9. Operating Segments

We are a global solutions provider to the world of essential natural resources – water, minerals and energy. Management defines our operational organizational structure into discrete segments based on our primary product lines.

In the first quarter of FY2017, changes were made for certain of our smaller operations to reflect changes in organizational accountabilities as part of our strategy to simplify our business and streamline our operating and reporting structure. Our Collector Wells group was shifted from Heavy Civil to Water Resources to better align their operational expertise. We also shifted certain other smaller operations out of our “Other” segment and into our four reporting segments, and are no longer reporting the “Other” segment. We believe these changes better reflect how the business is managed and performance is evaluated. Information for prior periods has been reclassified to conform to our new presentation.

We manage and report our operations through four segments: Water Resources, Inliner, Heavy Civil, and Mineral Services.

Our segments are defined as follows:

Water Resources

Water Resources provides its customers with an array of water management solutions, including discovery and defining of water sources through hydrologic studies, water supply development through water well drilling and intake construction, and water delivery through pipeline and pumping infrastructure. Water Resources also brings technologies to the water and wastewater markets and offers water treatment equipment engineering services, providing systems for the treatment of regulated and nuisance contaminants, specifically, iron, manganese, hydrogen sulfide, arsenic, radium, nitrate, perchlorate, and volatile organic compounds. Water Resources drills deep injection wells for industrial (primarily power) and municipal clients that need to dispose of wastewater associated with their processes. Water Resources also performs complete diagnostic and rehabilitation services for existing wells, pumps and related equipment, including conducting downhole closed circuit televideo inspections to investigate and resolve water well and pump performance problems. In addition, Water Resources constructs radial collector wells through its Ranney® Collector Wells technology, which is an alternative to conventional vertical wells and can be utilized to develop moderate to very high capacities of groundwater. Water Resources provides water systems and services in most regions of the U.S.

Inliner

Inliner provides a wide range of process, sanitary and storm water rehabilitation solutions to municipalities and industrial customers dealing with aging infrastructure needs. Inliner focuses on its proprietary Inliner^® cured-in-place pipe (“CIPP”) which allows it to rehabilitate aging sanitary sewer, storm water and process water infrastructure to provide structural rebuilding as well as infiltration and inflow reduction. Inliner’s trenchless technology minimizes environmental impact and reduces or eliminates surface and social disruption. Inliner has the ability to supply both traditional felt-based CIPP lining tubes cured with water or steam as well as a fiberglass-based lining tubes cured with ultraviolet light. Inliner holds the North American rights to the InlinerCIPP technology, owns and operates the liner manufacturer, as well as installation of Inliner CIPP product. While Inliner focuses on our proprietary Inliner CIPP, it provides full system renewal, including a wide variety of other rehabilitative methods including Janssen structural renewal for service lateral connections and mainlines, slip lining, traditional excavation and replacement, and form and manhole renewal with cementitious and epoxy products. Inliner provides services in most regions of the U.S.

Heavy Civil

Heavy Civil performs design and build services of water and wastewater treatment plants, as well as pipeline installation, to government agencies and industrial clients. In addition, Heavy Civil builds surface water intakes, pumping stations, hard rock tunnels and marine construction services-all in support of the water infrastructure in the U.S. Beyond water solutions, Heavy Civil also designs and constructs biogas facilities (anaerobic digesters) for the purpose of generating and capturing methane gas, an emerging renewable energy resource. Heavy Civil provides services in most regions of the U.S.

Mineral Services

Mineral Services conducts primarily above ground drilling activities, including all phases of core drilling, reverse circulation, dual tube, hammer and rotary air-blast methods. Our service offerings include both exploratory and definitional drilling. Global mining companies engage Mineral Services to extract samples from sites that the mining companies analyze for mineral content before investing heavily in development to extract the minerals. Mineral Services helps its clients determine if minable mineral deposit is on the site, the economic viability of the mining site and the geological properties of the ground, which helps in the determination of mine planning. Mineral Services also offers its customers water management and soil stabilization expertise. Mine water management consists of vertical, large diameter wells for sourcing and dewatering; and horizontal drains for slope de-pressurization. The primary markets are in the western U.S., Mexico, and South America. As discussed in Note 12 to the Condensed Consolidated Financial Statements, during FY 2016, we implemented a plan to exit our operations in Africa and Australia. Mineral Services also has ownership interests in foreign affiliates operating in Latin America that form its primary presence in Chile and Peru.

Financial information for our segments is presented below. Unallocated corporate expenses primarily consist of general and administrative functions performed on a company-wide basis and benefiting all segments. These costs include expenses related to accounting, financial reporting, internal audit, treasury, legal, tax compliance, executive management and board of directors.

Management evaluates segment performance based primarily on revenues and Adjusted EBITDA. Adjusted EBITDA represents income or loss from continuing operations before interest, taxes, depreciation and amortization, non-cash equity-based compensation, equity in earnings or losses from affiliates, certain non-recurring items such as impairment charges, restructuring costs, gain on extinguishment of debt, and certain other gains or losses, plus dividends received from affiliates. Refer to further discussion on Non-GAAP Financial Measures included in Part I, Item 2 in this Form 10-Q.

