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Segment Information
 6 Months Ended
Jun. 30, 2014
Segment Information

e. Segment Information. The company has two business segments: Services and Technology. Revenue classifications by segment are as follows: Services – systems integration and consulting, outsourcing, infrastructure services and core maintenance; Technology – enterprise-class software and servers and other technology.

 

The accounting policies of each business segment are the same as those followed by the company as a whole. Intersegment sales and transfers are priced as if the sales or transfers were to third parties. Accordingly, the Technology segment recognizes intersegment revenue and manufacturing profit on hardware and software shipments to customers under Services contracts. The Services segment, in turn, recognizes customer revenue and marketing profits on such shipments of company hardware and software to customers. The Services segment also includes the sale of hardware and software products sourced from third parties that are sold to customers through the company’s Services channels. In the company’s consolidated statements of income, the manufacturing costs of products sourced from the Technology segment and sold to Services customers are reported in cost of revenue for Services.

Also included in the Technology segment’s sales and operating profit are sales of hardware and software sold to the Services segment for internal use in Services engagements. The amount of such profit included in operating income of the Technology segment for the three months ended June 30, 2014 and 2013 was zero and $2.4 million, respectively. The amount for the six months ended June 30, 2014 and 2013 was $.4 million and $2.7 million, respectively. The profit on these transactions is eliminated in Corporate.

The company evaluates business segment performance based on operating income exclusive of pension income or expense, restructuring charges and unusual and nonrecurring items, which are included in Corporate. All other corporate and centrally incurred costs are allocated to the business segments based principally on revenue, employees, square footage or usage.

A summary of the company’s operations by business segment for the three and six month periods ended June 30, 2014 and 2013 is presented below (in millions of dollars):

 

     Total     Corporate     Services      Technology  

Three Months Ended June 30, 2014

          

Customer revenue

    $ 806.4        $ 712.9       $ 93.5   

Intersegment

      $ (13.8 )      .1         13.7   
  

 

 

    

 

 

    

 

 

     

 

 

  

Total revenue

    $ 806.4      $ (13.8 )    $ 713.0       $ 107.2   
  

 

 

    

 

 

    

 

 

     

 

 

  

Operating income

    $ 15.8      $ (14.7 )    $ 28.5       $ 2.0   
  

 

 

    

 

 

    

 

 

     

 

 

  

Three Months Ended June 30, 2013

          

Customer revenue

    $ 858.6        $ 739.7       $ 118.9   

Intersegment

      $ (16.9 )      .4         16.5   
  

 

 

    

 

 

    

 

 

     

 

 

  

Total revenue

    $ 858.6      $ (16.9 )    $ 740.1       $ 135.4   
  

 

 

    

 

 

    

 

 

     

 

 

  

Operating income

    $ 38.0      $ (23.5 )    $ 29.2       $ 32.3   
  

 

 

    

 

 

    

 

 

     

 

 

  

Six Months Ended June 30, 2014

          

Customer revenue

    $ 1,568.1        $ 1,403.8       $ 164.3   

Intersegment

      $ (23.4 )      .3         23.1   
  

 

 

    

 

 

    

 

 

     

 

 

  

Total revenue

    $ 1,568.1      $ (23.4 )    $ 1,404.1       $ 187.4   
  

 

 

    

 

 

    

 

 

     

 

 

  

Operating income (loss)

    $ (4.1 )    $ (31.0 )    $ 41.9       $ (15.0 ) 
  

 

 

    

 

 

    

 

 

     

 

 

  

Six Months Ended June 30, 2013

          

Customer revenue

    $ 1,668.5        $ 1,462.7       $ 205.8   

Intersegment

      $ (34.2 )      .9         33.3   
  

 

 

    

 

 

    

 

 

     

 

 

  

Total revenue

    $ 1,668.5      $ (34.2 )    $ 1,463.6       $ 239.1   
  

 

 

    

 

 

    

 

 

     

 

 

  

Operating income

    $ 39.6      $ (44.7 )    $ 51.8       $ 32.5   
  

 

 

    

 

 

    

 

 

     

 

 

  

 

Presented below is a reconciliation of total business segment operating income to consolidated income (loss) before income taxes (in millions of dollars):

 

     Three Months
Ended June 30		     Six Months
Ended June 30		  
     2014     2013     2014     2013  

Total segment operating income

    $ 30.5      $ 61.5      $      26.9      $ 84.3   

Interest expense

      (2.3 )      (2.6 )      (4.3 )      (5.3 ) 

Other income (expense), net

      (2.5 )      14.1        (12.3 )      9.2   

Corporate and eliminations

      (14.7 )      (23.5 )      (31.0 )      (44.7 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total income (loss) before income taxes

    $   11.0      $   49.5      $ (20.7 )    $      43.5   
  

 

 

    

 

 

    

 

 

    

 

 

  

Customer revenue by classes of similar products or services, by segment, is presented below (in millions of dollars):

 

     Three Months
Ended June 30		      Six Months
Ended June 30		  
     2014      2013      2014      2013  

Services

            

Systems integration and consulting

    $ 216.4       $ 234.7       $ 427.4       $ 446.5   

Outsourcing

      362.0         354.7         703.5         716.0   

Infrastructure services

      89.0         105.5         181.8         210.6   

Core maintenance

      45.5         44.8         91.1         89.6   
  

 

 

     

 

 

     

 

 

     

 

 

  
     712.9         739.7         1,403.8         1,462.7   

Technology

            

Enterprise-class software and servers

      90.8         112.2         153.4         192.2   

Other technology

      2.7         6.7         10.9         13.6   
  

 

 

     

 

 

     

 

 

     

 

 

  
     93.5         118.9         164.3         205.8   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 806.4       $ 858.6       $ 1,568.1       $ 1,668.5   
  

 

 

     

 

 

     

 

 

     

 

 

  

Geographic information about the company’s revenue, which is principally based on location of the selling organization, is presented below (in millions of dollars):

 

     Three Months
Ended June 30		      Six Months
Ended June 30		  
     2014      2013      2014      2013  

United States

    $ 308.4       $ 344.0       $ 619.7       $ 671.1   

United Kingdom

      126.6         95.3         222.9         197.4   

Other international

      371.4         419.3         725.5         800.0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 806.4       $ 858.6       $ 1,568.1       $ 1,668.5