Segment Reporting and Related Disclosures

9 Months Ended

Feb. 29, 2016

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 $409,310 of T&M equipment and $32,656 of DP equipment at February 29, 2016 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 February 29, 2016 and February 28, 2015:

	T&M		DP		Total
2016
Rentals and leases	$	25,340	$	3,833	$	29,173
Sales of equipment and other revenues	9,857		468		10,325
Segment and consolidated total	$	35,197	$	4,301	$	39,498
2015
Rentals and leases	$	26,372	$	3,880	$	30,252
Sales of equipment and other revenues	25,799		291		26,090
Segment and consolidated total	$	52,171	$	4,171	$	56,342

Revenues for these operating segments were as follows for the nine months ended February 29, 2016 and February 28, 2015:

	T&M		DP		Total
2016
Rentals and leases	$	79,937	$	13,712	$	93,649
Sales of equipment and other revenues	40,888		1,614		42,502
Segment and consolidated total	$	120,825	$	15,326	$	136,151
2015
Rentals and leases	$	84,410	$	13,200	$	97,610
Sales of equipment and other revenues	79,033		1,273		80,306
Segment and consolidated total	$	163,443	$	14,473	$	177,916

Depreciation of rental and lease equipment for these operating segments was as follows for the three and nine months ended February 29, 2016 and February 28, 2015:

	Three Months Ended
	February 29, 2016		February 28, 2015
T&M	$	12,699	$	12,856
DP	1,045		988
Segment and consolidated total	$	13,744	$	13,844

	Nine Months Ended
	February 29, 2016		February 28, 2015
T&M	$	39,388	$	39,387
DP	3,297		3,042
Segment and consolidated total	$	42,685	$	42,429

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 nine months ended February 29, 2016 and February 28, 2015:

	Three Months Ended
	February 29, 2016			February 28, 2015
T&M	$	8,755		$	10,964
DP	967			1,094
Total marginal contribution of operating segments	9,722			12,058
Deduct:
Unallocated SG&A expenses	8,010			8,394
Add:
Interest income (expense), net	(221		)	82
Other income	1			—
Income before income taxes	$	1,492		$	3,746

	Nine Months Ended
	February 29, 2016			February 28, 2015
T&M	$	29,272		$	37,410
DP	5,206			4,472
Total marginal contribution of operating segments	34,478			41,882
Deduct:
Unallocated SG&A expenses	25,123			24,532
Add:
Interest income (expense), net	(385		)	264
Other income	14			1,390
Income before income taxes	$	8,984		$	19,004

No single customer accounted for more than 10% of total revenues during the nine months ended February 29, 2016 and February 28, 2015.

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

	Three Months Ended				Nine Months Ended
	February 29, 2016		February 28, 2015		February 29, 2016		February 28, 2015
Revenues:1
U.S.	$	30,528	$	47,922	$	110,451	$	149,320
Other 2	8,970		8,420		25,700		28,596
Total	$	39,498	$	56,342	$	136,151	$	177,916

	As of
	February 29, 2016		May 31, 2015
Net Long-Lived Assets:3
U.S.	$	174,482	$	197,514
Other 2	45,670		47,277
Total	$	220,152	$	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.