NOTE N – SEGMENT REPORTING

We have three reportable segments comprised of MedSurg, Rhythm and Neuro, and Cardiovascular, which represent an aggregation of our operating segments.

Each of our reportable segments generates revenues from the sale of medical devices. We measure and evaluate our reportable segments based on segment net sales and operating income, excluding intersegment profits. In 2017, we updated our presentation of segment net sales and operating income to include the impact of foreign currency fluctuations, since our chief operating decision maker (CODM) reviews operating results both including and excluding the impact of foreign currency fluctuations, and the following presentation more closely aligns to our consolidated financial statements. We exclude from segment operating income certain corporate-related expenses and certain transactions or adjustments that our CODM considers to be non-operational, such as amounts related to amortization expense, intangible asset impairment charges, acquisition-related items, restructuring and restructuring-related items and litigation-related items. Although we exclude these amounts from segment operating income, they are included in reported Income (loss) before income taxes on the consolidated statements of operations and are included in the reconciliation below.

Effective January 1, 2018, following organizational changes to align the structure of our business with our focus on active implantable devices, we revised our reportable segments, in accordance with FASB ASC Topic 280, Segment Reporting. The revision reflects a reclassification of our Neuromodulation business from our MedSurg segment to our newly created Rhythm and Neuro segment. We have revised prior year amounts to conform to the current year’s presentation (as denoted with an asterisk (*) throughout). There was no revision to operating segments or reporting units as a result of the organizational change.

A reconciliation of the totals reported for the reportable segments to the applicable line items in our accompanying consolidated statements of operations is as follows (in millions, except percentages):



	Year Ended December 31,
Net sales	2018		2017		2016
MedSurg*	$	3,007	$	2,742	$	2,445
Rhythm and Neuro*	3,041		2,808		2,649
Cardiovascular	3,777		3,500		3,292
	$	9,823	$	9,048	$	8,386



	Year Ended December 31,
Depreciation expense	2018		2017		2016
MedSurg*	$	72	$	68	$	60
Rhythm and Neuro*	91		91		91
Cardiovascular	133		120		118
	$	296	$	279	$	270



	Year Ended December 31,
Income (loss) before income taxes	2018			2017			2016
MedSurg*	$	1,102		$	984		$	852
Rhythm and Neuro*	655			537			402
Cardiovascular	1,117			988			946
Operating income allocated to reportable segments	2,875			2,509			2,200
Corporate expenses, including hedging activities	(372		)	(252		)	(179		)
Intangible asset impairment charges, acquisition-related, restructuring- and restructuring-related and litigation-related net (charges) credits	(398		)	(407		)	(1,029		)
Amortization expense	(599		)	(565		)	(545		)
Operating income (loss)	1,506			1,285			447
Other expense, net	(85		)	(353		)	(270		)
	$	1,422		$	933		$	177



	Year Ended December 31,
Operating income as a percentage of segment net sales	2018		2017		2016
MedSurg*	36.7	%	35.9	%	34.9	%
Rhythm and Neuro*	21.5	%	19.1	%	15.2	%
Cardiovascular	29.6	%	28.2	%	28.7	%



	As of December 31,
Total assets	2018		2017
MedSurg*	$	1,846	$	1,871
Rhythm and Neuro*	1,696		1,607
Cardiovascular	1,954		1,824
Total assets allocated to reportable segments	5,497		5,302
Goodwill	7,911		6,998
Other intangible assets, net	6,372		5,837
All other corporate assets	1,219		905
	$	20,999	$	19,042



	As of December 31,
Long-lived assets	2018		2017		2016
U.S.	$	1,061	$	1,065	$	1,082
Ireland	242		210		181
Other countries	478		422		367
Property, plant and equipment, net	1,782		1,697		1,630
Goodwill	7,911		6,998		6,678
Other intangible assets, net	6,372		5,837		5,883
	$	16,064	$	14,531	$	14,191