Note 5: Operating Segments and Geographic Information

In 2013, we re-organized the Company around four global business platforms: Broadcast, Enterprise Connectivity, Industrial Connectivity, and Industrial IT. Previously, we were organized around geographic regions. The re-organization was executed as a result of our transformation into a global provider of comprehensive signal transmission solutions. We believe the new organization will allow us to better capitalize on market opportunities and meet customer demands. We have determined that each of the global business platforms represents a reportable segment. We have revised the prior period segment information to conform to the change in the composition of our reportable segments. The All Other segment represents the financial results of our cable operations that primarily conducted business in the consumer electronics end market, which we sold in December 2012.

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.

We evaluate segment performance based on operating income, working capital, and organic growth. Operating income of the segments includes all the ongoing costs of operations, but excludes interest and income taxes. Transactions between the segments are conducted on an arms-length basis. We allocate corporate expenses to the segments for purposes of measuring segment operating income. Corporate expenses are allocated on the basis of each segment’s relative operating income prior to the allocation, adjusted for certain items including asset impairment, severance and other restructuring costs, purchase accounting effects related to acquisitions, accelerated depreciation, amortization of intangible assets, and other costs.

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 equity method investment in Xuzhou Hirschmann Electronics Co. Ltd. (the Hirschmann JV) are analyzed separately from the results of our operating segments, and they are not included in the corporate expense allocation.

Operating Segment Information


Broadcast Solutions	Years Ended December 31,
	2013			2012			2011
	(In thousands)
External customer revenues	$	663,900		$	356,320		$	314,733
Affiliate revenues		933			691			616

Total revenues		664,833			357,011			315,349
Depreciation and amortization		(64,420	)		(23,184	)		(8,318	)
Asset impairment and loss on sale of assets		—			—			(366	)
Operating income (loss)		15,099			(11,657	)		21,523
Total assets		294,454			272,520			101,351
Acquisition of property, plant and equipment		10,526			8,844			4,735

Enterprise Connectivity Solutions	Years Ended December 31,
	2013			2012			2011
	(In thousands)
External customer revenues	$	493,129		$	496,857		$	546,800
Affiliate revenues		9,823			6,467			5,660

Total revenues		502,952			503,324			552,460
Depreciation and amortization		(12,988	)		(16,057	)		(15,840	)
Asset impairment and loss on sale of assets		—			(1,468	)		(607	)
Operating income		48,753			40,056			41,750
Total assets		223,073			234,882			240,589
Acquisition of property, plant and equipment		11,749			13,013			11,181

Industrial Connectivity Solutions	Years Ended December 31,
	2013			2012			2011
	(In thousands)
External customer revenues	$	680,643		$	670,112		$	665,035
Affiliate revenues		1,901			1,129			1,322

Total revenues		682,544			671,241			666,357
Depreciation and amortization		(11,408	)		(10,970	)		(13,890	)
Asset impairment and loss on sale of assets		—			(2,435	)		(1,067	)
Operating income		92,562			72,366			69,200
Total assets		259,400			263,293			301,535
Acquisition of property, plant and equipment		14,496			13,077			8,979

Industrial IT Solutions	Years Ended December 31,
	2013			2012			2011
	(In thousands)
External customer revenues	$	231,521		$	219,679		$	231,374
Affiliate revenues		208			286			47

Total revenues		231,729			219,965			231,421
Depreciation and amortization		(5,635	)		(4,848	)		(4,543	)
Asset impairment and loss on sale of assets		—			—			(509	)
Operating income		38,440			32,807			31,992
Total assets		56,658			54,428			56,432
Acquisition of property, plant and equipment		2,020			4,597			2,674


All Other	Years Ended December 31,
	2013			2012			2011
	(In thousands)
External customer revenues	$	—		$	97,771		$	124,245
Affiliate revenues		—			—			—

Total revenues		—			97,771			124,245
Depreciation and amortization		—			(2,828	)		(5,521	)
Asset impairment and loss on sale of assets		—			(29,773	)		—
Operating income (loss)		1,278			(32,640	)		(6,168	)
Total assets		—			—			76,604
Acquisition of property, plant and equipment		—			348			881

