Segment Reporting and Related Disclosures

3 Months Ended

Aug. 31, 2015

Segment Reporting [Abstract]

Segment Reporting and Related Disclosures

Segment Reporting and Related Disclosures

Accounting guidance establishes reporting standards for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available and is regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. In order to determine our operating segments, we considered the following: an operating segment is a component of an enterprise (i) that engages in business activities from which it may earn revenues and incur expenses, (ii) whose operating results are regularly reviewed by the enterprise’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and (iii) for which discrete financial information is available. In accordance with this guidance, we have identified two operating segments in our business: our T&M and DP businesses.

In the past, we concluded that although we had separate operating segments for T&M and DP equipment, these two segments could be aggregated into a single reportable segment because they had similar economic characteristics and qualitative factors. However, as a result of a change in economic characteristics in fiscal 2015 in our T&M segment, primarily attributable to the expiration of the Keysight reseller agreement and greater competition in the marketplace, we concluded that we no longer expected similar economic characteristics and qualitative factors to continue in the future. As such, management concluded that the operating segments should no longer be aggregated. Following the change in the composition of our reportable operating segments, we restated the segment information for fiscal 2015.

Our equipment pool, based on acquisition cost, consisted of $425,684 of T&M equipment and $38,732 of DP equipment at August 31, 2015 and $434,963 of T&M equipment and $37,824 of DP equipment at May 31, 2015. Additional segment asset information is not available.

Revenues for these operating segments were as follows for the three months ended August 31, 2015 and 2014:

	T&M		DP		Total
2015
Rentals and leases	$	27,130	$	5,173	$	32,303
Sales of equipment and other revenues	20,543		497		21,040
Segment and consolidated total	$	47,673	$	5,670	$	53,343
2014
Rentals and leases	$	29,249	$	4,640	$	33,889
Sales of equipment and other revenues	27,476		506		27,982
Segment and consolidated total	$	56,725	$	5,146	$	61,871

Depreciation of rental and lease equipment for these operating segments was as follows for the three months ended August 31, 2015 and 2014:

	Three Months Ended August 31,
	2015		2014
T&M	$	13,454	$	12,932
DP	1,147		983
Segment and consolidated total	$	14,601	$	13,915

Amortization expense is not material and is included in SG&A expenses.

We consider the marginal contribution as our measure of segment profit or loss. The marginal contribution is calculated as operating revenue less operating costs and direct and allocated SG&A expenses. Marginal contribution for these operating segments was as follows for the three months ended August 31, 2015 and 2014:

	Three Months Ended August 31,
	2015			2014
T&M	$	11,707		$	14,716
DP	933			681
Total marginal contribution of operating segments	12,640			15,397
Deduct:
Unallocated SG&A expenses	8,447			7,938
Add:
Interest income (expense), net	(242		)	103
Income before income taxes	$	3,951		$	7,562

No single customer accounted for more than 10% of total revenues during the three months ended August 31, 2015 and 2014.

We conduct rental, leasing and sales activities in foreign countries. Selected country information is presented below:

	Three Months Ended August 31,
	2015		2014
Revenues:1
U.S.	$	44,347	$	51,152
Other 2	8,996		10,719
Total	$	53,343	$	61,871

	As of
	August 31, 2015		May 31, 2015
Net Long-Lived Assets:3
U.S.	$	191,166	$	197,514
Other 2	48,499		47,277
Total	$	239,665	$	244,791

¹  Revenues by country are based on the shipping destination.

²  Other consists of countries other than the U.S. Each foreign country individually accounts for less than 10% of the total consolidated revenues and net long-lived assets.

³  Net long-lived assets include rental and lease equipment and other property, net of accumulated depreciation and amortization.