Operating Segments and Related Information

12 Months Ended

Dec. 31, 2012

Operating Segments and Related Information [Abstract]

OPERATING SEGMENTS AND RELATED INFORMATION

(2) 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) we provide in the U.S., Canada and Latin America.

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

New Services includes 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 operating 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 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 transaction costs and acquisition obligations classified as compensation, intangible asset impairment charges, certain litigation costs and litigation settlements, 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, 2012, 2011 and 2010 and segment asset information as of December 31, 2012 and 2011 (in thousands) is as follows:

2012	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			New Services			Corporate Support			Total
Revenue	$	121,638		$	53,783		$	33,082		$	—		$	208,503
Net earnings													$	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 on short-term intercompany balances		(44	)		(331	)		—			(2	)		(377	)
Acquisition obligations classified as compensation		—			—			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

2012	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		New Services		Corporate Support		Total
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

2011	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		New Services			Corporate Support			Total
Revenue	$	115,807	$	61,570	$	25,740		$	—		$	203,117
Net earnings											$	2,816
Income tax expense												1,292
Interest expense, 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 losses on short-term intercompany balances		144		272		1			—			417
Acquisition transaction costs and acquisition obligations classified as compensation		—		—		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
Allocated assets	$	62,702	$	20,308	$	17,316		$	—		$	100,326
Unallocated assets:
Cash and cash equivalents		—		—		—			20,337			20,337
Restricted cash		—		—		—			64			64
Deferred loan costs		—		—		—			376			376
Deferred income taxes		—		—		—			854			854
Prepaid expenses and other assets		—		—		—			4,456			4,456
Total assets	$	62,702	$	20,308	$	17,316		$	26,087		$	126,413

2010	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		New Services			Corporate Support			Total
Revenue	$	115,156	$	57,590	$	11,335		$	—		$	184,081
Net earnings											$	3,253
Income tax expense												1,882
Interest expense, net												1,305
Loss on debt extinguishment												1,381
EBIT	$	25,062	$	6,478	$	(6,804	)	$	(16,915	)		7,821
Depreciation of property and equipment		3,442		354		1,107			—			4,903
Amortization of intangible assets		2,427		1,403		301			—			4,131
EBITDA		30,931		8,235		(5,396	)		(16,915	)		16,855
Foreign currency transaction (gains) losses on short-term intercompany balances		33		391		(2	)		—			422
Acquisition transaction costs and acquisition obligations classified as compensation		—		—		371			—			371
Stock-based compensation		—		—		—			3,980			3,980
Adjusted EBITDA	$	30,964	$	8,626	$	(5,027	)	$	(12,935	)	$	21,628
Capital expenditures	$	5,674	$	329	$	931		$	—		$	6,934

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

	Years Ended December 31,
	2012		2011		2010
United States	$	124,302	$	107,072	$	92,574
United Kingdom		30,437		36,123		31,422
Canada		17,007		20,200		22,141
France		11,330		13,425		12,231
Brazil		5,919		5,718		5,128
Mexico		4,877		4,836		3,950
Australia		2,467		1,299		1,690
Sweden		1,753		2,145		1,460
Spain		1,252		1,901		2,065
Czech Republic		1,110		706		654
New Zealand		984		1,111		738
Ireland		954		776		1,024
Other		6,111		7,805		9,004
	$	208,503	$	203,117	$	184,081

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

	December 31,
	2012		2011
United States	$	42,629	$	46,083
United Kingdom		8,328		8,792
All Other		1,483		1,073
	$	52,440	$	55,948

Wal-Mart Stores Inc. (and its affiliated companies) accounted for approximately 10.2% of total revenue in 2011 and 12.1% in 2010. We recorded this revenue primarily in the Recovery Audit Services – Americas Segment. No client accounted for 10% or more of total revenue in 2012.