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Segment Information
 12 Months Ended
Dec. 31, 2015
Segment Reporting [Abstract]  
Segment Information

Note 22—Segment Information

The Company operates in three business segments: Merchant Acquiring, Payment Processing and Business Solutions.

The Merchant Acquiring segment consists of revenues from services that allow merchants to accept electronic methods of payment. In the Merchant Acquiring segment, revenues include a discount fee and membership fees charged to merchants, debit network fees and rental fees from POS devices and other equipment, net of credit card interchange and assessment fees charged by credit cards associations (such as VISA or MasterCard) or payment networks. The discount fee is generally a percentage of the transaction value. EVERTEC also charge merchants for other services that are unrelated to the number of transactions or the transaction value.

The Payment Processing segment revenues are comprised of revenues related to providing access to the ATH network and other card networks to financial institutions, including related services such as authorization, processing, management and recording of ATM and POS transactions, and ATM management and monitoring. Payment Processing revenues also include revenues from card processing services (such as credit and debit card processing, authorization and settlement and fraud monitoring and control to debit or credit issuers), payment processing services (such as payment and billing products for merchants, businesses and financial institutions) and electronic benefit transfer (“EBT”) (which principally consist of services to the government of Puerto Rico for the delivery of benefits to participants).

For ATH network and processing services, revenues are primarily driven by the number of transactions processed. Revenues are derived primarily from network fees, transaction switching and processing fees, and the leasing POS devices. For card issuer processing, revenues are primarily dependent upon the number of cardholder accounts on file, transactions and authorizations processed, the number of cards embossed and other processing services. For EBT services, revenues are primarily derived from the number of beneficiaries on file.

The Business Solutions segment consists of revenues from a full suite of business process management solutions in various product areas such as core bank processing, network hosting and management, IT professional services, business process outsourcing, item processing, cash processing, and fulfillment. Core bank processing and network services revenues are derived in part from a recurrent fee and from fees based on the number of accounts on file (i.e. savings or checking accounts, loans, etc.) or computer resources utilized. Revenues from other processing services within the Business Solutions segment are generally volume-based and depend on factors such as the number of accounts processed. In addition, EVERTEC are a reseller of hardware and software products and these resale transactions are generally one-time transactions.

The Company’s business segments are organized based on the nature of products and services. The Chief Operating Decision Maker (“CODM”) reviews their separate financial information to assess performance and to allocate resources.

Management evaluates the operating results of each of its reportable segments based upon revenues and operating income. Segment asset disclosure is not used by the CODM as a measure of segment performance since the segment evaluation is driven by earnings. As such, segment assets are not disclosed in the notes to the accompanying consolidated financial statements.

 

The following tables set forth information about the Company’s operations by its three business segments for the periods indicated:

 

(Dollar amounts in thousands)    Merchant
Acquiring, net		      Payment
Processing		      Business
Solutions		      Other     Total  

Year ended December 31, 2015

              

Revenues

    $ 85,411       $ 136,566       $ 179,797       $ (28,246 )(1)    $ 373,528   

Income from operations

      36,466         55,429         50,200         (38,735 )(2)      103,360   

Year ended December 31, 2014

              

Revenues—As restated

      79,136         131,381         177,939         (26,668 )(1)      361,788   

Income from operations—As restated

      34,362         58,796         48,299         (44,470 )(2)      96,987   

Year ended December 31, 2013

              

Revenues—As restated

      73,616         125,610         184,682         (25,506 )(1)      358,402   

Income from operations—As restated

      35,398         54,635         42,687         (46,474 )(2)      86,246   

 

(1)  Represents the elimination of intersegment revenues for services provided by the Payment Processing segment to the Merchant Acquiring segment, and other miscellaneous intersegment revenues.
(2)  Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses.

The reconciliation of income from operations to consolidated net income (loss) is as follows:

 

     Years ended December 31,  
(Dollar amounts in thousands)    2015     2014     2013  
           (As Restated)  

Segment income from operations

       

Merchant Acquiring

    $ 36,466      $ 34,362      $ 35,398   

Payment Processing

      55,429        58,796        54,635   

Business Solutions

      50,200        48,299        42,687   
  

 

 

    

 

 

    

 

 

  

Total segment income from operations

      142,095        141,457        132,720   

Merger related depreciation and amortization and other unallocated expenses (1)

      (38,735 )      (44,470 )      (46,474 ) 
  

 

 

    

 

 

    

 

 

  

Income from operations

      103,360        96,987        86,246   
  

 

 

    

 

 

    

 

 

  

Interest expense, net

      (23,771 )      (25,444 )      (37,181 ) 

Earnings of equity method investment

      147        1,140        935   

Other income (expenses)

      2,306        2,375        (75,682 ) 

Income tax benefit (expense)

      3,335        (8,901 )      (1,435 ) 
  

 

 

    

 

 

    

 

 

  

Net income (loss)

    $ 85,377      $ 66,157      $ (27,117 ) 
  

 

 

    

 

 

    

 

 

  

 

(1)  Primarily represents non-operating depreciation and amortization expenses generated as a result of the Merger and certain non-recurring fees and expenses.

 

The geographic segment information below is classified based on the geographic location of the Company’s subsidiaries:

 

     Years ended December 31,  
(Dollar amounts in thousands)    2015      2014      2013  
            (As restated)  

Revenues (1)

         

Puerto Rico

    $ 322,319       $ 313,228       $ 309,735   

Caribbean

      12,154         13,752         16,225   

Latin America

      39,055         34,808         32,442   
  

 

 

     

 

 

     

 

 

  

Total revenues

    $ 373,528       $ 361,788       $ 358,402   
  

 

 

     

 

 

     

 

 

  

 

(1)  Revenues are based on subsidiaries’ country of domicile.

Major customers

For the years ended December 31, 2015, 2014 and 2013, the Company had one major customer which accounted for approximately $167.3 million or 45%, $161.8 million, as restated, or 45% and $164.4 million, as restated, or 46%, respectively, of total revenues. See Note 20.

The Company’s next largest customer, the Government of Puerto Rico, consolidating all individual agencies and public corporations, represented 9%, 10% and 11% of the Company’s total revenues for the years ended December 31, 2015, 2014 and 2013, respectively.