Total Segments	Years Ended December 31,
	2013			2012			2011
	(In thousands)
External customer revenues	$	2,069,193		$	1,840,739		$	1,882,187
Affiliate revenues		12,865			8,573			7,645

Total revenues		2,082,058			1,849,312			1,889,832
Depreciation and amortization		(94,451	)		(57,887	)		(48,113	)
Asset impairment and loss on sale of assets		—			(33,676	)		(2,549	)
Operating income		196,132			100,932			158,297
Total assets		833,585			825,123			776,511
Acquisition of property, plant and equipment		38,791			39,879			28,450

Total segment operating income differs from net income reported in the Consolidated Financial Statements as follows:


	Years Ended December 31,
	2013			2012			2011
	(In thousands)
Total segment operating income	$	196,132		$	100,932		$	158,297
Income from equity method investment		8,922			9,704			13,169
Eliminations		(3,792	)		(2,139	)		(6,260	)

Total operating income		201,262			108,497			165,206
Interest expense		(73,095	)		(52,038	)		(48,118	)
Interest income		494			1,033			1,011
Loss on debt extinguishment		(1,612	)		(52,450	)		—
Income tax benefit (expense)		(22,315	)		38,194			(16,791	)

Income from continuing operations		104,734			43,236			101,308
Income (loss) from discontinued operations, net of tax		(1,421	)		16,774			13,037
Gain from disposal of discontinued operations, net of tax		—			134,480			—

Net income	$	103,313		$	194,490		$	114,345

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


	Years Ended December 31,
	2013			2012			2011
	(In thousands)
Total segment assets	$	833,585		$	825,123		$	776,511
Cash and cash equivalents		613,304			395,095			382,552
Goodwill		773,048			778,708			336,591
Intangible assets, less accumulated depreciation		376,976			428,273			139,515
Deferred income taxes		54,801			66,855			30,697
Income tax receivable		12,169			8,432			—
Corporate assets		87,870			82,097			61,770
Discontinued operations assets		—			—			60,484

Total assets	$	2,751,753		$	2,584,583		$	1,788,120


Total segment acquisition of property, plant and equipment	$	38,791		$	39,879		$	28,450
Corporate acquisition of property, plant and equipment		1,418			336			10,483
Discontinued operations acquisition of property, plant and equipment		—			795			1,120

Total acquisition of property, plant and equipment	$	40,209		$	41,010		$	40,053


Total segment depreciation and amortization	$	(94,451	)	$	(57,887	)	$	(48,113	)
Discontinued operations depreciation and amortization		—			(1,468	)		(2,061	)

Total depreciation and amortization	$	(94,451	)	$	(59,355	)	$	(50,174	)

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, 2013, 2012 and 2011 for the following countries: the U.S., Canada, Germany and China. 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, 2013
Revenues	$	1,032,190		$	195,387		$	126,461		$	108,745		$	606,410		$	2,069,193
Percent of total revenues		50	%		9	%		6	%		5	%		30	%		100	%
Long-lived assets	$	170,813		$	27,458		$	76,949		$	45,702		$	59,275		$	380,197

Year ended December 31, 2012
Revenues	$	825,437		$	196,761		$	193,082		$	105,377		$	520,082		$	1,840,739
Percent of total revenues		45	%		11	%		10	%		6	%		28	%		100	%
Long-lived assets	$	164,619		$	31,610		$	72,556		$	42,411		$	59,854		$	371,050

Year ended December 31, 2011
Revenues	$	832,681		$	192,184		$	246,866		$	117,088		$	493,368		$	1,882,187
Percent of total revenues		44	%		10	%		13	%		6	%		27	%		100	%
Long-lived assets	$	137,597		$	9,196		$	98,211		$	46,729		$	52,212		$	343,945

Major Customer

Revenues generated from sales to the distributor Anixter International Inc., primarily in the Industrial Connectivity and Enterprise segments, were $289.9 million (14% of revenues), $300.4 million (16% of revenues), and $288.3 million (15% of revenues) for 2013, 2012, and 2011, respectively. At December 31, 2013, we had $48.3 million in accounts receivable outstanding from Anixter International Inc. This represented approximately 16% of our total accounts receivable outstanding at December 31, 2013.