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Reportable Segments
 3 Months Ended
Mar. 31, 2014
Reportable Segments  
Reportable Segments

15.  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 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 revenue and other financial information by reportable segment during the three months ended March 31, 2014 and 2013 (in thousands):

 

Three months ended

 

North
America
Contract
Operations

 

International
Contract
Operations

 

Aftermarket
Services

 

Fabrication

 

Reportable
Segments
Total

 

March 31, 2014

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

156,523

 

$

111,040

 

$

88,048

 

$

287,397

 

$

643,008

 

Gross margin(1)

 

85,442

 

70,008

 

20,227

 

57,809

 

233,486

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2013:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

157,950

 

$

109,558

 

$

83,612

 

$

458,776

 

$

809,896

 

Gross margin(1)

 

86,840

 

63,359

 

18,166

 

56,377

 

224,742

 

 

(1)       Gross margin, a non-GAAP financial measure, is reconciled, in total, to net income (loss), its most directly comparable measure calculated and presented in accordance with GAAP, 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,

 

 

 

2014

 

2013

 

Net income

 

$

34,894

 

$

58,791

 

Selling, general and administrative

 

92,578

 

84,874

 

Depreciation and amortization

 

85,522

 

82,646

 

Long-lived asset impairment

 

3,807

 

3,563

 

Restructuring Charges

 

4,822

 

—

 

Interest expense

 

28,308

 

27,874

 

Equity in income of non-consolidated affiliates

 

(4,693

)

(4,665

)

Other (income) expense, net

 

(2,434

)

(9,808

)

Provision for income taxes

 

9,409

 

14,983

 

Income from discontinued operations, net of tax

 

(18,727

)

(33,516

)

Gross margin

 

$

233,486

 

$

224,742