Segment Reporting and Geographic Information

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Reporting and Geographic Information

Segment Reporting and Geographic Information

MRV operates its business in two segments: the Network Equipment segment and the Network Integration segment. The Network Equipment segment designs, manufactures, distributes and services optical networking solutions and Internet infrastructure products. The Network Integration segment distributes network solutions and Internet infrastructure products and provides value-added integration and support services for customers' networks. The Network Integration segment consists principally of the business operations of our wholly-owned subsidiary, Tecnonet.  As discussed in Note 1, the Company announced on August 10, 2015 that they entered into a shares purchase agreement to sell all of the shares of Tecnonet.  The sale is subject to stockholder approval and is expected to take place at a special meeting of stockholders currently scheduled for December 1, 2015.  Upon completion of the sale, the Company will have a single reporting segment, the Network Equipment segment.

The accounting policies of the segments are the same as those described in the summary of significant accounting polices disclosed in MRV's2014Form 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,
	2015			2014			2015			2014
Network Equipment	$	22,974		$	21,979		$	69,787		$	66,131
Network Integration	14,343			21,237			49,126			62,644
Total before intersegment adjustments	37,317			43,216			118,913			128,775
Intersegment adjustments	(42		)	(46		)	(151		)	(163		)
Total	$	37,275		$	43,170		$	118,762		$	128,612

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 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 components sold as part of system solutions. Substantially all Network Integration's sales are within Italy.

One customer accounted for $24.4 million and $33.8 million of revenue in the Network Integration segment, or 21% and 26% of total revenue, for the nine months endedSeptember 30, 2015, and 2014, respectively. The same customer accounted for $7.5 million and $11.0 million of revenue in the Network Integration segment, or 20% and 25% of total revenue for the three months ended September 30, 2015 and 2014, respectively. The same customer accounted for 7% and 5% of total accounts receivable before allowance for doubtful accounts as of September 30, 2015, and December 31, 2014, respectively.

Another customer accounted for $16.5 million and $20.2 million of revenue in the Network Integration segment, or 14% and 16% of total revenue, for the nine months endedSeptember 30, 2015, and 2014, respectively. The same customer accounted for $4.8 million and $6.1 million of revenue in the Network Integration segment, or 13% and 14% of total revenue for the three months ended September 30, 2015 and 2014, respectively. The same customer accounted for 23% and 29% of total accounts receivable before allowance for doubtful accounts as of September 30, 2015, and December 31, 2014, respectively.

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

	Three months ended				Nine months ended
	September 30,				September 30,
	2015		2014		2015		2014
United States	$	10,368	$	13,254	$	34,239	$	39,665
Americas (Excluding the U.S.)	1,297		197		5,917		879
Europe	19,545		25,553		63,855		78,653
Asia Pacific	6,065		4,166		14,751		9,415
Total	$	37,275	$	43,170	$	118,762	$	128,612

Revenue from external customers attributed to Italy totaled $14.7 million and $21.2 million for the three months ended September 30, 2015 and 2014, respectively. Revenue from external customers attributed to Italy totaled $50.1 million and $63.0 million for the nine months ended September 30, 2015 and 2014, respectively. Revenue from external customers attributed to Australia totaled $5.7 million and $3.8 million for the three months ended September 30, 2015 and 2014, respectively. Revenue from external customers attributed to Australia totaled $13.5 million and $7.8 million for the nine months ended September 30, 2015 and 2014, respectively.

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

	September 30, 2015		December 31, 2014
Americas	$	2,961	$	3,078
Europe	1,622		1,786
Asia Pacific	20		26
Total	$	4,603	$	4,890

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

	Three months ended						Nine months ended
	September 30,						September 30,
	2015			2014			2015			2014
Gross profit
Network Equipment	$	12,113		$	11,062		$	35,616		$	33,007
Network Integration	2,567			3,654			8,031			9,742
Total before intersegment adjustments	14,680			14,716			43,647			42,749
Corporate unallocated and intersegment adjustments(1)	(1		)	—			—			—
Total	$	14,679		$	14,716		$	43,647		$	42,749
Depreciation and amortization expense
Network Equipment	$	473		$	459		$	1,460		$	1,428
Network Integration	31			50			92			149
Corporate	29			52			87			111
Total	$	533		$	561		$	1,639		$	1,688
Operating income (loss)
Network Equipment	$	1,277		$	(953	)	$	1,599		$	(5,296	)
Network Integration	1,254			1,762			3,292			4,311
Total before intersegment adjustments	2,531			809			4,891			(985		)
Corporate unallocated operating loss and adjustments (1)	(1,345		)	(1,233		)	(3,713		)	(4,414		)
Total	$	1,186		$	(424	)	$	1,178		$	(5,399	)

(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,
	2015			2014
Additions (write-offs) of property and equipment
Network Equipment	$	1,168		$	1,736
Network Integration	74			95
Corporate	(6		)	83
Total	$	1,236		$	1,914

	September 30, 2015		December 31, 2014
Total Assets
Network Equipment	$	42,472	$	40,664
Network Integration	49,270		56,921
Corporate and intersegment eliminations	9,859		16,987
Total	$	101,601	$	114,572