													Unallocated
Three Months Ended July 31, 2016	Water						Heavy			Mineral			Corporate			Other Items/
(in thousands)	Resources			Inliner			Civil			Services			Expenses			Eliminations			Total
Revenues	$	56,471		$	52,976		$	35,414		$	14,318		$	—		$	(130	)	$	159,049

(Loss) income from continuing operations before income taxes	$	(2,238	)	$	6,808		$	103		$	1,634		$	(8,149	)	$	(4,209	)	$	(6,051	)
Interest expense		—			—			—			—			—			4,209			4,209
Depreciation expense and amortization		3,015			1,262			428			1,801			448			—			6,954
Non-cash equity-based compensation		105			43			37			45			615			—			845
Equity in (earnings) losses of affiliates		—			—			—			(458	)		—			—			(458	)
Restructuring costs		603			72			4			173			153			—			1,005
Other expense (income), net		280			(52	)		(154	)		(479	)		217			—			(188	)
Dividends received from affiliates		—			—			—			1,347			—			—			1,347
Adjusted EBITDA	$	1,765		$	8,133		$	418		$	4,063		$	(6,716	)	$	—		$	7,663

													Unallocated
Three Months Ended July 31, 2015	Water						Heavy			Mineral			Corporate			Other Items/
(in thousands)	Resources			Inliner			Civil			Services			Expenses			Eliminations			Total
Revenues	$	60,599		$	41,790		$	48,546		$	25,981		$	—		$	(599	)	$	176,317

(Loss) income from continuing operations before income taxes	$	(962	)	$	4,422		$	(1,178	)	$	(14,422	)	$	(10,068	)	$	(4,295	)	$	(26,503	)
Interest expense		—			—			—			—			—			4,295			4,295
Depreciation expense and amortization		3,311			1,031			655			2,788			469			—			8,254
Non-cash equity-based compensation		80			46			5			45			527			—			703
Equity in (earnings) losses of affiliates		—			—			—			1,486			—			—			1,486
Impairment charges		4,598			—			—			—			—			—			4,598
Restructuring costs		(45	)		(2	)		(10	)		11,675			306			—			11,924
Other expense (income), net		269			(46	)		(179	)		(191	)		(105	)		—			(252	)
Dividends received from affiliates		—			—			—			847			—			—			847
Adjusted EBITDA	$	7,251		$	5,451		$	(707	)	$	2,228		$	(8,871	)	$	—		$	5,352

													Unallocated
Six Months Ended July 31, 2016	Water						Heavy			Mineral			Corporate			Other Items/
(in thousands)	Resources			Inliner			Civil			Services			Expenses			Eliminations			Total
Revenues	$	118,421		$	100,510		$	74,507		$	25,573		$	—		$	(223	)	$	318,788

(Loss) income from continuing operations before income taxes	$	(1,938	)	$	12,453		$	(679	)	$	1,287		$	(16,309	)	$	(8,455	)	$	(13,641	)
Interest expense		—			—			—			—			—			8,455			8,455
Depreciation expense and amortization		6,168			2,516			897			3,020			781			—			13,382
Non-cash equity-based compensation		309			294			74			94			1,321			—			2,092
Equity in (earnings) losses of affiliates		—			—			—			(1,727	)		—			—			(1,727	)
Restructuring costs		603			72			395			237			153			—			1,460
Other expense (income), net		720			16			(138	)		(1,235	)		299			—			(338	)
Dividends received from affiliates		—			—			—			2,438			—			—			2,438
Adjusted EBITDA	$	5,862		$	15,351		$	549		$	4,114		$	(13,755	)	$	—		$	12,121

													Unallocated
Six Months Ended July 31, 2015	Water						Heavy			Mineral			Corporate			Other Items/
(in thousands)	Resources			Inliner			Civil			Services			Expenses			Eliminations			Total
Revenues	$	118,751		$	89,810		$	93,629		$	49,505		$	—		$	(1,107	)	$	350,588

Income (loss) from continuing operations before income taxes	$	1,929		$	9,664		$	(3,201	)	$	(16,974	)	$	(19,823	)	$	(3,911	)	$	(32,316	)
Interest expense		—			—			—			—			—			8,147			8,147
Depreciation expense and amortization		6,761			2,028			1,350			5,889			961			—			16,989
Non-cash equity-based compensation		229			585			183			168			1,148			—			2,313
Equity in (earnings) losses of affiliates		—			—			—			1,593			—			—			1,593
Impairment charges		4,598			—			—			—			—			—			4,598
Restructuring costs		18			17			31			11,696			352			—			12,114
Gain on extinguishment of debt		—			—			—			—			—			(4,236	)		(4,236	)
Other (income) expense, net		(167	)		(42	)		(540	)		(541	)		(3	)		—			(1,293	)
Dividends received from affiliates		—			—			—			2,210			—			—			2,210
Adjusted EBITDA	$	13,368		$	12,252		$	(2,177	)	$	4,041		$	(17,365	)	$	—		$	10,119

The following table summarizes revenue for our continuing operations, by product line and by major geographic area, for the three and six months ended July 31, 2016 and 2015:

	Three Months				Six Months
	Ended July 31,				Ended July 31,
(in thousands)	2016		2015		2016		2015
Product Line Information
Water systems	$	49,394	$	54,896	$	104,872	$	107,405
Water treatment technologies		3,152		2,417		7,421		6,127
Sewer rehabilitation		52,976		41,790		100,510		89,810
Water and wastewater plant construction		21,132		39,434		42,440		73,157
Pipeline construction		13,569		8,785		30,542		18,975
Environmental and specialty drilling		3,393		2,215		6,276		3,598
Exploration drilling		13,618		24,424		23,912		45,488
Other		1,815		2,356		2,815		6,028
Total revenues	$	159,049	$	176,317	$	318,788	$	350,588

Geographic Information
United States	$	152,228	$	160,905	$	306,268	$	321,951
Africa/Australia		—		3,872		152		7,962
South America		1,838		2,073		2,301		3,983
Mexico		4,966		8,806		9,966		15,467
Other foreign		17		661		101		1,225
Total revenues	$	159,049	$	176,317	$	318,788	$	350,588