Segment Reporting and Geographic Information

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Segment Reporting and Geographic Information

Segment Reporting and Geographic Information

MRV operates its business in two segments: Network Equipment and Network Integration. Network Equipment designs, manufactures, distributes and services optical networking solutions and Internet infrastructure products, and Network Integration distributes network solutions and Internet infrastructure products and provides value-added integration and support services for customers' networks.

The accounting policies of the segments are the same as those described in the summary of significant accounting polices disclosed in MRV's2013Form 10-K. Management evaluates segment performance based on revenues, gross profit and operating income (loss) of each segment. As such, there are no separately identifiable Statements of Operations data below operating income (loss).

The following table summarizes revenues by segment, including intersegment revenues (in thousands):

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2014			2013			2014			2013
Network Equipment	$	21,979		$	22,806		$	66,131		$	64,852
Network Integration	21,237			15,585			62,644			50,701
Before intersegment adjustments	43,216			38,391			128,775			115,553
Intersegment adjustments	(46		)	(6		)	(163		)	(88		)
Total	$	43,170		$	38,385		$	128,612		$	115,465

Network Equipment revenue primarily consists of optical communication systems that include Metro Ethernet equipment, optical transport equipment, lab automation equipment, out-of-band network equipment, and the related service revenue and fiber optic components sold as part of system solutions. Network Integration revenue primarily consists of value-added integration and support service revenue, related third-party product sales (including third-party product sales through distribution) and fiber optic components sold as part of system solutions. All Network Integration's sales are within Italy.

One customer accounted for $11.0 million and $10.4 million of revenue in Network Integration revenue, or 25% and 27% of total revenue, for the three months endedSeptember 30, 2014, and 2013, respectively. Another customer accounted for $6.1 million and $4.0 million of Network Integration revenue, or 14% and 10% of total revenue, for the three months endedSeptember 30, 2014, and 2013, respectively.

One customer accounted for $33.8 million and $32.5 million of revenue in Network Integration revenue, or 26% and 28% of total revenue, for the nine months endedSeptember 30, 2014, and 2013, respectively. Another customer accounted for $20.2 million and $12.9 million of Network Integration revenue, or 16% and 11% of total revenue, for the nine months endedSeptember 30, 2014, and 2013, respectively.

One customer in Network Integration accounted for 12% and 22% of total net accounts receivable as of September 30, 2014, and December 31, 2013, respectively. Another Network Integration customer accounted for 29% and 27% of total net accounts receivable as of September 30, 2014, and December 31, 2013, respectively.

The following table summarizes external revenue by geographic region (in thousands):

	Three months ended				Nine months ended
	September 30,				September 30,
	2014		2013		2014		2013
United States	$	13,254	$	15,010	$	39,665	$	40,811
Americas (Excluding the U.S.)	197		972		879		3,452
Europe	25,553		21,275		78,653		66,565
Asia Pacific	4,166		1,128		9,415		4,637
Total	$	43,170	$	38,385	$	128,612	$	115,465

Revenue from external customers attributed to Italy totaled $21.2 million and $16.0 million for the three months ended September 30, 2014, and September 30, 2013 respectively. Revenue from external customers attributed to Italy totaled $63.0 million and $51.5 million for the nine months endedSeptember 30, 2014, and September 30, 2013 respectively.

The following table summarizes long-lived assets, consisting of property and equipment, by geographic region (in thousands):

	September 30, 2014		December 31, 2013
Americas	$	3,256	$	3,326
Europe	1,874		2,194
Asia Pacific	29		35
Total	$	5,159	$	5,555

The following table provides selected Statement of Operations information by business segment (in thousands):

	Three months ended						Nine months ended
	September 30,						September 30,
	2014			2013			2014			2013
Gross profit
Network Equipment	$	11,062		$	12,041		$	33,007		$	33,990
Network Integration	3,654			2,934			9,742			7,378
Total before intersegment adjustments	14,716			14,975			42,749			41,368
Corporate unallocated and intersegment adjustments(1)	—			(1		)	—			5
Total	$	14,716		$	14,974		$	42,749		$	41,373
Depreciation expense
Network Equipment	$	459		$	406		$	1,428		$	988
Network Integration	50			54			149			159
Corporate	52			45			111			141
Total	$	561		$	505		$	1,688		$	1,288
Operating income (loss)
Network Equipment	$	(953	)	$	87		$	(5,296	)	$	(1,328	)
Network Integration	1,762			1,525			4,311			2,891
Total before intersegment adjustments	809			1,612			(985		)	1,563
Corporate unallocated operating loss and adjustments (1)	(1,233		)	(1,573		)	(4,414		)	(6,072		)
Total	$	(424	)	$	39		$	(5,399	)	$	(4,509	)

(1) Adjustments reflect the elimination of intersegment revenue and profit in inventory.

The following tables provide selected Balance Sheet and Statement of Cash Flow information by business segment (in thousands):

	Nine months ended
	September 30,
	2014		2013
Additions to Fixed Assets
Network Equipment	$	1,736	$	2,679
Network Integration	95		53
Corporate	83		6
Total	$	1,914	$	2,738

	September 30, 2014		December 31, 2013
Total Assets
Network Equipment	$	42,457	$	48,955
Network Integration	58,259		54,625
Corporate and intersegment eliminations	18,167		24,367
Total	$	118,883	$	127,947