SEGMENT REPORTING

6 Months Ended

Jun. 30, 2013

SEGMENT REPORTING

SEGMENT REPORTING

NOTE 6:   SEGMENT REPORTING

In the first quarter of 2013, we reorganized our internal financial reporting structure.  Under the new structure, we began reporting our financial performance based on the following two reportable segments:  the Technology segment and the Bankruptcy and Settlement Administration segment.  The composition of the segment previously called eDiscovery remains unchanged and is now referred to as the Technology segment.  The former Bankruptcy segment and Settlement Administration segment were combined and will now be reported as the Bankruptcy and Settlement Administration segment.  Although our consolidated results of operations, financial position and cash flows were not impacted, we have updated the segment disclosures for prior periods to reflect our new internal reporting structure.

Our Technology segment provides eDiscovery managed services and technology solutions comprised of consulting, collections and forensics, processing, search and review, and document review to companies and law firms.  Produced documents are made available primarily through a hosted environment utilizing our proprietary software DocuMatrix™, and third-party software which allows for efficient attorney review and data requests.  Our Bankruptcy and Settlement Administration segment provides managed services and technology solutions that address the needs of our customers with respect to litigation, claims and project administration, compliance matters, controlled disbursements, corporate restructuring, bankruptcy and class action proceedings.

The segment performance measure is based on earnings before interest, taxes, depreciation and amortization, other operating expense, and share-based compensation expense.  In management’s evaluation of performance, certain costs, such as compensation for administrative staff and executive management, are not allocated by segment and, accordingly, the following reporting segment results do not include such unallocated costs.

Assets reported within a segment are those assets that can be identified to a segment and primarily consist of trade receivables, property, equipment and leasehold improvements, software, identifiable intangible assets and goodwill.  Cash, certain tax-related assets, and certain prepaid assets and other assets are not allocated to our segments.  Although we can and do identify long-lived assets such as property, equipment and leasehold improvements, software, and identifiable intangible assets to reporting segments, we do not allocate the related depreciation and amortization to the segment as management evaluates segment performance exclusive of these non-cash charges.

Following is a summary of segment information for the three months ended June 30, 2013.

	Three Months Ended June 30, 2013
	Technology		Bankruptcy and Settlement Administration		Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	70,126	$	34,850	$	—		$	104,976
Intersegment revenues	78		—		(78		)	—
Operating revenues including intersegment revenue	70,204		34,850		(78		)	104,976
Reimbursable expenses	535		7,861		—			8,396
Total revenues	70,739		42,711		(78		)	113,372
Direct costs, selling, general and administrative costs	48,979		31,788		(78		)	80,689
Segment performance measure	$	21,760	$	10,923	$	—		$	32,683

Following is a summary of segment information for the three months ended June 30, 2012.

	Three Months Ended June 30, 2012
	Technology		Bankruptcy and Settlement Administration		Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	42,711	$	47,126	$	—		$	89,837
Intersegment revenues	104		—		(104		)	—
Operating revenues including intersegment revenue	42,815		47,126		(104		)	89,837
Reimbursable expenses	266		7,792		—			8,058
Total revenues	43,081		54,918		(104		)	97,895
Direct costs, selling, general and administrative costs	27,059		39,441		(104		)	66,396
Segment performance measure	$	16,022	$	15,477	$	—		$	31,499

Following is a reconciliation of our segment performance measure to income before income taxes.

	Three Months Ended June 30,
	2013			2012
	(in thousands)
Segment performance measure	$	32,683		$	31,499
Unallocated corporate expenses	(11,021		)	(9,010		)
Share-based compensation expense	(2,825		)	(1,549		)
Depreciation and software and leasehold amortization	(7,391		)	(6,523		)
Amortization of intangible assets	(4,736		)	(6,752		)
Fair value adjustment to contingent consideration	—			5,471
Intangible asset impairment expense	—			(1,777		)
Other operating (expense) income	(49		)	54
Income from operations	6,661			11,413
Interest expense, net	(1,996		)	(2,712		)
Income before income taxes	$	4,665		$	8,701

Following is a summary of segment information for the six months ended June 30, 2013.

	Six Months Ended June 30, 2013
	Technology		Bankruptcy and Settlement Administration		Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	124,913	$	82,971	$	—		$	207,884
Intersegment revenues	83		—		(83		)	—
Operating revenues including intersegment revenue	124,996		82,971		(83		)	207,884
Reimbursable expenses	822		28,256		—			29,078
Total revenues	125,818		111,227		(83		)	236,962
Direct costs, selling, general and administrative costs	87,666		85,705		(83		)	173,288
Segment performance measure	$	38,152	$	25,522	$	—		$	63,674

Following is a summary of segment information for the six months ended June 30, 2012.

	Six Months Ended June 30, 2012
	Technology		Bankruptcy and Settlement Administration		Eliminations			Total
	(in thousands)
Revenues:
Operating revenues	$	91,559	$	81,105	$	—		$	172,664
Intersegment revenues	152		—		(152		)	—
Operating revenues including intersegment revenue	91,711		81,105		(152		)	172,664
Reimbursable expenses	722		12,981		—			13,703
Total revenues	92,433		94,086		(152		)	186,367
Direct costs, selling, general and administrative costs	58,818		64,390		(152		)	123,056
Segment performance measure	$	33,615	$	29,696	$	—		$	63,311

Following is a reconciliation of our segment performance measure to income before income taxes.

	Six Months Ended June 30,
	2013			2012
	(in thousands)
Segment performance measure	$	63,674		$	63,311
Unallocated corporate expenses	(21,345		)	(20,172		)
Share-based compensation expense	(4,364		)	(3,403		)
Depreciation and software and leasehold amortization	(14,390		)	(13,251		)
Amortization of intangible assets	(9,702		)	(13,521		)
Fair value adjustment to contingent consideration	—			5,471
Intangible asset impairment expense	—			(1,777		)
Other operating (expense) income	(96		)	225
Income from operations	13,777			16,883
Interest expense, net	(3,831		)	(5,432		)
Income before income taxes	$	9,946		$	11,451

Following are total assets by segment.

	June 30,  2013		December 31, 2012
	(in thousands)
Assets
Technology	$	360,916	$	335,051
Bankruptcy and Settlement Administration	286,682		296,811
Unallocated corporate	43,301		22,854
Total consolidated assets	$	690,899	$	654,716