Interest and non-operating expenses, net	(3,134		)	(2,553		)	(9,724		)	(9,165		)
Consolidated earnings before income taxes	$	85,418		$	84,533		$	222,986		$	203,637

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)



	September 30,		December 31,
	2018		2017
Operating segment assets:
Net accounts receivable, inventories and demonstration assets:
Industrial	$	270,299	$	287,439
Government and Defense	297,590		332,044
Commercial	136,350		136,942
	$	704,239	$	756,425
Goodwill⁽¹⁾:
Industrial	392,472		—
Government and Defense	291,478		—
Commercial	227,310		—
	$	911,260	—
Total operating segment assets	$	1,615,499	$	756,425

Assets not allocated:
Cash, cash equivalents and restricted cash	$	593,335	$	519,090
Assets held for sale, net	—		67,344
Prepaid expenses and other current assets	57,157		44,360
Property and equipment, net	250,050		263,996
Deferred income taxes	94,440		21,001
Goodwill⁽¹⁾	—		909,811
Intangible assets, net	151,778		168,130
Other assets	$	94,626	$	59,869
Total assets	$	2,856,885	$	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 September 30, 2018								Nine Months Ended September 30, 2018
	Industrial		Government and Defense		Commercial		Total		Industrial		Government and Defense		Commercial		Total
United States	$	95,896	$	114,176	$	30,463	$	240,535	$	271,451	$	312,106	$	115,957	$	699,514
Europe	28,208		25,378		35,024		88,610		96,361		61,281		121,479		279,121
Asia	37,881		14,326		10,343		62,550		121,593		46,373		28,646		196,612
Middle East/Africa	5,015		13,757		6,255		25,027		13,553		65,029		18,262		96,844
Canada/Latin America	10,151		4,318		3,707		18,176		33,273		7,524		14,335		55,132
	$	177,151	$	171,955	$	85,792	$	434,898	$	536,231	$	492,313	$	298,679	$	1,327,223

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

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



	Three Months Ended September 30, 2017								Nine Months Ended September 30, 2017
	Industrial		Government and Defense		Commercial		Total		Industrial		Government and Defense		Commercial		Total
United States	$	81,517	$	97,723	$	71,515	$	250,755	$	235,705	$	276,761	$	184,146	$	696,612
Europe	31,565		28,156		31,808		91,529		95,909		60,734		109,199		265,842
Asia	42,697		5,942		7,777		56,416		115,091		29,932		25,038		170,061
Middle East/Africa	4,397		17,533		4,507		26,437		14,150		55,371		17,305		86,826
Canada/Latin America	10,766		20,380		8,429		39,575		29,608		30,832		25,869		86,309
	$	170,942	$	169,734	$	124,036	$	464,712	$	490,463	$	453,630	$	361,557	$	1,305,650

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



	September 30,		December 31,
	2018		2017
United States	$	723,405	$	797,816
Europe	462,271		343,208
Other foreign	222,038		260,782
	$	1,407,714	$	1,401,806

Major Customers

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
United States government	$	144,747	$	117,797	$	383,946	$	345,856