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REPORTABLE SEGMENTS
 9 Months Ended
Sep. 30, 2012
REPORTABLE SEGMENTS  
REPORTABLE SEGMENTS

16.  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 and nine months ended September 30, 2012 and 2011 (in thousands):

 

Three months ended

 

North
America
Contract
Operations

 

International
Contract
Operations

 

Aftermarket
Services

 

Fabrication

 

Reportable
Segments
Total

 

September 30, 2012:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

151,532

 

$

110,632

 

$

95,854

 

$

360,686

 

$

718,704

 

Gross margin(1)

 

76,315

 

64,372

 

20,061

 

49,932

 

210,680

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2011:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

147,737

 

$

113,759

 

$

95,673

 

$

332,651

 

$

689,820

 

Gross margin(1)

 

71,858

 

65,532

 

19,871

 

29,392

 

186,653

 

 

Nine months ended

 

North
America
Contract
Operations

 

International
Contract
Operations

 

Aftermarket
Services

 

Fabrication

 

Reportable
Segments
Total

 

September 30, 2012:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

450,684

 

$

336,046

 

$

287,401

 

$

890,549

 

$

1,964,680

 

Gross margin(1)

 

230,808

 

198,805

 

62,349

 

102,835

 

594,797

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2011:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

441,171

 

$

330,384

 

$

254,833

 

$

914,428

 

$

1,940,816

 

Gross margin(1)

 

213,098

 

191,425

 

36,722

 

102,526

 

543,771

 

 

(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
September 30,

 

Nine Months Ended
September 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net income (loss)

 

$

119,346

 

$

(214,547

)

$

(40,265

)

$

(275,235

)

Selling, general and administrative

 

85,536

 

89,257

 

274,509

 

269,132

 

Depreciation and amortization

 

85,248

 

88,762

 

259,268

 

267,373

 

Long-lived asset impairment

 

3,204

 

1,823

 

135,869

 

3,886

 

Restructuring charges

 

1,515

 

2,941

 

5,828

 

2,941

 

Goodwill impairment

 

—

 

196,142

 

—

 

196,142

 

Interest expense

 

31,723

 

38,672

 

106,682

 

110,428

 

Equity in (income) loss of non-consolidated affiliates

 

(4,793

)

262

 

(46,860

)

262

 

Other (income) expense, net

 

(1,450

)

12,745

 

1,207

 

9,815

 

Provision for (benefit from) income taxes

 

1,267

 

(32,640

)

(34,578

)

(50,220

)

(Income) loss from discontinued operations, net of tax

 

(110,916

)

3,236

 

(66,863

)

9,247

 

Gross margin

 

$

210,680

 

$

186,653

 

$

594,797

 

$

543,771