Operating Segments and Geographic Information

Effective January 1, 2018, we changed our organizational structure and, as a result, now are reporting two segments. The segments formerly known as Broadcast Solutions and Enterprise Solutions now are presented as the Enterprise Solutions segment, and the segments formerly known as Industrial Solutions and Network Solutions now are presented as the Industrial Solutions segment. The reorganization allows us to further accelerate progress in key strategic areas, and the segment consolidation properly aligns our external reporting with the way the businesses are now managed. We have recast the prior period segment information to conform to the change in the composition of these reportable segments. This change had no impact to our reporting units for purposes of goodwill impairment testing.

We have determined that each of the global business platforms represents a reportable segment.

The segments design, manufacture, and market a portfolio of signal transmission solutions for mission critical applications used in a variety of end markets, including broadcast, enterprise, and industrial. We sell the products manufactured by our segments principally through distributors or directly to systems integrators, original equipment manufacturers (OEMs), end-users, and installers.

The key measures of segment profit or loss reviewed by our chief operating decision maker are Segment Revenues and Segment EBITDA. Segment Revenues represent non-affiliate revenues and include revenues that would have otherwise been recorded by acquired businesses as independent entities but were not recognized in our Consolidated Statements of Operations due to the effects of purchase accounting and the associated write-down of acquired deferred revenue to fair value. Segment EBITDA excludes certain items, including depreciation expense; amortization of intangibles; asset impairment; severance, restructuring, and acquisition integration costs; purchase accounting effects related to acquisitions, such as the adjustment of acquired inventory and deferred revenue to fair value; and other costs. We allocate corporate expenses to the segments for purposes of measuring Segment EBITDA. Corporate expenses are allocated on the basis of each segment’s relative EBITDA prior to the allocation.

Our measure of segment assets does not include cash, goodwill, intangible assets, deferred tax assets, or corporate assets. All goodwill is allocated to reporting units of our segments for purposes of impairment testing.

The results of our former equity method investment in the Hirschmann JV, which we sold effective December 31, 2017, were not included in the corporate expense allocation.

Operating Segment Information



Enterprise Solutions	Years ended December 31,
	2018		2017		2016
	(In thousands)
Segment revenues	$	1,522,178	$	1,356,305	$	1,372,941
Affiliate revenues	6,085		5,091		2,799
Segment EBITDA	267,656		216,558		239,978
Depreciation expense	28,861		26,272		29,455
Amortization of intangibles	45,944		51,054		48,966
Amortization of software development intangible assets	2,180		56		—
Severance, restructuring, and acquisition integration costs	57,563		29,043		18,561
Purchase accounting effects of acquisitions	3,497		6,133		(2,079		)
Deferred revenue adjustments	6,612		—		1,774
Patent settlement	—		—		(5,554		)
Acquisition of property, plant and equipment	65,619		49,440		38,392
Segment assets	761,309		687,914		571,960



Industrial Solutions	Years ended December 31,
	2018		2017		2016
	(In thousands)
Segment revenues	$	1,069,802	$	1,032,338	$	984,864
Affiliate revenues	81		67		71
Segment EBITDA	207,724		214,190		193,811
Depreciation expense	18,754		19,325		17,753
Amortization of intangibles	52,885		52,943		49,419
Amortization of software development intangible assets	8		—		—
Severance, restructuring, and acquisition integration costs	11,050		13,747		12,579
Deferred revenue adjustments	—		—		4,913
Acquisition of property, plant and equipment	29,215		13,319		15,190
Segment assets	458,801		458,481		342,038



Total Segments	Years ended December 31,
	2018		2017		2016
	(In thousands)
Segment revenues	$	2,591,980	$	2,388,643	$	2,357,805
Affiliate revenues	6,166		5,158		2,870
Segment EBITDA	475,380		430,748		433,789
Depreciation expense	47,615		45,597		47,208
Amortization of intangibles	98,829		103,997		98,385
Amortization of software development intangible assets	2,188		56		—
Severance, restructuring, and acquisition integration costs	68,613		42,790		31,140
Purchase accounting effects of acquisitions	3,497		6,133		(2,079		)
Deferred revenue adjustments	6,612		—		6,687
Patent settlement	—		—		(5,554		)
Acquisition of property, plant and equipment	94,834		62,759		53,582
Segment assets	1,220,110		1,146,395		913,998

The following table is a reconciliation of the total of the reportable segments’ Revenues and EBITDA to consolidated revenues and consolidated income before taxes, respectively.



