Segment Information And Geographic Data

9 Months Ended

Sep. 30, 2011

Segment Information And Geographic Data

Segment Information And Geographic Data

9. Segment Information and Geographic Data

ASC 280, Segment Reporting, requires operating segment information to be presented based on the internal reporting used by the chief operating decision making group to allocate resources and evaluate operating segment performance. Our enterprise management processes use financial information that is closely aligned with our three product categories at the gross profit level. Relevant discrete financial information is prepared at the gross profit level for each of our three operating segments that are used by the chief operating decision making group to allocate resources and assess the performance of each operating segment.

We classify our revenue, gross profit, assets, and liabilities in accordance with our operating segments as follows:

Fiery, which includes products, services, and technology that transform digital copiers and printers into high performance networked printing devices consisting of stand-alone and embedded controllers, add-on solutions, and design-licensed solutions primarily for the office and commercial printing markets. This operating segment includes our Fiery series (external print servers and embedded servers), Splash and MicroPress, color and black & white server products, software options for Fiery products, including proofing and scanning solutions, self-service and payment solutions, mobile printing, and parts.

Inkjet, which consists of (i) our VUTEk super-wide format digital inkjet printers and ink used by billboard graphics printers, commercial photo labs, large sign shops, graphic screen printers, and digital graphics providers to print billboards, building wraps, banners, art exhibits, point of purchase signage, customized interior design, and other large displays, (ii) our Jetrion industrial inkjet digital printing systems, custom high-performance integration solutions, and specialty inks for the converting, packaging, and direct mail industries, and (iii) our Rastek hybrid and flatbed UV wide format graphics printers for the mid-range printer market.

APPS, which consists of software technology focused on print production workflow, business process automation, e-commerce, and job tracking tools. The APPS operating segment includes our business process automation software, including Monarch (formerly Hagen), Pace, PSI, Logic, PrintSmith, and PrintFlow; Digital StoreFront, our web-based order entry and order management software; Radius, our business process automation packaging software; PrintStream, our business process automation software for mailing and fulfillment services in the printing industry; and Prism, our business process automation software for shop floor management and work in progress tracking in the printing and packaging industry.

We sell PrintSmith to small print-for-pay and small commercial print shops; Pace to medium and large commercial print shops, display graphics providers, in-plant printing operations, and government printing operations; Monarch to large commercial, publication, direct mail, and digital print shops; Radius to the packaging industry; and PrintStream to Pace and Monarch customers that provide fulfillment services to their end customers.

Our chief operating decision making group evaluates the performance of our operating segments based on revenue and gross profit. Gross profit for each operating segment is defined as revenue from sales to third parties less related cost of revenue attributable to the operating segment. Cost of revenue for each operating segment excludes certain expenses managed outside the operating segments consisting primarily of stock-based compensation expense. Operating income is not reported by operating segment because operating expenses include significant shared expenses and other costs that are managed outside of the operating segments. Such operating expenses include various corporate expenses such as stock-based compensation expense, corporate sales and marketing expenses, research and development, income taxes, various non-recurring charges, and other separately managed general and administrative expenses.

Summary gross profit information, excluding stock-based compensation expense, for the three and nine months ended September 30, 2011 and 2010 is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Fiery
Revenue	$	66,353		$	60,966		$	203,303		$	172,892
Gross profit		44,759			41,621			137,918			116,955
Gross profit percentages		67.5	%		68.3	%		67.8	%		67.6	%
Inkjet
Revenue	$	59,411		$	52,232		$	167,689		$	146,261
Gross profit		23,509			17,997			63,430			46,766
Gross profit percentages		39.6	%		34.5	%		37.8	%		32.0	%
APPS
Revenue	$	21,520		$	15,851		$	57,506		$	39,843
Gross profit		15,167			10,654			40,052			26,815
Gross profit percentages		70.5	%		67.2	%		69.6	%		67.3	%

A reconciliation of our segment gross profit to the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010 is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Segment gross profit	$	83,435		$	70,272		$	241,400		$	190,536
Stock-based compensation expense		(657	)		(279	)		(1,334	)		(809	)
Gross profit	$	82,778		$	69,993		$	240,066		$	189,727

Tangible and intangible assets, net of liabilities, are summarized by operating segment as of September 30, 2011 and December 31, 2010 as follows (in thousands):

September 30, 2011	Fiery		Inkjet		APPS
Goodwill	$	64,634	$	36,508	$	54,861
Identified intangible assets, net		4,312		29,280		19,374
Tangible assets, net of liabilities		35,621		52,785		19,771
Net tangible and intangible assets	$	104,567	$	118,573	$	94,006
December 31, 2010
Goodwill	$	60,005	$	36,508	$	43,005
Identified intangible assets, net		682		34,198		14,259
Tangible assets, net of liabilities		40,046		72,766		(3,861	)
Net tangible and intangible assets	$	100,733	$	143,472	$	53,403

Information about Geographic Areas

Our revenue originates in the U.S., the Netherlands, Germany, Japan, and the U.K. We report revenue by geographic area based on ship-to destinations. Shipments to some of our original equipment manufacturer ("OEM") distributors are made to centralized purchasing and manufacturing locations, which in turn sell through to other locations. As a result of these factors, we believe that sales to certain geographic locations might be higher or lower, as the ultimate destinations are difficult to ascertain.

Our revenue by ship-to destination for the three and nine months ended September 30, 2011 and 2010 was as follows (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2011		2010		2011		2010
Americas	$	84,935	$	75,676	$	241,980	$	208,016
Europe, Middle East, and Africa ("EMEA")		46,589		37,550		133,770		105,539
Asia Pacific ("APAC")		15,760		15,823		52,748		45,441
Japan		7,267		10,988		28,587		32,936
Rest of world ("ROW")		8,493		4,835		24,161		12,505
Total revenue	$	147,284	$	129,049	$	428,498	$	358,996