OPERATING SEGMENTS

6 Months Ended

Jun. 30, 2013

OPERATING SEGMENTS [Abstract]

OPERATING SEGMENTS

11. OPERATING SEGMENTS

The Company's reportable segments are: North America, Europe, Russia and Other. This determination is based on the unique business practices and market specifics of each region and that each region engages in business activities from which it earns revenues and incurs expenses. The Company's reportable segments are based on the allocation of managerial responsibility for its client base. Because managerial responsibility for a particular client relationship generally correlates with the client's geographic location, there is a high degree of similarity between client locations and the geographic boundaries of the Company's reportable segments. In some specific cases, however, managerial responsibility for a particular client is assigned to a management team in another region, usually based on the strength of the relationship between client executives and particular members of EPAM's senior management team. In a case like this, the client's activity would be reported through the management team's reportable segment.

The Company's Chief Operating Decision Maker (CODM) evaluates its performance and allocates resources based on segment revenues and operating profit. Segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each operating segment have similar characteristics and are subject to similar factors, pressures and challenges. Expenses included in segment operating profit consist principally of direct selling and delivery costs as well as an allocation of certain shared services expenses. Certain expenses are not specifically allocated to specific segments as management does not believe it is practical to allocate such costs to individual segments because they are not directly attributable to any specific segment. Further, stock based compensation expense is not allocated to individual segments in internal management reports used by the CODM. Accordingly, these expenses are separately disclosed as "unallocated" and adjusted only against the Company's total income from operations.

Revenues from external customers and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportable segments for the three and six months ended June 30, 2013 and 2012, were as follows:

	Three Months Ended, June 30,					Six Months Ended, June 30,
	2013			2012		2013			2012
Total segment revenues:
North America	$	69,076		$	46,703	$	132,133		$	89,566
Europe		48,424			40,794		94,577			80,655
Russia		13,498			9,778		25,851			19,255
Other		2,176			6,501		4,789			8,671
Total segment revenues	$	133,174		$	103,776	$	257,350		$	198,147
Segment operating profit:
North America	$	16,213		$	10,440	$	30,394		$	20,166
Europe		8,118			7,003		16,489			15,663
Russia		1,687			1,499		2,319			1,818
Other		(148	)		3,119		(64	)		3,320
Total segment operating profit	$	25,870		$	22,061	$	49,138		$	40,967

Intersegment transactions were excluded from the above on the basis that they are neither included into the measure of a segment's profit and loss by the CODM, nor provided to the CODM on a regular basis.

Reconciliation of segment revenues and operating profit to consolidated income before provision for income taxes is presented below:

	Three Months Ended, June 30,						Six Months Ended, June 30,
	2013			2012			2013			2012
Total segment revenues	$	133,174		$	103,776		$	257,350		$	198,147
Unallocated revenue		10			24			32			36
Revenues	$	133,184		$	103,800		$	257,382		$	198,183
Total Segment operating profit:	$	25,870		$	22,061		$	49,138		$	40,967
Unallocated amounts:
Other revenues		10			24			32			36
Stock-based compensation expense		(3,850	)		(1,773	)		(6,426	)		(3,323	)
Stock charge		-			-			-			(640	)
Non-corporate taxes		(680	)		(514	)		(1,500	)		(1,239	)
Professional fees		(724	)		(889	)		(2,074	)		(1,318	)
Depreciation and amortization		(715	)		(151	)		(1,430	)		(308	)
Bank charges		(321	)		(296	)		(653	)		(545	)
Other corporate expenses		(2,055	)		(1,632	)		(4,016	)		(3,016	)
Income from operations		17,535			16,830			33,071			30,614
Interest and other income, net		769			460			1,399			936
Foreign exchange loss		(869	)		(1,394	)		(1,368	)		(1,314	)
Income before provision for income taxes	$	17,435		$	15,896		$	33,102		$	30,236

Geographic Area Information

Management has determined that it is not practical to allocate identifiable assets by segment since such assets are used interchangeably amongst the segments. Geographical information about the Company's long-lived assets based on physical location of the assets was as follows:

	As of June 30, 2013		As of December 31, 2012
Belarus	$	40,210	$	40,095
Ukraine		5,711		5,357
Russia		3,688		3,234
United States		2,788		2,048
Hungary		2,342		1,744
Other		661		657
Total	$	55,400	$	53,135

Long-lived assets include property and equipment, net of accumulated depreciation and amortization.

Information about the Company's revenues by client location is as follows:

	Three Months ended June 30,				Six Months ended June 30,
	2013		2012		2013		2012
United States	$	59,746	$	48,565	$	117,196	$	94,604
United Kingdom		27,711		22,858		54,779		45,786
Russia		13,192		9,393		24,930		18,491
Switzerland		10,734		6,797		20,014		12,942
Canada		8,393		1,763		13,818		2,546
Germany		4,537		3,959		9,070		7,441
Netherlands		2,384		868		4,770		1,658
Kazakhstan		2,028		1,662		4,493		3,333
Sweden		1,349		1,017		2,604		2,472
Spain		609		377		1,241		722
Ukraine		143		4,321		331		4,375
Other locations		848		514		1,188		1,020
Reimbursable expenses and other revenues		1,510		1,706		2,948		2,793
Revenues	$	133,184	$	103,800	$	257,382	$	198,183

Service Offering Information

Information about the Company's revenues by service offering is as follows:

	Three Months ended June 30,				Six Months ended June 30,
	2013		2012		2013		2012
Software development	$	90,298	$	69,268	$	174,078	$	132,151
Application testing services		26,547		20,428		50,700		39,296
Application maintenance and support		10,648		8,728		21,487		16,969
Infrastructure services		3,461		3,148		6,871		5,752
Licensing		720		522		1,298		1,222
Reimbursable expenses and other revenues		1,510		1,706		2,948		2,793
Revenues	$	133,184	$	103,800	$	257,382	$	198,183