	Years Ended December 31,
	2018			2017			2016
	(In thousands)
Total Segment Revenues	$	2,591,980		$	2,388,643		$	2,357,805
Deferred revenue adjustments (1)	(6,612		)	—			(6,687		)
Patent settlement (2)	—			—			5,554
Consolidated Revenues	$	2,585,368		$	2,388,643		$	2,356,672
Total Segment EBITDA	$	475,380		$	430,748		$	433,789
Amortization of intangibles	(98,829		)	(103,997		)	(98,385		)
Severance, restructuring, and acquisition integration costs (3)	(68,613		)	(42,790		)	(31,140		)
Depreciation expense	(47,615		)	(45,597		)	(47,208		)
Deferred revenue adjustments (1)	(6,612		)	—			(6,687		)
Purchase accounting effects related to acquisitions (4)	(3,497		)	(6,133		)	2,079
Costs related to patent litigation	(2,634		)	—			—
Amortization of software development intangible assets	(2,188		)	(56		)	—
Loss on sale of assets (5)	(94		)	(1,013		)	—
Impairment of assets held for sale (5)	—			—			(23,931		)
Patent settlement (2)	—			—			5,554
Income from equity method investment	—			7,502			1,793
Gain from patent litigation	62,141			—			—
Eliminations	(2,218		)	(3,260		)	(3,781		)
Consolidated operating income	305,221			235,404			232,083
Interest expense, net	(61,559		)	(82,901		)	(95,050		)
Non-operating pension cost	(342		)	(714		)	(8,230		)
Loss on debt extinguishment	(22,990		)	(52,441		)	(2,342		)
Consolidated income before taxes	$	220,330		$	99,348		$	126,461


(1)	Our segment results include revenues that would have been recorded by acquired businesses had they remained as independent entities. Our consolidated results do not include these revenues due to the purchase accounting effect of recording deferred revenue at fair value. See Note 4, Acquisitions, for details.


(2)	Both our consolidated revenues and gross profit were positively impacted by royalty revenues received during 2016 that related to years prior to 2016 as a result of a patent settlement.


(3)	See Note 12, Severance, Restructuring, and Acquisition Integration Activities, for details.

(4)

In 2018, we recognized $3.5 million of cost of sales related to purchase accounting adjustments, most of which was for the adjustment of acquired inventory to fair value for our SAM and NT2 acquisitions. In 2017, we recognized $6.1 million of cost of sales related to the adjustment of acquired inventory to fair value for our Thinklogical acquisition. In 2016, we made a $3.2 million adjustment to reduce the earn-out liability associated with the M2FX acquisition. This adjustment was partially offset by $0.8 million and $0.2 million of cost of sales related to the adjustment of acquired inventory to fair value related to our Enterprise segment and M2FX acquisition, respectively.


(5)	In 2018, 2017, and 2016, we recognized a $0.1 million loss on sale of assets, $1.0 million loss on sale of assets, and $23.9 million impairment of assets held for sale, respectively, for the sale of our MCS business and Hirschmann JV.

Below are reconciliations of other segment measures to the consolidated totals.



	Years Ended December 31,
	2018		2017		2016
	(In thousands)
Total segment assets	$	1,220,110	$	1,146,395	$	913,998
Cash and cash equivalents	420,610		561,108		848,116
Goodwill	1,557,653		1,478,257		1,385,995
Intangible assets, less accumulated amortization	511,093		545,207		560,082
Deferred income taxes	56,018		42,549		33,706
Corporate assets	13,837		67,097		64,906
Total assets	$	3,779,321	$	3,840,613	$	3,806,803
Total segment acquisition of property, plant and equipment	$	94,834	$	62,759	$	53,582
Corporate acquisition of property, plant and equipment	3,013		1,502		392
Total acquisition of property, plant and equipment	$	97,847	$	64,261	$	53,974

Geographic Information

The Company attributes foreign sales based on the location of the customer purchasing the product. The table below summarizes net sales and long-lived assets for the years ended December 31, 2018, 2017 and 2016 for the following countries: the U.S., Canada, China, and Germany. No other individual foreign country’s net sales or long-lived assets are material to the Company.



	United States			Canada			China			Germany			All Other			Total
	(In thousands, except percentages)
Year ended December 31, 2018
Revenues	$	1,324,653		$	174,727		$	132,544		$	117,598		$	835,846		$	2,585,368
Percent of total revenues	51		%	7		%	5		%	5		%	32		%	100		%
Long-lived assets	$	189,211		$	32,312		$	37,227		$	39,870		$	97,213		$	395,833
Year ended December 31, 2017
Revenues	$	1,265,455		$	167,605		$	121,600		$	113,990		$	719,993		$	2,388,643
Percent of total revenues	53		%	7		%	5		%	5		%	30		%	100		%
Long-lived assets	$	231,938		$	33,806		$	34,774		$	38,029		$	63,982		$	402,529
Year ended December 31, 2016
Revenues	$	1,283,925		$	159,985		$	114,605		$	104,214		$	693,943		$	2,356,672
Percent of total revenues	55		%	7		%	5		%	4		%	29		%	100		%
Long-lived assets	$	193,263		$	31,278		$	30,487		$	32,386		$	60,654		$	348,068

Major Customer

Revenues generated from sales to the distributor Anixter International Inc., in both the Enterprise Solutions and Industrial Solutions segments, were $309.0 million (12% of revenues), $292.2 million (12% of revenues), and $286.2 million (12% of revenues) for 2018, 2017, and 2016, respectively. At December 31, 2018, we had $37.0 million in accounts receivable outstanding from Anixter International Inc. This represented approximately 8% of our total accounts receivable outstanding at December 31, 2018.