Business Segment Information

12 Months Ended

Dec. 31, 2015

Segment Reporting [Abstract]

Business Segment Information

19. Business Segment Information

The Company conducts its business globally and is managed geographically in three segments: (1) Americas, which consists of North America and CALA reporting units; (2) EMEA; and (3) APAC. The segments are determined in accordance with how management views and evaluates the Company’s business and allocates its resources, and are based on the criteria as outlined in the authoritative guidance.

Segment Revenue and Profit

Segment revenues consist of product and service revenues. Product revenues are attributed to a segment based on the ordering location of the customer. For internal reporting purposes and determination of segment contribution margins, geographic segment product revenues may differ slightly from actual geographic revenues due to internal revenue allocations between the Company’s segments. Service revenues are generally attributed to a segment based on the end-user’s location where services are performed. A significant portion of each segment’s expenses arises from shared services and infrastructure that Polycom has historically allocated to the segments in order to realize economies of scale and to use resources efficiently.

Segment contribution margin includes all geographic segment revenues less the related cost of sales and direct revenues and marketing expenses. Cost of revenues consists of the standard cost of revenues and does not include items such as warranty expense, royalties, and the allocation of overhead expenses, including facilities and IT costs, as well as stock-based compensation costs and amortization of purchased intangible assets. Management allocates some infrastructure costs, such as facilities and IT costs, in determining segment contribution margins. Contribution margin is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Certain operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated costs include corporate manufacturing costs, sales and marketing costs other than direct sales and marketing expenses, research and development expenses, general and administrative costs, such as legal and accounting, stock-based compensation costs, transaction-related costs, amortization of purchased intangibles, restructuring costs and interest and other income (expense), net.

Segment Data

The results of the reportable segments are derived directly from Polycom’s management reporting system. Management measures the performance of each segment based on several metrics, including contribution margin as defined above. Asset data, with the exception of gross accounts receivable, is not reviewed by management at the segment level.

Financial information for each reportable geographical segment as of and for the fiscal years ended December 31, 2015, 2014, and 2013, based on the Company’s internal management system and as utilized by the Company’s Chief Operating Decision Maker (“CODM”), its Chief Executive Officer, is as follows (in thousands):

	Americas			EMEA			APAC			Total
2015:
Revenue	$	617,211		$	336,894		$	313,120		$	1,267,225
% of total revenue		49	%		26	%		25	%		100	%
Contribution margin	$	236,482		$	141,744		$	147,512		$	525,738
% of segment revenue		38	%		42	%		47	%		41	%
2014:
Revenue	$	662,533		$	349,821		$	332,800		$	1,345,154
% of total revenue		49	%		26	%		25	%		100	%
Contribution margin	$	270,265		$	150,426		$	140,365		$	561,056
% of segment revenue		41	%		43	%		42	%		42	%
2013:
Revenue	$	694,522		$	338,035		$	335,832		$	1,368,389
% of total revenue		50	%		25	%		25	%		100	%
Contribution margin	$	270,786		$	142,686		$	136,462		$	549,934
% of segment revenue		39	%		42	%		41	%		40	%
At December 31, 2015:
Gross accounts receivable	$	97,742		$	78,726		$	66,443		$	242,911
% of total gross accounts receivable		40	%		33	%		27	%		100	%
At December 31, 2014:
Gross accounts receivable	$	88,316		$	62,540		$	63,808		$	214,664
% of total gross accounts receivable		41	%		29	%		30	%		100	%

* The United States and China, individually, accounted for more than 10% of the Company’s revenues in 2015, 2014 and 2013. Net revenues in the United States were $528.0 million, $565.9 million, and $589.6 million for the years ended December 31, 2015, 2014, and 2013, respectively. Net revenues in China were $143.4 million, $144.7 million, and $147.3 million for the years ended December 31, 2015, 2014 and 2013, respectively. During 2015, 2014, and 2013, one customer, ScanSource, accounted for 20%, 17%, and 16%, respectively, of the Company’s revenues. At December 31, 2015, 2014, ScanSource accounted for 20% and 19%, respectively, of total gross accounts receivable.

The following tables set forth the reconciliation of segment information to Polycom consolidated totals (in thousands):

	Year Ended December 31,
	2015			2014			2013
Segment contribution margin	$	525,738		$	561,056		$	549,934
Corporate and unallocated costs		(370,368	)		(409,700	)		(430,471	)
Stock-based compensation		(45,139	)		(47,960	)		(64,465	)
Effect of stock-based compensation cost on warranty    expense		(336	)		(494	)		(547	)
Amortization of purchased intangibles		(10,451	)		(12,816	)		(19,750	)
Restructuring costs		(11,096	)		(40,347	)		(48,470	)
Litigation reserves and payments		—			(3,130	)		—
Transaction-related costs		(574	)		(156	)		(3,424	)
Interest and other income (expense), net		(1,855	)		(3,438	)		(5,011	)
Income (loss) from continuing operations before    provision for (benefit from) income taxes	$	85,919		$	43,015		$	(22,204	)

The following table sets forth the Company’s revenues by groups of similar products and services as follows (in thousands):

	Year Ended December 31,
	2015		2014		2013
Revenues:
UC group systems	$	772,744	$	868,311	$	904,923
UC personal devices		267,249		236,781		219,103
UC platform		227,232		240,062		244,363
Total	$	1,267,225	$	1,345,154	$	1,368,389

The Company’s fixed assets, net of accumulated depreciation, are located in the following geographical areas (in thousands):

	December 31,
	2015		2014
United States	$	77,082	$	78,692
EMEA		10,149		11,254
APAC		13,486		17,663
Other		1,136		1,586
Total	$	101,853	$	109,195

No single country outside of the United States has more than 10% of total net fixed assets as of December 31, 2015 and 2014.