14. Business Segment Data and Geographical Information
The Company provides specialized technical services to an international client base that includes petroleum refineries, chemical plants, pipelines, offshore drilling and production platforms, steel mills, food and beverage processing facilities, power generation, and other flow-process industries.
An operating segment is defined as a component of an enterprise about which separate financial information is available that is evaluated regularly by the chief decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. For financial reporting purposes, the Company operates in three segments which comprise the Company’s three geographical areas: the Americas, EMEA and Asia-Pacific.
The Company evaluates performance based on the operating income (loss) from each segment which excludes interest income and other income (expense), interest expense, and income tax expense (benefit). The accounting policies of the reportable segments are the same as those described in Note 1. Intersegment revenues are recorded at cost plus a profit margin. All transactions and balances between segments are eliminated in consolidation.
The following is a summary of the financial information of the Company’s reportable segments as of and for the years ended December 31, 2012, 2011 and 2010 reconciled to the amounts reported in the consolidated financial statements (in thousands):
| Americas | EMEA | Asia- Pacific |
Reconciling Items |
Total | ||||||||||||||||
|
Year ended December 31, 2012: |
||||||||||||||||||||
|
Revenues from external customers 1 |
$ | 182,806 | $ | 106,298 | $ | 37,388 | $ | — | $ | 326,492 | ||||||||||
|
Intersegment revenues 2 |
4,982 | 8,488 | 1,057 | (14,527 | ) | — | ||||||||||||||
|
Operating income (loss) 3 4 |
$ | 18,253 | $ | 3,175 | $ | 3,741 | $ | (17,657 | ) | $ | 7,512 | |||||||||
|
Allocation of headquarter costs 5 |
(9,787 | ) | (5,791 | ) | (2,079 | ) | 17,657 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjusted operating income (loss) |
$ | 8,466 | $ | (2,616 | ) | $ | 1,662 | $ | — | $ | 7,512 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Depreciation and amortization |
5,519 | 1,798 | 1,572 | — | 8,889 | |||||||||||||||
|
Income tax (expense) benefit |
(3,417 | ) | (1,536 | ) | (412 | ) | — | (5,365 | ) | |||||||||||
|
Total assets 6 7 |
139,815 | 68,247 | 23,566 | — | 231,628 | |||||||||||||||
|
Capital expenditures |
6,710 | 1,926 | 650 | — | 9,286 | |||||||||||||||
|
Year ended December 31, 2011: |
||||||||||||||||||||
|
Revenues from external customers 1 |
$ | 158,515 | $ | 118,649 | $ | 39,043 | $ | — | $ | 316,207 | ||||||||||
|
Intersegment revenues 2 |
3,130 | 5,792 | 1,340 | (10,262 | ) | — | ||||||||||||||
|
Operating income (loss) 3 4 |
$ | 19,717 | $ | 8,995 | $ | 5,404 | $ | (13,665 | ) | $ | 20,451 | |||||||||
|
Allocation of headquarter costs 5 |
(6,763 | ) | (5,205 | ) | (1,697 | ) | 13,665 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjusted operating income (loss) |
$ | 12,954 | $ | 3,790 | $ | 3,707 | $ | — | $ | 20,451 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Depreciation and amortization |
4,582 | 2,011 | 1,638 | — | 8,231 | |||||||||||||||
|
Income tax (expense) benefit |
7,617 | (2,270 | ) | (685 | ) | — | 4,662 | |||||||||||||
|
Total assets 6 7 |
114,855 | 67,538 | 24,839 | — | 207,232 | |||||||||||||||
|
Capital expenditures |
3,960 | 1,544 | 946 | — | 6,450 | |||||||||||||||
|
Year ended December 31, 2010: |
||||||||||||||||||||
|
Revenues from external customers 1 |
$ | 135,174 | $ | 109,373 | $ | 41,406 | $ | — | $ | 285,953 | ||||||||||
|
Intersegment revenues 2 |
2,947 | 7,783 | 243 | (10,973 | ) | — | ||||||||||||||
|
Operating income (loss) 3 4 |
$ | 16,208 | $ | 1,970 | $ | 10,891 | $ | (15,409 | ) | $ | 13,660 | |||||||||
|
Allocation of headquarter costs 5 |
(7,228 | ) | (5,983 | ) | (2,198 | ) | 15,409 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjusted operating income (loss) |
