Note 5: Operating Segments and Geographic Information

We are organized around five global business platforms: Broadcast, Enterprise Connectivity, Industrial Connectivity, Industrial IT, and Network Security. The Network Security platform was formed with our acquisition of Tripwire in January 2015. 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.

Effective January 1, 2015, 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. The prior period presentation has been updated accordingly.

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 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,
	2015		2014		2013
	(In thousands)
Segment revenues	$	900,637	$	928,586	$	679,197
Affiliate revenues		1,371		1,381		933
Segment EBITDA		142,428		140,367		109,541
Depreciation expense		17,103		16,553		18,422
Amortization of intangibles		50,989		50,739		46,005
Severance, restructuring, and acquisition integration costs		39,078		48,557		12,128
Purchase accounting effects of acquisitions		132		8,574		6,550
Deferred gross profit adjustments		2,446		10,777		11,337
Acquisition of property, plant and equipment		27,900		17,912		10,526
Segment assets		394,197		430,991		294,454


Enterprise Connectivity Solutions	Years ended December 31,
	2015		2014		2013
	(In thousands)
Segment revenues	$	445,243	$	455,795	$	493,129
Affiliate revenues		5,322		8,467		9,823
Segment EBITDA		71,508		66,035		62,165
Depreciation expense		11,783		13,744		12,469
Amortization of intangibles		543		650		543
Severance, restructuring, and acquisition integration costs		723		3,318		400
Purchase accounting effects of acquisitions		52		608		—
Acquisition of property, plant and equipment		9,788		12,574		11,749
Segment assets		190,298		206,377		223,073

Industrial Connectivity Solutions	Years ended December 31,
	2015		2014		2013
	(In thousands)
Segment revenues	$	603,350	$	682,374	$	680,643
Affiliate revenues		1,613		2,927		1,901
Segment EBITDA		99,941		106,097		104,655
Depreciation expense		11,235		11,145		10,308
Amortization of intangibles		3,154		1,236		1,085
Severance, restructuring, and acquisition integration costs		6,228		11,953		700
Purchase accounting effects of acquisitions		334		1,328		—
Acquisition of property, plant and equipment		8,836		10,053		14,496
Segment assets		231,265		255,997		259,400

Industrial IT Solutions	Years ended December 31,
	2015		2014		2013
	(In thousands)
Segment revenues	$	244,303	$	253,464	$	231,521
Affiliate revenues		70		54		208
Segment EBITDA		43,253		47,927		45,719
Depreciation expense		2,293		2,294		2,449
Amortization of intangibles		5,859		5,801		3,170
Severance, restructuring, and acquisition integration costs		169		6,999		1,660
Purchase accounting effects of acquisitions		32		2,030		—
Acquisition of property, plant and equipment		2,039		1,903		2,020
Segment assets		55,285		67,417		56,658


Network Security Solutions	Years ended December 31,
	2015		2014		2013
	(In thousands)
Segment revenues	$	167,050	$	—	$	—
Affiliate revenues		8		—		—
Segment EBITDA		44,620		—		—
Depreciation expense		4,137		—		—
Amortization of intangibles		43,246		—		—
Severance, restructuring, and acquisition integration costs		972		—		—
Purchase accounting effects of acquisitions		9,197		—		—
Deferred gross profit adjustments		50,430		—		—
Acquisition of property, plant and equipment		5,009		—		—
Segment assets		63,235		—		—

Total Segments	Years ended December 31,
	2015		2014		2013
	(In thousands)
Segment revenues	$	2,360,583	$	2,320,219	$	2,084,490
Affiliate revenues		8,384		12,829		12,865
Segment EBITDA		401,750		360,426		322,080
Depreciation expense		46,551		43,736		43,648
Amortization of intangibles		103,791		58,426		50,803
Severance, restructuring, and acquisition integration costs		47,170		70,827		14,888
Purchase accounting effects of acquisitions		9,747		12,540		6,550
Deferred gross profit adjustments		52,876		10,777		11,337
Acquisition of property, plant and equipment		53,572		42,442		38,791
Segment assets		934,280		960,782		833,585

