Operating Segments and Related Information

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Operating Segments and Related Information

OPERATING SEGMENTS AND RELATED INFORMATION

We conduct our operations through three reportable segments:

Recovery Audit Services – Americas represents recovery audit services (other than Healthcare Claims Recovery Audit services) provided in the United States of America (“U.S.”), Canada and Latin America.

Recovery Audit Services – Europe/Asia-Pacific represents recovery audit services (other than Healthcare Claims Recovery Audit services) provided in Europe, Asia and the Pacific region.

New Services represents Profit Optimization services (formerly referred to as analytics and advisory services) and Healthcare Claims Recovery Audit services.

We include the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to the three reportable segments in Corporate Support.

We evaluate the performance of our reportable segments based upon revenue and measures of profit or loss we refer to as EBITDA and Adjusted EBITDA. We define Adjusted EBITDA as earnings from continuing operations before interest and taxes (“EBIT”), adjusted for depreciation and amortization (“EBITDA”), and then further adjusted for unusual and other significant items that management views as distorting the operating results of the various segments from period to period. Such adjustments include restructuring charges, stock-based compensation, bargain purchase gains, acquisition-related charges and benefits (acquisition transaction costs, acquisition obligations classified as compensation, and fair value adjustments to acquisition-related contingent consideration), tangible and intangible asset impairment charges, certain litigation costs and litigation settlements, certain severance charges and foreign currency transaction gains and losses on short-term intercompany balances viewed by management as individually or collectively significant. We do not have any inter-segment revenue.

Segment information for the years ended December 31, 2013 and 2012 and 2011 (in thousands) is as follows:

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific			New Services			Corporate Support			Total
2013
Revenue	$	118,649	$	46,436		$	30,131		$	—		$	195,216
Net loss												$	(186	)
Income tax expense												2,755
Interest income, net												(77		)
EBIT	$	27,094	$	3,901		$	(5,720	)	$	(22,783	)	2,492
Depreciation of property and equipment	5,617		514			2,100			—			8,231
Amortization of intangible assets	2,792		1,508			697			—			4,997
EBITDA	35,503		5,923			(2,923		)	(22,783		)	15,720
Impairment charges	2,702		—			1,505			—			4,207
Foreign currency transaction (gains) losses on short-term intercompany balances	327		(316		)	—			(24		)	(13		)
Acquisition-related charges	1,315		(900		)	187			—			602
Transformation severance and related expenses	107		1,135			168			1,134			2,544
Stock-based compensation	—		—			—			6,294			6,294
Adjusted EBITDA	$	39,954	$	5,842		$	(1,063	)	$	(15,379	)	$	29,354
Capital expenditures	$	5,292	$	781		$	802		$	—		$	6,875
Allocated assets	$	55,978	$	16,706		$	12,426		$	—		$	85,110
Unallocated assets:
Cash and cash equivalents	—		—			—			43,700			43,700
Restricted cash	—		—			—			57			57
Deferred loan costs	—		—			—			—			—
Deferred income taxes	—		—			—			1,708			1,708
Prepaid expenses and other assets	—		—			—			2,254			2,254
Total assets	$	55,978	$	16,706		$	12,426		$	47,719		$	132,829

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			New Services			Corporate Support			Total
2012
Revenue	$	121,638		$	53,783		$	33,082		$	—		$	208,503
Net income													$	5,392
Income tax expense													1,297
Interest expense, net													966
EBIT	$	28,589		$	5,035		$	(3,803	)	$	(22,166	)	7,655
Depreciation of property and equipment	4,651			322			2,111			—			7,084
Amortization of intangible assets	4,355			2,062			807			—			7,224
EBITDA	37,595			7,419			(885		)	(22,166		)	21,963
Foreign currency transaction (gains) losses on short-term intercompany balances	(44		)	(331		)	—			(2		)	(377		)
Acquisition-related charges (benefits)	—			—			382			—			382
Transformation severance and related expenses	493			1,156			394			64			2,107
Wage claim costs	577			—			407			—			984
Stock-based compensation	—			—			—			6,321			6,321
Adjusted EBITDA	$	38,621		$	8,244		$	298		$	(15,783	)	$	31,380
Capital expenditures	$	5,699		$	846		$	1,386		$	—		$	7,931
Allocated assets	$	57,722		$	17,893		$	25,126		$	—		$	100,741
Unallocated assets:
Cash and cash equivalents	—			—			—			37,806			37,806
Restricted cash	—			—			—			65			65
Deferred loan costs	—			—			—			193			193
Deferred income taxes	—			—			—			1,604			1,604
Prepaid expenses and other assets	—			—			—			3,177			3,177
Total assets	$	57,722		$	17,893		$	25,126		$	42,845		$	143,586

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		New Services			Corporate Support			Total
2011
Revenue	$	115,807	$	61,570	$	25,740		$	—		$	203,117
Net income											$	2,816
Income tax expense											1,292
Interest income, net											1,616
EBIT	$	26,280	$	7,484	$	(6,951	)	$	(21,089	)	5,724
Depreciation of property and equipment	3,491		417		1,493			—			5,401
Amortization of intangible assets	2,467		1,665		859			—			4,991
EBITDA	32,238		9,566		(4,599		)	(21,089		)	16,116
Foreign currency transaction (gains) losses on short-term intercompany balances	144		272		1			—			417
Acquisition-related charges (benefits)	—		—		440			360			800
Transformation severance and related expenses	1,465		566		—			—			2,031
Stock-based compensation	—		—		—			5,093			5,093
Adjusted EBITDA	$	33,847	$	10,404	$	(4,158	)	$	(15,636	)	$	24,457
Capital expenditures	$	5,459	$	1,041	$	1,787		$	—		$	8,287

The following table presents revenue by country based on the location of clients served (in thousands):

	Years Ended December 31,
	2013		2012		2011
United States	$	115,819	$	124,302	$	107,072
United Kingdom	24,639		30,437		36,123
Canada	19,584		17,007		20,200
France	10,225		11,330		13,425
Brazil	5,090		5,919		5,718
Mexico	4,482		4,877		4,836
Australia	4,461		2,467		1,299
New Zealand	976		984		1,111
Thailand	971		896		470
Czech Republic	909		1,110		706
Hong Kong	851		743		586
Spain	844		1,252		1,901
Other	6,365		7,179		9,670
	$	195,216	$	208,503	$	203,117

The following table presents long-lived assets by country based on the location of the asset (in thousands):

	December 31,
	2013		2012
United States	$	33,686	$	42,629
United Kingdom	6,690		8,328
All Other	1,378		1,483
	$	41,754	$	52,440

Wal-Mart Stores Inc. (and its affiliated companies) accounted for approximately 10.2% of total revenue in 2011. We recorded this revenue primarily in the Recovery Audit Services – Americas Segment. No client accounted for 10% or more of total revenue in 2013 or 2012.