$ | 8,980 | $ | (4,013 | ) | $ | 8,693 | $ | — | $ | 13,660 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Depreciation and amortization |
3,450 | 1,885 | 1,155 | — | 6,490 | |||||||||||||||
|
Income tax (expense) benefit |
(947 | ) | (1,641 | ) | (1,192 | ) | — | (3,780 | ) | |||||||||||
|
Total assets 6 7 |
93,740 | 65,494 | 22,867 | — | 182,101 | |||||||||||||||
|
Capital expenditures |
3,956 | 2,679 | 677 | — | 7,312 | |||||||||||||||
| 1 |
Included in the Americas are U.S. revenues of $178.6 million, $151.1 million and $132.7 million for the years ended December 31, 2012, 2011 and 2010, respectively. Included in EMEA are U.K. revenues of $57.2 million, $58.7 million and $46.5 million for the year ended December 31, 2012, 2011 and 2010, respectively. |
| 2 |
Reconciling Items represent eliminations or reversals of transactions between reportable segments. |
| 3 |
Reconciling Items represent certain corporate overhead costs, including executive management, strategic planning, treasury, legal, human resources, information technology, accounting and risk management, which are not allocated to reportable segments. |
| 4 |
Includes restructuring charges of $3.6 million, $0.4 million and $5.7 million for the years ended December 31, 2012, 2011 and 2010, respectively. Includes corporate headquarter relocation charges for $1.6 million and $0.1 million for the years ended December 31, 2012 and 2011, respectively. Includes impairment charges of $0.4 million and $0.9 million for the years ended December 31, 2012 and 2011, respectively. |
| 5 |
Represents the allocation of headquarter costs and operating income (loss) had the Company allocated such costs based on the segments’ respective revenues. Historically, the Company has not allocated headquarter costs to its operating segments. |
| 6 |
Included in the Americas are U.S. total assets of $136.8 million, $112.2 million and $91.4 million for the years ended December 31, 2012, 2011 and 2010, respectively. |
| 7 |
Goodwill in the Americas at December 31, 2012, 2011 and 2010 totaled $7.0 million, $6.1 million and $4.9 million, respectively. Goodwill in EMEA totaled $6.6 million at each of December 31, 2012, 2011 and 2010. Goodwill in Asia-Pacific totaled $1.9 million at each of December 31, 2012 and 2011 and $1.6 million at December 31, 2010. |
The following geographical area information includes total long-lived assets (which consist of all non-current assets, other than goodwill, indefinite-lived intangible assets and deferred tax assets) based on physical location at December 31, (in thousands):
| 2012 | 2011 | |||||||
|
Americas |
$ | 34,532 | $ | 21,661 | ||||
|
EMEA |
11,417 | 11,114 | ||||||
|
Asia-Pacific |
4,672 | 5,500 | ||||||
|
|
|
|
|
|||||
|
Total long-lived assets |
$ | 50,621 | $ | 38,275 | ||||
|
|
|
|
|
|||||
Included in the Americas geographical area were United States property and equipment, net of $27.5 million and $19.4 million at December 31, 2012 and 2011, respectively. Included in the EMEA geographical area at December 31, 2012 and 2011 were U.K. property and equipment, net of $5.4 million and $4.7 million, respectively.
Considering the Company’s global nature, and its exposure to foreign currencies, the financial results in any geographical area can be impacted by changes in currency exchange rates in any given year. In 2012, the financial results were favorably impacted in EMEA but were partially offset by unfavorable impacts in Asia-Pacific as a result of currency exchange rate changes during the year. In 2011, the financial results were favorably impacted in Asia Pacific, EMEA and the Americas as a result of currency exchange rate changes during the year. In 2010, the financial results were favorably impacted in Asia Pacific but were partially offset by unfavorable impacts in EMEA as a result of currency exchange rate changes during the year.