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Reportable Segments
 9 Months Ended
Sep. 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 nine months ended September 30, 2014 and 2013 (in thousands):

 

Three Months Ended

 

North
America
Contract
Operations

 

International
Contract
Operations

 

Aftermarket
Services

 

Fabrication

 

Reportable
Segments
Total

 

September 30, 2014:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

191,000

 

$

124,355

 

$

96,005

 

$

312,472

 

$

723,832

 

Gross margin(1)

 

108,547

 

76,372

 

20,495

 

61,071

 

266,485

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2013:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

152,627

 

$

117,545

 

$

102,157

 

$

403,255

 

$

775,584

 

Gross margin(1)

 

81,750

 

66,947

 

21,369

 

74,865

 

244,931

 

 

Nine Months Ended

 

North
America
Contract
Operations

 

International
Contract
Operations

 

Aftermarket
Services

 

Fabrication

 

Reportable
Segments
Total

 

September 30, 2014:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

529,463

 

$

369,787

 

$

284,412

 

$

922,448

 

$

2,106,110

 

Gross margin(1)

 

298,415

 

234,270

 

61,784

 

161,476

 

755,945

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2013:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$

472,784

 

$

344,975

 

$

285,137

 

$

1,318,490

 

$

2,421,386

 

Gross margin(1)

 

260,284

 

198,163

 

60,967

 

206,128

 

725,542

 

 

 

(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
September 30,

 

Nine Months Ended
September 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

Net income

 

$

42,158

 

$

45,261

 

$

97,915

 

$

128,556

 

Selling, general and administrative

 

94,806

 

93,581

 

283,096

 

269,460

 

Depreciation and amortization

 

98,256

 

81,305

 

295,734

 

244,702

 

Long-lived asset impairment

 

12,385

 

4,571

 

26,039

 

24,708

 

Restructuring charges

 

219

 

—

 

5,394

 

—

 

Interest expense

 

25,737

 

28,882

 

86,767

 

87,006

 

Equity in income of non-consolidated affiliates

 

(4,951

)

(4,778

)

(14,553

)

(14,165

)

Other (income) expense, net

 

4,663

 

(5,479

)

(1,442

)

(22,510

)

Provision for income taxes

 

11,215

 

16,709

 

31,494

 

55,316

 

Income from discontinued operations, net of tax

 

(18,003

)

(15,121

)

(54,499

)

(47,531

)

Gross margin

 

$

266,485

 

$

244,931

 

$

755,945

 

$

725,542