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,
	2015			2014			2013
	(In thousands)
Total Segment Revenues	$	2,360,583		$	2,320,219		$	2,084,490
Deferred revenue adjustments (1)		(51,361	)		(11,954	)		(15,297	)

Consolidated Revenues	$	2,309,222		$	2,308,265		$	2,069,193

Total Segment EBITDA	$	401,750		$	360,426		$	322,080
Amortization of intangibles		(103,791	)		(58,426	)		(50,803	)
Deferred gross profit adjustments (1)		(52,876	)		(10,777	)		(11,337	)
Severance, restructuring, and acquisition integration costs (2)		(47,170	)		(70,827	)		(14,888	)
Depreciation expense		(46,551	)		(43,736	)		(43,648	)
Purchase accounting effects related to acquisitions (3)		(9,747	)		(12,540	)		(6,550	)
Income from equity method investment		1,770			3,955			8,922
Gain on sale of assets		—			—			1,278
Eliminations		(2,832	)		(4,956	)		(3,792	)

Consolidated operating income		140,553			163,119			201,262
Interest expense, net		(100,613	)		(81,573	)		(72,601	)
Loss on debt extinguishment		—			—			(1,612	)

Consolidated income from continuing operations before taxes	$	39,940		$	81,546		$	127,049

(1)	For the year ended December 31, 2015, both our consolidated revenues and gross profit were negatively impacted by the reduction of the acquired deferred revenue balance to fair value associated with our acquisition of Tripwire. See Note 3, Acquisitions.

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

(3)

For the year ended December 31, 2015, we recognized $9.2 million of compensation expense related to the accelerated vesting of acquiree stock based compensation awards associated with our acquisition of Tripwire. In addition, we recognized $ 0.3 million of cost of sales related to the adjustment of acquired inventory to fair value related to our acquisition of Coast. For the year ended December 31, 2014, we recognized $8.3 million of cost of sales related to the adjustment of acquired inventory to fair value for our acquisitions of Grass Valley and ProSoft.

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


	Years Ended December 31,
	2015		2014		2013
	(In thousands)
Total segment assets	$	934,280	$	960,782	$	833,585
Cash and cash equivalents		216,751		741,162		613,304
Goodwill		1,385,115		943,374		773,048
Intangible assets, less accumulated amortization		655,871		461,292		376,976
Deferred income taxes		34,295		60,652		54,801
Income tax receivable		3,787		4,953		12,169
Corporate assets		85,742		88,455		87,870

Total assets	$	3,315,841	$	3,260,670	$	2,751,753

Total segment acquisition of property, plant and equipment	$	53,572	$	42,442	$	38,791
Corporate acquisition of property, plant and equipment		1,397		3,017		1,418

Total acquisition of property, plant and equipment	$	54,969	$	45,459	$	40,209

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, 2015, 2014 and 2013 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, 2015
Revenues	$	1,270,467	$	170,522	$	114,863	$	103,106	$	650,264	$	2,309,222
Percent of total revenues		55%		7%		5%		4%		29%		100%
Long-lived assets	$	207,265	$	27,315	$	62,794	$	35,588	$	64,434	$	397,396
Year ended December 31, 2014
Revenues	$	1,134,721	$	194,149	$	132,330	$	120,297	$	726,768	$	2,308,265
Percent of total revenues		49%		8%		6%		5%		32%		100%
Long-lived assets	$	191,728	$	29,773	$	70,574	$	40,557	$	70,727	$	403,359
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

Major Customer

Revenues generated from sales to the distributor Anixter International Inc., primarily in the Industrial Connectivity and Enterprise Connectivity segments, were $281.9 million (12% of revenues), $290.5 million (13% of revenues), and $289.9 million (14% of revenues) for 2015, 2014, and 2013, respectively. At December 31, 2015, we had $31.1 million in accounts receivable outstanding from Anixter International Inc. This represented approximately 8% of our total accounts receivable outstanding at December 31, 2015.