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Reportable Segments
 6 Months Ended
Jun. 30, 2014
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 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 tables present revenue and other financial information by reportable segment during the three and six months ended June 30, 2014 and 2013 (in thousands):

 

Three Months Ended

 

North
America
Contract
Operations

 

International
Contract
Operations

 

Aftermarket
Services

 

Fabrication

 

Reportable
Segments
Total

 

June 30, 2014:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

181,940

 

$

134,392

 

$

100,359

 

$

322,579

 

$

739,270

 

Gross margin(1)

 

104,426

 

87,890

 

21,062

 

42,596

 

255,974

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2013:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

162,207

 

$

117,872

 

$

99,368

 

$

456,459

 

$

835,906

 

Gross margin(1)

 

91,694

 

67,857

 

21,432

 

74,886

 

255,869

 

 

Six Months Ended

 

North
America
Contract
Operations

 

International
Contract
Operations

 

Aftermarket
Services

 

Fabrication

 

Reportable
Segments
Total

 

June 30, 2014:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

338,463

 

$

245,432

 

$

188,407

 

$

609,976

 

$

1,382,278

 

Gross margin(1)

 

189,868

 

157,898

 

41,289

 

100,405

 

489,460

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2013:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

320,157

 

$

227,430

 

$

182,980

 

$

915,235

 

$

1,645,802

 

Gross margin(1)

 

178,534

 

131,216

 

39,598

 

131,263

 

480,611

 

 

 

(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
June 30,

 

Six Months Ended
June 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Net income

 

$

20,863

 

$

24,504

 

$

55,757

 

$

83,295

 

Selling, general and administrative

 

95,712

 

91,005

 

188,290

 

175,879

 

Depreciation and amortization

 

111,956

 

80,751

 

197,478

 

163,397

 

Long-lived asset impairment

 

9,847

 

16,574

 

13,654

 

20,137

 

Restructuring charges

 

353

 

—

 

5,175

 

—

 

Interest expense

 

32,722

 

30,250

 

61,030

 

58,124

 

Equity in income of non-consolidated affiliates

 

(4,909

)

(4,722

)

(9,602

)

(9,387

)

Other (income) expense, net

 

(3,671

)

(7,223

)

(6,105

)

(17,031

)

Provision for income taxes

 

10,870

 

23,624

 

20,279

 

38,607

 

(Income) loss from discontinued operations, net of tax

 

(17,769

)

1,106

 

(36,496

)

(32,410

)

Gross margin

 

$

255,974

 

$

255,869

 

$

489,460

 

$

480,611