Operating Segments and Geographic Information

12 Months Ended

Dec. 31, 2019

Operating Segments and Geographic Information

We are organized around two global business platforms: Enterprise Solutions and Industrial Solutions. 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. We sell the products manufactured by our segments 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,
	2019		2018		2017
	(In thousands)
Segment revenues	$	1,081,232	$	1,095,900	$	1,054,847
Affiliate revenues	4,221		6,085		5,091
Segment EBITDA	162,276		190,910		196,554
Depreciation expense	20,765		19,374		19,255
Amortization of intangibles	23,500		22,255		37,245
Amortization of software development intangible assets	175		71		—
Severance, restructuring, and acquisition integration costs	11,050		14,863		28,146
Purchase accounting effects of acquisitions	592		1,690		6,133
Acquisition of property, plant and equipment	42,897		42,938		34,613
Segment assets	527,189		479,324		473,429



Industrial Solutions	Years ended December 31,
	2019		2018		2017
	(In thousands)
Segment revenues	$	1,050,046	$	1,069,802	$	1,032,338
Affiliate revenues	11		81		67
Segment EBITDA	188,947		203,746		208,875
Depreciation expense	19,644		18,935		19,369
Amortization of intangibles	51,109		52,885		52,943
Amortization of software development intangible assets	350		8		—
Severance, restructuring, and acquisition integration costs	15,494		7,762		13,747
Acquisition of property, plant and equipment	34,581		29,215		13,319
Segment assets	464,418		459,647		464,683



Total Segments	Years ended December 31,
	2019		2018		2017
	(In thousands)
Segment revenues	$	2,131,278	$	2,165,702	$	2,087,185
Affiliate revenues	4,232		6,166		5,158
Segment EBITDA	351,223		394,656		405,429
Depreciation expense	40,409		38,309		38,624
Amortization of intangibles	74,609		75,140		90,188
Amortization of software development intangible assets	525		79		—
Severance, restructuring, and acquisition integration costs	26,544		22,625		41,893
Purchase accounting effects of acquisitions	592		1,690		6,133
Acquisition of property, plant and equipment	77,478		72,153		47,932
Segment assets	991,607		938,971		938,112

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



	Years Ended December 31,
	2019			2018			2017
	(In thousands)
Total Segment Revenues	$	2,131,278		$	2,165,702		$	2,087,185
Deferred revenue adjustments	—			—			—
Consolidated Revenues	$	2,131,278		$	2,165,702		$	2,087,185

Total Segment EBITDA	$	351,223		$	394,656		$	405,429
Amortization of intangibles	(74,609		)	(75,140		)	(90,188		)
Depreciation expense	(40,409		)	(38,309		)	(38,624		)
Severance, restructuring, and acquisition integration costs (1)	(26,544		)	(22,625		)	(41,893		)
Purchase accounting effects related to acquisitions (2)	(592		)	(1,690		)	(6,133		)
Amortization of software development intangible assets	(525		)	(79		)	—
Loss on sale of assets (3)	—			(94		)	(1,013		)
Costs related to patent litigation	—			(2,634		)	—
Gain from patent litigation	—			62,141			—
Income from equity method investment	—			—			7,502
Eliminations	(1,337		)	(2,218		)	(1,439		)
Consolidated operating income	207,207			314,008			233,641
Interest expense, net	(55,814		)	(60,839		)	(82,651		)
Non-operating pension benefit (cost)	1,017			(99		)	(561		)
Loss on debt extinguishment	—			(22,990		)	(52,441		)
Consolidated income from continuing operations before taxes	$	152,410		$	230,080		$	97,988


(1)	See Note 14, Severance, Restructuring, and Acquisition Integration Activities, for details.

(2)

In 2019, we collectively recognized $0.6 million of cost of sales related to purchase accounting adjustments of acquired inventory to fair value for both our SPC and Opterna acquisitions. In 2018, we made a $1.7 million adjustment to increase the earn-out liability associated with an acquisition. 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.


(3)	In 2018 and 2017, we recognized a $0.1 million and $1.0 million loss on sale of assets, respectively, for the sale of our MCS business and Hirschmann JV. See Note 2.

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



	Years Ended December 31,
	2019		2018		2017
	(In thousands)
Total segment assets	$	991,607	$	938,971	$	938,112
Cash and cash equivalents	407,480		407,454		541,350
Goodwill	1,243,669		1,206,877		1,208,587
Intangible assets, less accumulated amortization	339,505		359,931		424,932
Deferred income taxes	25,216		26,459		28,517
Corporate assets	24,147		16,786		60,865
Assets of discontinued operations	375,135		822,843		638,250
Total assets	$	3,406,759	$	3,779,321	$	3,840,613
Total segment acquisition of property, plant and equipment	$	77,478	$	72,153	$	47,932
Corporate acquisition of property, plant and equipment	3,110		3,013		1,502
Total acquisition of property, plant and equipment	$	80,588	$	75,166	$	49,434

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, 2019, 2018 and 2017 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, 2019
Revenues	$	1,271,628		$	170,683		$	129,716		$	105,614		$	453,637		$	2,131,278
Percent of total revenues	60		%	8		%	6		%	5		%	21		%	100		%
Long-lived assets	$	152,214		$	16,452		$	40,247		$	48,272		$	101,179		$	358,364
Year ended December 31, 2018
Revenues	$	1,206,401		$	166,669		$	107,582		$	100,691		$	584,359		$	2,165,702
Percent of total revenues	56		%	8		%	5		%	4		%	27		%	100		%
Long-lived assets	$	170,368		$	13,352		$	36,989		$	39,724		$	63,776		$	324,209
Year ended December 31, 2017
Revenues	$	1,254,758		$	167,466		$	120,568		$	112,976		$	431,417		$	2,087,185
Percent of total revenues	60		%	8		%	6		%	5		%	21		%	100		%
Long-lived assets	$	210,292		$	13,200		$	34,647		$	37,875		$	49,834		$	345,848

Major Customer

Revenues generated from sales to the distributor Anixter International Inc., in both the Enterprise Solutions and Industrial Solutions segments, were $285.0 million (13% of revenues), $309.0 million (14% of revenues), and $292.2 million (14% of revenues) for 2019, 2018, and 2017, respectively. Revenues generated from sales to both Anixter and WESCO combined were approximately $328.2 million (15% of revenues), $361.7 million (17% of revenues), and $342.8 million (16% of revenues) for 2019, 2018, and 2017, respectively. At December 31, 2019, we had $10.2 million in accounts receivable outstanding from Anixter International Inc. This represented approximately 3% of our total accounts receivable outstanding at December 31, 2019.