Operating Segments and Related Information

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Operating Business Units and Related Information

Operating Segments and Related Information

Operating Segments

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.

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 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.

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.

Note 19.        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,
	2019			2018			2019			2018
Revenue—External Customers:
Industrial	$	176,617		$	177,151		$	544,889		$	536,231
Government and Defense	213,348			171,955			584,207			492,313
Commercial	81,283			85,792			268,886			298,679
	$	471,248		$	434,898		$	1,397,982		$	1,327,223
Revenue—Intersegments:
Industrial	$	3,818		$	3,455		$	13,364		$	15,950
Government and Defense	959			2,327			3,906			8,428
Commercial	4,355			5,845			14,572			13,926
Eliminations	(9,132		)	(11,627		)	(31,842		)	(38,304		)
	$	—		$	—		$	—		$	—
Segment operating income:
Industrial	$	58,344		$	56,046		$	177,318		$	159,597
Government and Defense	56,298			53,878			153,535			145,608
Commercial	7,569			10,441			33,497			42,280
	$	122,211		$	120,365		$	364,350		$	347,485

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,
	2019			2018			2019			2018
Consolidated segment operating income	$	122,211		$	120,365		$	364,350		$	347,485
Unallocated corporate expenses	(29,532		)	(22,427		)	(95,244		)	(79,865		)
Amortization of purchased intangible assets	(15,478		)	(5,824		)	(42,451		)	(17,909		)
Impact of acquisition-related inventory step-up	(674		)	—			(1,573		)	—
Loss on sale of business	—			—			—			(10,178		)
Restructuring and other charges	(2,139		)	(3,562		)	(5,875		)	(6,823		)
Consolidated earnings from operations	74,388			88,552			219,207			232,710
Interest and non-operating expenses, net	(7,262		)	(3,134		)	(19,201		)	(9,724		)
Consolidated earnings before income taxes	$	67,126		$	85,418		$	200,006		$	222,986

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

Note 19.        Operating Segments and Related Information - (Continued)

Operating Segments - (Continued)

A reconciliation of the Company's consolidated segment operating assets to consolidated total assets is as follows (in thousands):

	September 30,		December 31,
	2019		2018
Operating segment assets:
Net accounts receivable, inventories and demonstration assets:
Industrial	$	268,217	$	266,457
Government and Defense	350,020		307,041
Commercial	139,931		137,560
	$	758,168	$	711,058
Goodwill:
Industrial	403,225		391,603
Government and Defense	719,082		284,188
Commercial	232,488		228,780
	$	1,354,795	$	904,571
Total operating segment assets	$	2,112,963	$	1,615,629
Assets not allocated:
Cash and cash equivalents	$	295,391	$	512,144
Prepaid expenses and other current assets	63,623		69,445
Property and equipment, net	253,338		247,407
Deferred income taxes	101,211		100,620
Intangible assets, net	262,095		146,845
Other assets	109,259		89,152
Total assets	$	3,197,880	$	2,781,242

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, 2019								Nine Months Ended September 30, 2019
	Industrial		Government and Defense		Commercial		Total		Industrial		Government and Defense		Commercial		Total
United States	$	94,676	$	146,421	$	28,819	$	269,916	$	295,008	$	389,940	$	96,566	$	781,514
Europe	27,989		24,537		33,706		86,232		92,152		76,133		117,846		286,131
Asia	40,133		16,080		10,603		66,816		118,026		51,014		27,724		196,764
Middle East/Africa	3,633		24,571		3,762		31,966		10,324		60,793		12,722		83,839
Canada/Latin America	10,186		1,739		4,393		16,318		29,379		6,327		14,028		49,734
	$	176,617	$	213,348	$	81,283	$	471,248	$	544,889	$	584,207	$	268,886	$	1,397,982

Note 19.        Operating Segments and Related Information - (Continued)

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

	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

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

	September 30,		December 31,
	2019		2018
United States	$	1,141,735	$	720,885
Europe	426,266		446,704
Other foreign	411,486		220,386
	$	1,979,487	$	1,387,975

Major Customers

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
United States government	$	165,682	$	144,747	$	459,336	$	383,946