Quarterly report pursuant to Section 13 or 15(d)

NOTE 4: SEGMENT INFORMATION

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NOTE 4: SEGMENT INFORMATION
9 Months Ended
Sep. 30, 2011
Segment Reporting Disclosure [Text Block]
NOTE 4:                      SEGMENT INFORMATION

a.           General:

The Company operates primarily in three operating segments. Additionally, the three segments are also treated by the Company as reporting units for goodwill impairment evaluation purposes. The goodwill amounts associated with each of these reporting units were determined and valued when the respective operations were purchased.

The Company’s reportable segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities. The accounting policies of the operating segments are the same as those used by the Company in the preparation of its annual financial statements. The Company evaluates performance based upon two primary factors, one is the segment’s net income and the other is the segment’s contribution to the Company’s future strategic growth.

b.           The following is information about reportable segment revenues, income (losses) and total assets for the nine and three months ended September 30, 2011 and 2010:

   
Training and
Simulation
Division
   
Battery and
Power Systems
Division
   
Armor
Division
   
Corporate
Expenses
   
Total
Company
 
Nine months ended September 30, 2011
                             
Revenues from outside customers
  $ 31,393,117     $ 12,777,002     $ 9,640,396     $     $ 53,810,515  
Depreciation and amortization expenses (1)
    (1,394,059 )     (812,383 )     (112,638 )     (43,704 )     (2,362,784 )
Direct expenses (2) 
    (28,146,936 )     (12,824,928 )     (12,117,988 )     (3,907,266 )     (56,997,118 )
Segment income (loss)
    1,852,122       (860,309 )     (2,590,230 )     (3,950,970 )     (5,549,387 )
Financial income (expense)
    (27,976 )     (169,769 )     (246,831 )     34,872       (409,704 )
Income tax expense (benefit)
    (81,165 )                 362,500       281,335  
Net income (loss)
  $ 1,905,311     $ (1,030,078 )   $ (2,837,061 )   $ (4,278,598 )   $ (6,240,426 )
Segment assets (3) 
  $ 46,133,387     $ 24,505,138     $ 12,266,353     $ (881,726 )   $ 82,023,152  
Additions to long-lived assets
  $ 1,786,535     $ 691,243     $ 121,069     $ 3,345     $ 2,602,192  
Nine months ended September 30, 2010
                                       
Revenues from outside customers
  $ 27,778,348     $ 13,040,862     $ 15,593,046     $     $ 56,412,256  
Depreciation and amortization expenses (1)
    (1,182,959 )     (762,398 )     (129,418 )     (129,204 )     (2,203,979 )
Direct expenses (2) 
    (22,963,920 )     (12,600,629 )     (15,343,264 )     (3,202,179 )     (54,109,992 )
Segment income (loss)
    3,631,469       (322,165 )     120,364       (3,331,383 )     98,285  
Financial income (expense)
    (753 )     (51,292 )     (57,514 )     4,596       (104,963 )
Income tax expense (benefit)
    172,232       57,608       (702 )     420,000       649,138  
Net income (loss)
  $ 3,458,484     $ (431,065 )   $ 63,552     $ (3,746,787 )   $ (655,816 )
Segment assets (3) 
  $ 45,487,649     $ 24,154,634     $ 10,010,542     $ 1,542,375     $ 81,195,200  
Additions to long-lived assets
  $ 344,561     $ 393,379     $ 44,115     $     $ 782,055  
Three months ended September 30, 2011
                                       
Revenues from outside customers
  $ 16,682,519     $ 4,455,415     $ 5,074,114     $     $ 26,212,048  
Depreciation and amortization expenses (1)
    (464,374 )     (280,638 )     (38,513 )     (14,142 )     (797,667 )
Direct expenses (2) 
    (15,459,952 )     (4,258,413 )     (5,329,377 )     (1,484,375 )     (26,532,117 )
Segment income (loss)
    758,193       (83,636 )     (293,776 )     (1,498,517 )     (1,117,736 )
Financial income (expense)
    (27,503 )     (324,830 )     (255,250 )     199,566       (408,017 )
Income tax expense (benefit)
    (137,409 )                 137,498       89  
Net income (loss)
  $ 868,099     $ (408,466 )   $ (549,026 )   $ (1,436,449 )   $ (1,525,842 )
Three months ended September 30, 2010
                                       
Revenues from outside customers
  $ 7,710,398     $ 4,152,721     $ 4,494,883     $     $ 16,358,002  
Depreciation and amortization expenses (1)
    (406,025 )     (507,778 )     (122,742 )     (40,924 )     (1,077,469 )
Direct expenses (2) 
    (6,789,668 )     (3,978,851 )     (4,314,013 )     (1,209,208 )     (16,291,740 )
Segment income (loss)
    514,705       (333,908 )     58,128       (1,250,132 )     (1,011,207 )
Financial income (expense)
    (9,659 )     240,206       8,238       (144,944 )     93,841  
Income tax expense (benefit)
    61,286       (11,290 )     2       140,000       189,998  
Net income (loss)
  $ 443,760     $ (82,412 )   $ 66,364     $ (1,535,076 )   $ (1,107,364 )

(1)
Includes depreciation of property and equipment and amortization of intangible assets and capitalized software.

(2)
Including, inter alia, selling and marketing, general and administrative and allowance for settlements.

(3)
Out of those amounts, goodwill in our Training and Simulation, Battery and Power Systems and Armor Divisions stood at $24,435,641, $6,161,318 and $1,833,787, respectively, as of September 30, 2011 and $24,435,641, $6,240,331 and $1,852,420, respectively, as of September 30, 2010. Subsequent to the 2004 purchase of AoA, the Company recorded an impairment charge in 2005 to fully impair related goodwill ($10.5 million) and intangible assets ($2.6 million). Additionally, due to an earnout on the same transaction, the Company recorded an additional $316,000 in goodwill in 2007 and immediately recorded an impairment of $316,000. The Company has not recorded any other goodwill impairment charges.