Operating Segments and Related Information

9 Months Ended

Sep. 30, 2011

Operating Segments and Related Information [Abstract]

Operating Segments and Related Information

Note D – Operating Segments and Related Information

The Company is comprised of the following three reportable operating 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 healthcare claims recovery audit services and our business analytics and advisory services.

Additionally, Corporate Support includes the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to the three operating segments.

We evaluate the performance of our operating segments based upon revenues 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, taxes, depreciation and amortization (“EBITDA”) as adjusted for unusual and other significant items that management views as distorting the operating results of the various segments from period to period. Adjustments include restructuring charges, stock-based compensation, bargain purchase gains, acquisition obligations classified as compensation, intangible asset impairment charges, litigation settlements, severance charges (including severance charges relating to the transformation of our recovery audit service delivery model, or “transformation severance”) and foreign currency transaction gains and losses on intercompany balances viewed by management as individually or collectively significant. We do not have any inter-segment revenues.

Segment information for the three and nine months ended September 30, 2011 and 2010 (in thousands) is as follows:

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia – Pacific			New Services			Corporate Support			Total
Three Months Ended September 30, 2011
Revenues	$	30,980		$	14,516		$	6,255		$	—		$	51,751
Operating income (loss)	$	8,046		$	2,002		$	(1,870	)	$	(5,710	)	$	2,468
Depreciation and amortization		1,538			465			619			—			2,622
Foreign currency transaction gains (losses) on intercompany balances		(177	)		(879	)		1			—			(1,055	)
EBITDA		9,407			1,588			(1,250	)		(5,710	)		4,035
Foreign currency transaction (gains) losses on intercompany balances		177			879			(1	)		—			1,055
Acquisition obligations classified as compensation		—			—			106			—			106
Transformation severance and related expenses		182			(12	)		—			—			170
Stock-based compensation		—			—			—			1,461			1,461
Adjusted EBITDA	$	9,766		$	2,455		$	(1,145	)	$	(4,249	)	$	6,827
Three Months Ended September 30, 2010
Revenues	$	29,738		$	14,869		$	2,293		$	—		$	46,900
Operating income (loss)	$	6,754		$	2,129		$	(2,059	)	$	(4,045	)	$	2,779
Depreciation and amortization		1,462			412			416			—			2,290
Foreign currency transaction gains (losses) on intercompany balances		44			1,225			5			—			1,274
EBITDA		8,260			3,766			(1,638	)		(4,045	)		6,343
Foreign currency transaction (gains) losses on intercompany balances		(44	)		(1,225	)		(5	)		—			(1,274	)
Acquisition obligations classified as compensation		—			—			107			—			107
Stock-based compensation		—			—			—			1,171			1,171
Adjusted EBITDA	$	8,216		$	2,541		$	(1,536	)	$	(2,874	)	$	6,347

	Recovery Audit Services– Americas			Recovery  Audit Services– Europe/Asia – Pacific			New Services			Corporate Support			Total
Nine Months Ended September 30, 2011
Revenues	$	87,994		$	45,021		$	20,158		$	—		$	153,173
Operating income (loss)	$	20,105		$	5,433		$	(4,855	)	$	(15,282	)	$	5,401
Depreciation and amortization		4,225			1,320			1,722			—			7,267
Foreign currency transaction gains (losses) on intercompany balances		(154	)		(25	)		3			—			(176	)
EBITDA		24,176			6,728			(3,130	)		(15,282	)		12,492
Foreign currency transaction (gains) losses on intercompany balances		154			25			(3	)		—			176
Acquisition obligations classified as compensation		—			—			334			—			334
Transformation severance and related expenses		1,119			148			—			—			1,267
Stock-based compensation		—			—			—			3,663			3,663
Adjusted EBITDA	$	25,449		$	6,901		$	(2,799	)	$	(11,619	)	$	17,932
Nine Months Ended September 30, 2010
Revenues	$	84,582		$	42,564		$	6,590		$	—		$	133,736
Operating income (loss)	$	17,396		$	5,310		$	(5,475	)	$	(13,040	)	$	4,191
Depreciation and amortization		4,419			1,216			967			—			6,602
Foreign currency transaction gains (losses) on intercompany balances		(27	)		(416	)		5			—			(438	)
EBITDA		21,788			6,110			(4,503	)		(13,040	)		10,355
Foreign currency transaction (gains) losses on intercompany balances		27			416			(5	)		—			438
Acquisition obligations classified as compensation		—			—			265			—			265
Stock-based compensation		—			—			—			3,047			3,047
Adjusted EBITDA	$	21,815		$	6,526		$	(4,243	)	$	(9,993	)	$	14,105