Note 13 – Segment Information and Major Customers

In 2015, we realigned our organizational structure to better match our market opportunities, technological development initiatives, and improve efficiencies. During the first quarter of 2016, our chief operating decision maker requested changes in the information that he regularly reviews for purposes of allocating resources and assessing performance. As a result, beginning with the quarter ended March 31, 2016, we began reporting our financial performance based on two, new reportable segments – Network Solutions and Services & Support. Network Solutions includes hardware products and next-generation virtualized solutions used in service provider or business networks, as well as prior-generation products. Services & Support includes our suite of ProCloud managed services, network installation, engineering and maintenance services, and fee-based technical support and equipment repair/replacement plans.

We evaluate the performance of our new segments based on gross profit; therefore, selling, general and administrative expenses, research and development expenses, interest and dividend income, interest expense, net realized investment gain/loss, other income/expense and provision for taxes are reported on a company-wide, functional basis only. Historical financial information by reportable segment and category, as discussed below, has been recast to conform to our new reporting structure. There are no inter-segment revenues.

The following table presents information about the reported sales and gross profit of our reportable segments for each of the years ended December 31, 2017, 2016 and 2015. Asset information by reportable segment is not reported, since we do not produce such information internally.

Sales and Gross Profit by Market Segment
(In thousands)	2017				2016				2015
	Sales		Gross Profit		Sales		Gross Profit		Sales		Gross Profit
Network Solutions	$	540,396	$	260,855	$	525,502	$	254,807	$	527,422	$	233,579
Services & Support		126,504		42,805		111,279		36,537		72,642		33,318
Total	$	666,900	$	303,660	$	636,781	$	291,344	$	600,064	$	266,897

Sales by Category

In addition to our new reporting segments, we will also report revenue for the following three categories – Access & Aggregation, Customer Devices, and Traditional & Other Products.

The following table presents sales information by product category for the years ended December 31, 2017, 2016 and 2015:

(In thousands)	2017		2016		2015
Access & Aggregation	$	473,943	$	436,372	$	405,698
Customer Devices		138,456		137,608		125,565
Traditional & Other Products		54,501		62,801		68,801
Total	$	666,900	$	636,781	$	600,064

The following table presents sales information by geographic area for the years ended December 31, 2017, 2016 and 2015. International sales correlate to shipments with a non-U.S. destination.

(In thousands)	2017		2016		2015
United States	$	508,178	$	501,337	$	419,366
Germany		119,502		85,780		111,666
Other international		39,220		49,664		69,032
Total	$	666,900	$	636,781	$	600,064

Customers comprising more than 10% of revenue can change from year to year. Single customers comprising more than 10% of our revenue in 2017 included two customers at 40% and 16%. Single customers comprising more than 10% of our revenue in 2016 included three customers at 24%, 19% and 12%. Single customers comprising more than 10% of our revenue in 2015 included three customers at 20%, 17% and 14%. No other customer accounted for 10% or more of our sales in 2017, 2016 or 2015. Our five largest customers, other than those with more than 10 percent of revenues disclosed above, can change from year to year. These customers represented 15%, 13%, and 14% of total revenue in 2017, 2016 and 2015, respectively. Revenues in this disclosure do not include distributor agents, who predominantly provide fulfillment services to end users. In such cases where known, that revenue is associated with the end user.

Additional Segment Information

As of December 31, 2017, long-lived assets, net totaled $85.1 million, which includes $80.6 million held in the U.S. and $4.5 million held outside the U.S. As of December 31, 2016, long-lived assets, net totaled $84.5 million, which includes $79.9 million held in the U.S. and $4.6 million held outside the U.S.