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Reportable Segments
 3 Months Ended
Mar. 31, 2013
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 evaporators and brine heaters for desalination plants.

 

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

 

The following table presents sales and other financial information by reportable segment (in thousands):

 

Three months ended

 

North
America
Contract
Operations

 

International
Contract
Operations

 

Aftermarket
Services

 

Fabrication

 

Reportable
Segments
Total

 

March 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

159,431

 

$

109,558

 

$

83,612

 

$

458,776

 

$

811,377

 

Gross margin(1)

 

87,378

 

63,359

 

18,166

 

56,377

 

225,280

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2012:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

150,588

 

$

112,786

 

$

89,645

 

$

262,222

 

$

615,241

 

Gross margin(1)

 

76,352

 

68,897

 

17,914

 

26,620

 

189,783

 

 

 

(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 to evaluate 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 to gross margin (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2013

 

2012

 

Net income

 

$

58,791

 

$

7,287

 

Selling, general and administrative

 

84,979

 

94,839

 

Depreciation and amortization

 

82,646

 

85,111

 

Long-lived asset impairment

 

3,563

 

4,122

 

Restructuring charges

 

—

 

3,047

 

Interest expense

 

27,874

 

37,991

 

Equity in income of non-consolidated affiliates

 

(4,665

)

(37,339

)

Other (income) expense, net

 

(9,809

)

(6,094

)

Provision for (benefit from) income taxes

 

15,151

 

(343

)

(Income) loss from discontinued operations, net of tax

 

(33,250

)

1,162

 

Gross margin

 

$

225,280

 

$

189,783