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Geographic and Segment Information | 9 Months Ended
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Sep. 30, 2017
Segment Reporting [Abstract] |
Geographic and Segment Information | Geographic and Segment Information Segment Information We identify operating segments based on the way we manage, evaluate and internally report our business activities for purposes of allocating resources and assessing performance. We have three reportable segments: Cardiac Surgery, Neuromodulation, and Cardiac Rhythm Management. The Cardiac Surgery segment generates its revenue from the development, production and sale of cardiovascular surgery products. Cardiac Surgery products include oxygenators, heart-lung machines, autotransfusion systems, mechanical heart valves and tissue heart valves. The Neuromodulation segment generates its revenue from the design, development and marketing of neuromodulation therapy for the treatment of drug-resistant epilepsy and treatment resistant depression. Neuromodulation products include the VNS Therapy System, which consists of an implantable pulse generator, a lead that connects the generator to the vagus nerve, surgical equipment to assist with the implant procedure, equipment to enable the treating physician to set the pulse generator stimulation parameters for the patient, instruction manuals and magnets to suspend or induce stimulation manually. The Cardiac Rhythm Management segment generates its revenue from the development, manufacturing and marketing of products for the diagnosis, treatment, and management of heart rhythm disorders and heart failure. Cardiac Rhythm Management products include high-voltage defibrillators, cardiac resynchronization therapy devices and low-voltage pacemakers. “Other” includes Corporate shared services expenses for finance, legal, human resources and information technology and Corporate business development (“New Ventures”). New Ventures, which includes our recent Caisson acquisition, is focused on new growth platforms and identification of other opportunities for expansion. Net sales of our reportable segments include end-customer revenues from the sale of products they each develop and manufacture or distribute. We define segment income as operating income before merger and integration, restructuring, and amortization of intangibles. Net sales and income from operations by segment (in thousands):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Net Sales: |  | 2017 |  | 2016 |  | 2017 |  | 2016
Cardiac Surgery |  | $ | 159,822 |  |  | $ | 148,518 |  |  | $ | 457,612 |  |  | $ | 453,012 |
Neuromodulation |  | 91,016 |  |  | 89,504 |  |  | 275,190 |  |  | 260,901 |
Cardiac Rhythm Management |  | 58,411 |  |  | 56,768 |  |  | 182,235 |  |  | 188,057 |
Other |  | 415 |  |  | 478 |  |  | 1,119 |  |  | 1,314 |
|  | $ | 309,664 |  |  | $ | 295,268 |  |  | $ | 916,156 |  |  | $ | 903,284 |
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Income from Operations: |  | 2017 |  | 2016 |  | 2017 |  | 2016
Cardiac Surgery |  | $ | 23,807 |  |  | $ | 17,791 |  |  | $ | 63,490 |  |  | $ | 29,197 |
Neuromodulation |  | 45,932 |  |  | 47,049 |  |  | 139,357 |  |  | 134,871 |
Cardiac Rhythm Management |  | 5,427 |  |  | (4,598 | ) |  | 13,536 |  |  | (14,432 | )
Other |  | (27,947 | ) |  | (13,525 | ) |  | (79,378 | ) |  | (49,090 | )
Total Reportable Segments’ Income from Operations |  | 47,219 |  |  | 46,717 |  |  | 137,005 |  |  | 100,546 |
Merger and integration expenses |  | 2,013 |  |  | 7,576 |  |  | 7,743 |  |  | 20,537 |
Restructuring expenses |  | 792 |  |  | 4,381 |  |  | 12,060 |  |  | 37,219 |
