Segment Reporting and Related Disclosures

6 Months Ended

Nov. 30, 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 determined 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 $417,562 of T&M equipment and $37,241 of DP equipment at November 30, 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 November 30, 2015 and 2014:

	T&M		DP		Total
2015
Rentals and leases	$	27,467	$	4,706	$	32,173
Sales of equipment and other revenues	10,489		648		11,137
Segment and consolidated total	$	37,956	$	5,354	$	43,310
2014
Rentals and leases	$	28,789	$	4,680	$	33,469
Sales of equipment and other revenues	25,758		476		26,234
Segment and consolidated total	$	54,547	$	5,156	$	59,703

Revenues for these operating segments were as follows for the six months ended November 30, 2015 and 2014:

	T&M		DP		Total
2015
Rentals and leases	$	54,597	$	9,879	$	64,476
Sales of equipment and other revenues	31,032		1,145		32,177
Segment and consolidated total	$	85,629	$	11,024	$	96,653
2014
Rentals and leases	$	58,038	$	9,320	$	67,358
Sales of equipment and other revenues	53,233		983		54,216
Segment and consolidated total	$	111,271	$	10,303	$	121,574

Depreciation of rental and lease equipment for these operating segments was as follows for the three and six months ended November 30, 2015 and 2014:

	Three Months Ended November 30,
	2015		2014
T&M	$	13,246	$	13,603
DP	1,094		1,067
Segment and consolidated total	$	14,340	$	14,670

	Six Months Ended November 30,
	2015		2014
T&M	$	26,695	$	26,529
DP	2,246		2,056
Segment and consolidated total	$	28,941	$	28,585

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 and six months ended November 30, 2015 and 2014:

	Three Months Ended November 30,
	2015		2014
T&M	$	9,939	$	12,735
DP	2,175		1,693
Total marginal contribution of operating segments	12,114		14,428
Deduct:
Unallocated SG&A expenses	8,664		8,201
Add:
Interest income (expense), net	78		79
Other income	13		1,390
Income before income taxes	$	3,541	$	7,696

	Six Months Ended November 30,
	2015			2014
T&M	$	20,515		$	26,453
DP	4,240			3,371
Total marginal contribution of operating segments	24,755			29,824
Deduct:
Unallocated SG&A expenses	17,112			16,138
Add:
Interest income (expense), net	(164		)	182
Other income	13			1,390
Income before income taxes	$	7,492		$	15,258

No single customer accounted for more than 10% of total revenues during the six months ended November 30, 2015 and 2014.

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

	Three Months Ended November 30,				Six Months Ended November 30,
	2015		2014		2015		2014
Revenues:1
U.S.	$	35,576	$	50,245	$	79,923	$	101,397
Other 2	7,734		9,458		16,730		20,177
Total	$	43,310	$	59,703	$	96,653	$	121,574

	As of
	November 30, 2015		May 31, 2015
Net Long-Lived Assets:3
U.S.	$	180,978	$	197,514
Other 2	49,102		47,277
Total	$	230,080	$	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.