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REPORTABLE SEGMENTS
 3 Months Ended
Mar. 31, 2012
REPORTABLE SEGMENTS  
REPORTABLE SEGMENTS

14.  REPORTABLE SEGMENTS

 

We manage our business segments primarily based upon the type of product or service provided. We have four reportable segments: North America contract operations, international contract operations, aftermarket services and fabrication. The North America and international contract operations segments primarily provide natural gas compression services, production and processing equipment services and maintenance services to meet specific customer requirements on Exterran-owned assets. The aftermarket services segment provides a full range of services to support the surface production, compression and processing needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets. The fabrication segment provides (i) design, engineering, fabrication, installation and sale of natural gas compression units and accessories and equipment used in the production, treating and processing of crude oil and natural gas and (ii) engineering, procurement and fabrication services primarily related to the manufacturing of critical process equipment for refinery and petrochemical facilities, the fabrication of tank farms and the fabrication of evaporators and brine heaters for desalination plants.

 

We evaluate the performance of our segments based on gross margin for each segment. Revenues include only sales to external customers. We do not include intersegment sales when we evaluate the performance of our segments.

 

The following table presents sales and other financial information by reportable segment for the three months ended March 31, 2012 and 2011 (in thousands):

 

Three months ended

 

North
America
Contract
Operations

 

International
Contract
Operations

 

Aftermarket
Services

 

Fabrication

 

Reportable
Segments
Total

 

March 31, 2012:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

154,170

 

$

112,786

 

$

97,336

 

$

262,222

 

$

626,514

 

Gross margin(1)

 

78,131

 

68,897

 

17,199

 

26,620

 

190,847

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2011:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

151,054

 

$

105,681

 

$

81,698

 

$

280,046

 

$

618,479

 

Gross margin(1)

 

70,545

 

64,715

 

9,160

 

40,755

 

185,175

 

 

 

(1)       Gross margin, a non-GAAP financial measure, is reconciled to net income (loss) below.

 

We define gross margin as total revenue less cost of sales (excluding depreciation and amortization expense). Gross margin is included as a supplemental disclosure because it is a primary measure used by our management as it represents the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key components of our operations. As an indicator of our operating performance, gross margin should not be considered an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP. Our gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate gross margin in the same manner.

 

The following table reconciles net income (loss) to gross margin (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2012

 

2011

 

Net income (loss)

 

$

7,287

 

$

(30,464

)

Selling, general and administrative

 

96,076

 

91,281

 

Depreciation and amortization

 

87,308

 

90,478

 

Long-lived asset impairment

 

4,332

 

—

 

Restructuring charges

 

3,047

 

—

 

Interest expense

 

37,991

 

37,170

 

Equity in income of non-consolidated affiliates

 

(37,339

)

—

 

Other (income) expense, net

 

(6,783

)

(414

)

Benefit from income taxes

 

(1,697

)

(5,014

)

Loss from discontinued operations, net of tax

 

625

 

2,138

 

Gross margin

 

$

190,847

 

$

185,175