NOTE 20—SEGMENTS:

In November 2017, Teva announced a new organizational structure and leadership changes to enable strategic alignment across its portfolios, regions and functions. Teva now operates its business through three segments: North America, Europe and International Markets.

Since 2013 and until December 31, 2017, Teva had two reportable segments: generic and specialty medicines. The generic medicines segment included Teva’s OTC and API businesses. Teva’s other activities included distribution activities, sales of medical devices and certain contract manufacturing operation (“CMO”) services.

Teva now operates its business and reports its financial results in three segments:

(a)

North America segment, which includes the United States and Canada.

(b)

Europe segment, which includes the European Union and certain other European countries.

(c)

International Markets segment, which includes all countries other than those in the North America and Europe segments.

The purpose of the new structure is to enable stronger alignment and integration between operations, commercial regions, R&D and Teva’s global marketing and portfolio function, in order to optimize its product lifecycle across all therapeutic areas. The Company began reporting its financial results under this structure in the first quarter of 2018.

In addition to these three segments, Teva has other sources of revenues, primarily the sale of APIs to third parties, certain contract manufacturing services and an out-licensing platform offering a portfolio of products to other pharmaceutical companies through its affiliate Medis.

All the above changes were reflected through retroactive revision of prior period segment information.

Teva’s Chief Executive Officer (“CEO”), who is the chief operating decision maker (“CODM”), reviews financial information prepared on a consolidated basis, accompanied by disaggregated information about revenues and contributed profit by the three identified reportable segments, namely North America, Europe and International Markets, to make decisions about resources to be allocated to the segments and assess their performance.

Segment profit is comprised of gross profit for the segment less R&D expenses, S&M expenses, G&A expenses and other income related to the segment. Segment profit does not include amortization and certain other items.

Teva manages its assets on a company basis, not by segments, as many of its assets are shared or commingled. Teva’s CODM does not regularly review asset information by reportable segment and, therefore, Teva does not report asset information by reportable segment.

Teva’s CEO may review its strategy and organizational structure. Any changes in strategy may lead to a reevaluation of the Company’s segments and goodwill allocation to reporting units, as well as fair value attributable to its reporting units. See note 7.

a.	Segment information:


	North America			Europe		International Markets
	Year ended December 31,
	2018
	(U.S. $ in millions)
Revenues	$	9,297		$	5,186	$	3,005
Gross profit		4,979			2,884		1,254
R&D expenses		713			283		96
S&M expenses		1,154			1,003		518
G&A expenses		484			325		153
Other income (loss)		(209	)		—		(11	)

Segment profit	$	2,837		$	1,273	$	498


	North America			Europe			International Markets
	Year ended December 31,
	2017
	(U.S. $ in millions)
Revenues	$	12,141		$	5,466		$	3,395
Gross profit		7,322			2,887			1,433
R&D expenses		969			390			154
S&M expenses		1,288			1,130			672
G&A expenses		533			354			189
Other income (loss)		(92	)		(16	)		(8	)

Segment profit	$	4,624		$	1,029		$	426


	North America			Europe			International Markets
	Year ended December 31,
	2016
	(U.S. $ in millions)
Revenues	$	11,778		$	4,969		$	4,015
Gross profit		8,404			2,685			1,811
R&D expenses		1,040			383			205
S&M expenses		1,362			1,267			754
G&A expenses		496			377			226
Other income (loss)		(30	)		(9	)		(10	)

Segment profit	$	5,536		$	667		$	636


	Year ended December 31,
	2018			2017			2016
	(U.S.$ in millions)
North America profit	$	2,837		$	4,624		$	5,536
Europe profit		1,273			1,029			667
International Markets profit		498			426			636

Total segment profit		4,608			6,079			6,839
Profit (loss) of other activities		115			(6	)		8

		4,723			6,073			6,847
Amounts not allocated to segments:
Amortization		1,166			1,444			993
Other asset impairments, restructuring and other items		987			1,836			830
Goodwill impairment		3,027			17,100			900
Intangible asset impairments		1,991			3,238			589
Gain on divestitures, net of divestitures related costs		(66	)		(1,083	)		(720	)
Inventory step-up		—			67			383
Other R&D expenses		83			221			426
Costs related to regulatory actions taken in facilities		14			47			153
Legal settlements and loss contingencies		(1,208	)		500			899
Other unallocated amounts		366			187			240

Consolidated operating income (loss)		(1,637	)		(17,484	)		2,154

Financial expenses, net		959			895			1,330

Consolidated income (loss) before income taxes	$	(2,596	)	$	(18,379	)	$	824

b.	Segment revenues by major products and activities:

The following tables present revenues by major products and activities for each segment for the year ended December 31, 2018, 2017 and 2016:

North America segment:


	Year ended December 31,
	2018		2017		2016
	(U.S.$ in millions)
Generic products	$	4,056	$	5,203	$	4,654
COPAXONE		1,759		3,116		3,543
BENDEKA / TREANDA		642		656		661
ProAir		397		501		565
QVAR		182		313		409
AUSTEDO		204		24		—
Anda		1,347		1,153		301

The table above does not include revenues from other products and activities amounting to $710 million, $1,175 million and $1,645 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Europe segment:


	Year ended December 31,
	2018		2017		2016
	(U.S.$ in millions)
Generic products	$	3,593	$	3,471	$	3,155
COPAXONE		535		595		585
Respiratory products		402		368		239

The table above does not include revenues from other products and activities amounting to $656 million, $1,032 million and $990 million for the years 2018, 2017 and 2016, respectively.

International Markets segment:


	Year ended December 31,
	2018		2017		2016
	(U.S.$ in millions)
Generic products	$	2,022	$	2,370	$	3,129
COPAXONE		72		91		95
Distribution		602		550		458

The table above does not include revenues from other products and activities amounting to $309 million, $384 million and $333 million for the years 2018, 2017 and 2016, respectively.

Teva revenues from external customers attributed to Israel were less than 5% of the consolidated revenues in the years ended December 31, 2018, 2017 and 2016, respectively.

c.	Supplemental data—major customers:

The following table represents the percentage of consolidated third party net sales to Teva’s major customers during the years ended December 31, 2018, 2017 and 2016.


	Percentage of Third Party Net Sales
	2018			2017			2016
McKesson Corporation		12	%		16	%		15	%
AmerisourceBergen Corporation		14	%		15	%		19	%

Most of Teva’s revenues from these customers were in the United States.

d.	Property, plant and equipment—by geographical location were as follows:


	December 31,
	2018		2017
	(U.S. $ in millions)
Israel	$	1,987	$	2,180
United States		950		1,109
Croatia		538		561
Germany		518		423
Czech republic		352		347
Hungary		343		368
Japan		188		376
Other		1,992		2,309

Total property, plant and equipment	$	6,868	$	7,673