Note 16. Operating Segments and Geographic Information

Our chief executive officer is our Chief Operating Decision Maker (“CODM”). The CODM allocates resources to the segments based on their business prospects, competitive factors, net revenue and gross margin.

We have two operating segments, Optical Communications, which we refer to as OpComms, and Commercial Lasers, which we refer to as Lasers. Our OpComms products address the following markets: telecommunications (“Telecom”), data communications (“Datacom”), and consumer and industrial (“Consumer and Industrial”). The two operating segments were primarily determined based on how the CODM views and evaluates our operations. Operating results are regularly reviewed by the CODM to make decisions about resources to be allocated to the segments and to assess their performance. Other factors, including market separation and customer specific applications, go-to-market channels, products and manufacturing, are considered in determining the formation of these operating segments.

We do not allocate research and development, sales and marketing, or general and administrative expenses to our segments because management does not include the information in its measurement of the performance of the operating segments. In addition, we do not allocate amortization and impairment of acquisition-related intangible assets, stock-based compensation and certain other charges impacting the gross margin of each segment because management does not include this information in its measurement of the performance of the operating segments.

Information on reportable segments utilized by our CODM is as follows (in millions):



	Three Months Ended						Six Months Ended
	December 30, 2017			December 31, 2016			December 30, 2017			December 31, 2016
Net revenue:
OpComms	$	360.1		$	236.6		$	568.0		$	454.9
Lasers	44.5			28.4			79.8			68.2
Net revenue	$	404.6		$	265.0		$	647.8		$	523.1
Gross profit:
OpComms	161.9			86.7			234.0			157.7
Lasers	19.9			11.2			30.5			28.4
Total segment gross profit	181.8			97.9			264.5			186.1
Unallocated corporate items:
Stock-based compensation	(4.4		)	(2.1		)	(7.1		)	(4.1		)
Amortization of intangibles	(0.8		)	(1.7		)	(1.6		)	(3.4		)
Other charges⁽¹⁾	(5.5		)	(7.1		)	(16.2		)	(9.9		)
Gross profit	$	171.1		$	87.0		$	239.6		$	168.7

(1) The increase in unallocated corporate items during the six months ended December 30, 2017 compared to the six months ended December 31, 2016 primarily relates to inventory write-downs due to canceled programs included in “Other charges” which were not allocated to the segments.

The table below discloses the percentage of our total net revenue attributable to each of our two reportable segments. In addition, it discloses the percentage of our total net revenue attributable to our product offerings which serve the Telecom, Datacom and Consumer and Industrial markets which accounted for 10% or more of our total net revenue during the last three fiscal years:



	Three Months Ended				Six Months Ended
	December 30, 2017		December 31, 2016		December 30, 2017		December 31, 2016
OpComms:	89.0	%	89.4	%	87.7	%	86.9	%
Telecom	27.2	%	60.5	%	34.1	%	62.3	%
Datacom	8.5	%	25.7	%	12.3	%	21.4	%
Consumer and Industrial	53.3	%	3.2	%	41.3	%	3.2	%
Lasers	11.0	%	10.6	%	12.3	%	13.1	%

We operate in three geographic regions: Americas, Asia-Pacific, and EMEA (Europe, Middle East, and Africa). Net revenue is assigned to the geographic region and country where our product is initially shipped. For example, certain customers may request shipment of our product to a contract manufacturer in one country, which may differ from the location of their end customers. The following table presents net revenue by the three geographic regions we operate in and net revenue from countries that exceeded 10% of our total net revenue (in millions, except percentage data):



	Three Months Ended								Six Months Ended
	December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Net revenue:
Americas:
United States	$	25.9	6.4	%	$	35.6	13.4	%	$	59.5	9.2	%	$	71.5	13.7	%
Mexico	30.6		7.6		48.7		18.4		55.4		8.6		88.5		16.9
Other Americas	2.0		0.5		1.9		0.7		4.2		0.6		5.9		1.1
Total Americas	$	58.5	14.5	%	$	86.2	32.5	%	$	119.1	18.4	%	$	165.9	31.7	%

Asia-Pacific:
Hong Kong	$	45.7	11.3	%	$	75.7	28.6	%	$	94.6	14.6	%	$	134.0	25.6	%
Japan	89.5		22.1		21.3		8.0		123.6		19.1		52.6		10.1
South Korea	86.5		21.4		1.0		0.4		97.4		15.0		2.7		0.5
Philippines	48.4		12.0		0.1		—		63.4		9.8		0.1		—
Other Asia-Pacific	50.5		12.5		51.9		19.6		98.8		15.3		115.6		22.1
Total Asia-Pacific	$	320.6	79.3	%	$	150.0	56.6	%	$	477.8	73.8	%	$	305.0	58.3	%

EMEA	$	25.5	6.3	%	$	28.8	10.9	%	$	50.9	7.9	%	$	52.2	10.0	%

Total net revenue	$	404.6			$	265.0			$	647.8			$	523.1

During the three and six months ended December 30, 2017 and December 31, 2016, net revenue generated from a single end customer which represented 10% or greater of total net revenue is summarized as follows:



	Three Months Ended				Six Months Ended
	December 30, 2017		December 31, 2016		December 30, 2017		December 31, 2016
Customer A	49.8	%	*		37.2	%	*
Customer B	*		24.7	%	10.5	%	20.0	%
Customer C	*		17.5	%	*		16.6	%
Customer D	*		*		*		14.2	%
*Represents less than 10% of total net revenue

Long-lived assets, namely net property, plant and equipment were identified based on the operations in the corresponding geographic areas (in millions):



	As of
	December 30, 2017		July 1, 2017
Property, Plant and Equipment, net
United States	$	98.4	$	88.2
China	80.7		82.5
Thailand	87.3		85.3
Other countries	34.9		17.5
Total long-lived assets	$	301.3	$	273.5

We purchase a substantial portion of our inventory from contract manufacturers and vendors located primarily in Taiwan, Thailand, and China.

During the three and six months ended December 30, 2017 and December 31, 2016, net inventory purchased from a single contract manufacturer which represented 10% or greater of total net purchases is summarized as follows:



	Three Months Ended				Six Months Ended
	December 30, 2017		December 31, 2016		December 30, 2017		December 31, 2016
Vendor A	36.0	%	53.0	%	40.0	%	53.0	%
Vendor B	36.0	%	*		25.0	%	*
Vendor C	14.0	%	26.0	%	19.0	%	26.0	%
Vendor D	*		14.0	%	*		13.0	%
*Represents less than 10% of total net purchases