Amortization of intangibles |  | 12,350 |  |  | 11,775 |  |  | 35,445 |  |  | 33,959 |
Income from operations |  | $ | 32,064 |  |  | $ | 22,985 |  |  | $ | 81,757 |  |  | $ | 8,831 |
The following tables present our assets and capital expenditures by segment (in thousands):
Assets: |  | September 30, 2017 |  | December 31, 2016
Cardiac Surgery |  | $ | 1,414,260 |  |  | $ | 1,277,799 |
Neuromodulation |  | 564,785 |  |  | 611,085 |
Cardiac Rhythm Management |  | 351,390 |  |  | 341,998 |
Other |  | 272,695 |  |  | 111,749 |
|  | $ | 2,603,130 |  |  | $ | 2,342,631 |
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Capital expenditures: |  | 2017 |  | 2016 |  | 2017 |  | 2016
Cardiac Surgery |  | $ | 5,541 |  |  | $ | 6,465 |  |  | $ | 13,292 |  |  | $ | 16,774 |
Neuromodulation |  | 370 |  |  | 1,781 |  |  | 2,348 |  |  | 5,602 |
Cardiac Rhythm Management |  | 1,537 |  |  | 1,591 |  |  | 4,343 |  |  | 2,786 |
Other |  | 1,633 |  |  | 2,435 |  |  | 4,021 |  |  | 3,766 |
|  | $ | 9,081 |  |  | $ | 12,272 |  |  | $ | 24,004 |  |  | $ | 28,928 |
The changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, 2017 were as follows (in thousands):
|  | Neuromodulation |  | Cardiac Surgery |  | Cardiac Rhythm Management |  | Other |  | Total
December 31, 2016 |  | $ | 315,943 |  |  | $ | 375,769 |  |  | $ | — |  |  | $ | — |  |  | $ | 691,712 |
Goodwill as a result of acquisitions (1) |  | — |  |  | — |  |  | — |  |  | 42,418 |  |  | 42,418 |
Foreign currency adjustments |  | — |  |  | 46,940 |  |  | — |  |  | — |  |  | 46,940 |
September 30, 2017 |  | $ | 315,943 |  |  | $ | 422,709 |  |  | $ | — |  |  | $ | 42,418 |  |  | $ | 781,070 |
(1) | Goodwill recognized as a result of the Caisson acquisition. Refer to “Note 2. Acquisitions.”
Geographic Information We operate under three geographic regions: United States, Europe, and Rest of world. Net sales to external customers by geography are determined based on the country the products are shipped to and are as follows (in thousands):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Net Sales |  | 2017 |  | 2016 |  | 2017 |  | 2016
United States |  | $ | 122,208 |  |  | $ | 123,810 |  |  | $ | 366,115 |  |  | $ | 362,358 |
Europe (1) (2) |  | 92,953 |  |  | 91,245 |  |  | 294,338 |  |  | 301,727 |
Rest of world |  | 94,503 |  |  | 80,213 |  |  | 255,703 |  |  | 239,199 |
Total (3) |  | $ | 309,664 |  |  | $ | 295,268 |  |  | $ | 916,156 |  |  | $ | 903,284 |
(1) | Net sales to external customers in the UK include $9.6 million and $26.8 million for the three and nine months ended September 30, 2017, respectively and $8.8 million and $27.9 million for the three and nine months ended September 30, 2016, respectively.
(2) | Includes those countries in Europe where we have a direct sales presence. Countries where sales are made through distributors are included in ‘Rest of world’.
(3) | No single customer represented over 10% of our consolidated net sales. Except for the U.S. and France, no country’s net sales exceeded 10% of our consolidated net sales. French sales were $29.6 million and $96.6 million for the three and nine months ended September 30, 2017, respectively, and $28.9 million and $95.9 million for the three and nine months ended September 30, 2016, respectively.
Property, plant and equipment, net by geography are as follows (in thousands):
PP&E |  | September 30, 2017 |  | December 31, 2016
United States |  | $ | 62,630 |  |  | $ | 61,279 |
Europe |  | 137,682 |  |  | 130,777 |
Rest of world |  | 13,457 |  |  | 31,786 |
Total |  | $ | 213,769 |  |  | $ | 223,842 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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