Business Segments

3 Months Ended

Jun. 30, 2011

Business Segments

Business Segments

11. Business Segments

Description of Business Segments

During the first quarter of fiscal 2012 and fiscal 2011, the Company had three reportable business segments: HSG, RSG, and TSG (see Note 3 to Condensed Consolidated Financial Statements for a discussion regarding the disposal of TSG). The reportable segments are each managed separately and are supported by various practices as well as Company-wide functional departments. These functional support departments include general accounting, tax, and information technology. Certain costs associated with the functional support departments are contained within Corporate/Other and are not allocated back to the reportable business segments. Corporate/Other is not a reportable business segment as defined by GAAP.

HSG is a leading technology provider to the hospitality industry, offering hardware, application software, and services that streamline management of operations, property, and inventory for customers in the gaming, hotel and resort, cruise lines, food management services, and sports and entertainment markets.

RSG is a leader in designing solutions for retailers to improve productivity, operational efficiency, technology utilization, customer satisfaction, and in-store profitability, and to provide retail customers with an enhanced shopping experience. RSG provides mobility and wireless, customized pricing, and inventory solutions, and customer relationship management systems. RSG also provides implementation plans and supplies the hardware package required to operate the systems, including servers, receipt printers, point-of-sale terminals, and wireless devices for in-store use by retail store associates.

TSG is a leading provider of IBM, HP, Oracle, EMC², Hitachi Data Systems, and NetApp enterprise IT solutions for the complex data center needs of customers in a variety of industries — including finance, government, healthcare, telecommunications, and education, among others. The solutions offered include enterprise architecture and high availability, infrastructure optimization, storage and resource management, identity management, and business continuity.

Measurement of Segment Operating Results and Segment Assets

The Company's Interim President and Chief Executive Officer, who is the Chief Operating Decision Maker ("CODM"), evaluates performance and allocates resources to its reportable segments based on operating income. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies elsewhere in these Notes to Condensed Consolidated Financial Statements. Intersegment sales are recorded at pre-determined amounts to allow for inter-company profit to be included in the operating results of the individual reportable segments. Such inter-company profit is eliminated for consolidated financial reporting purposes.

The CODM does not evaluate a measurement of segment assets when evaluating the performance of the Company's reportable segments. As such, financial information relating to segment assets is not provided in the table below.

Customer Concentration

Verizon Communications, Inc. accounted for 29.8% and 28.1% of TSG's total revenues, and 19.2% and 18.1% of total Company revenues for the three months ended June 30, 2011 and 2010, respectively.

Segment Operating Results

The following table presents segment profit and related information for each of the Company's reportable segments. Please refer to Note 5 to Condensed Consolidated Financial Statements for further information on the Corporate/Other restructuring charges.

	Reportable Segments									Corporate/ Other
	HSG			RSG			TSG						Consolidated
Three Months Ended June 30, 2011
Total revenue	$	20,960		$	33,105		$	97,757		$	—		$	151,822
Elimination of intersegment revenue		—			(179	)		—			—			(179	)
Revenue from external customers	$	20,960		$	32,926		$	97,757		$	—		$	151,643
Gross margin	$	13,267		$	6,260		$	18,906		$	—		$	38,433
Gross margin percentage		63.3	%		19.0	%		19.3	%					25.3	%
Operating income (loss)	$	515		$	2,095		$	2,570		$	(10,567	)	$	(5,387	)
Other expenses, net		—			—			—			(138	)		(138	)
Interest expense, net		—			—			—			(305	)		(305	)
Income (loss) before income taxes	$	515		$	2,095		$	2,570		$	(11,010	)	$	(5,830	)
Other information:
Capital expenditures	$	749		$	7		$	—		$	—		$	756
Non-cash charges:
Depreciation and Amortization (1)	$	1,058		$	151		$	119		$	1,202		$	2,530
Restructuring charges	$	187		$	134		$	49		$	2,025		$	2,395
Total	$	1,245		$	285		$	168		$	3,227		$	4,925
Three Months Ended June 30, 2010
Total revenue	$	23,049		$	23,813		$	85,087		$	—		$	131,949
Elimination of intersegment revenue		—			(76	)		—			—			(76	)
Revenue from external customers	$	23,049		$	23,737		$	85,087		$	—		$	131,873
Gross margin	$	13,287		$	5,669		$	14,910		$	—		$	33,866
Gross margin percentage		57.6	%		23.9	%		17.5	%					25.7	%
Operating income (loss)	$	2,239		$	1,768		$	(1,752	)	$	(8,847	)	$	(6,592	)
Other income, net		—			—			—			1,083			1,083
Interest expense, net		—			—			—			(263	)		(263	)
Income (loss) before income taxes	$	2,239		$	1,768		$	(1,752	)	$	(8,027	)	$	(5,772	)
Other information:
Capital expenditures	$	965		$	—		$	62		$	502		$	1,529
Non-cash charges:
Depreciation and Amortization (1)	$	1,092		$	80		$	799		$	1,484		$	3,455
Restructuring charges	$	—		$	—		$	—		$	393		$	393
Total	$	1,092		$	80		$	799		$	1,877		$	3,848

(1) Does not include the amortization of deferred financing fees totaling $131,000 for each of the three months ended June 30, 2011 and 2010, which related to Corporate/Other.

Enterprise-Wide Disclosures

The Company's assets are primarily located in the United States. Further, revenues attributable to customers outside the United States accounted for approximately 3% and 5% of total revenues for the three months ended June 30, 2011 and 2010, respectively. Total revenues for the Company's three specific areas of offerings are as follows:

	Three months ended June 30
	2011		2010
Hardware	$	99,021	$	81,279
Software		19,038		22,208
Services		33,584		28,386
Total	$	151,643	$	131,873