Basis of Presentation and Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2014

Basis of Presentation and Summary of Significant Accounting Policies

Summary of net income attributable to Exterran common stockholders used in the calculation of basic and diluted income per common share

The following table summarizes net income attributable to Exterran common stockholders used in the calculation of basic and diluted income per common share (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Income from continuing operations attributable to Exterran stockholders	$	16,047		$	25,856		$	24,524		$	52,986
Income from discontinued operations, net of tax	18,003			15,121			54,499			47,531
Less: Net income attributable to participating securities	(448		)	(754		)	(1,157		)	(2,793		)
Net income attributable to Exterran common stockholders	$	33,602		$	40,223		$	77,866		$	97,724

Schedule of potential shares of common stock that were included in computing diluted income attributable to Exterran common stockholders per common share

The following table shows the potential shares of common stock that were included in computing diluted income attributable to Exterran common stockholders per common share (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Weighted average common shares outstanding including participating securities	67,347		65,780		66,820		66,218
Less: Weighted average participating securities outstanding	(915	)	(1,211	)	(959	)	(1,840	)
Weighted average common shares outstanding — used in basic income per common share	66,432		64,569		65,861		64,378
Net dilutive potential common shares issuable:
On exercise of options and vesting of restricted stock units	468		565		527		537
On settlement of employee stock purchase plan shares	—		2		—		2
On exercise of warrants	3,506		**		2,929		**
On conversion of 4.25% convertible senior notes due 2014	*		**		**		**
On conversion of 4.75% convertible senior notes due 2014	*		*		*		**
Weighted average common shares outstanding — used in diluted income per common share	70,406		65,136		69,317		64,917

* Not applicable as the debt instrument was not outstanding during the period.

** Excluded from diluted income per common share as their inclusion would have been anti-dilutive.

Schedule of potential shares of common stock issuable, excluded from computation of diluted income attributable to Exterran common stockholders per common share

The following table shows the potential shares of common stock issuable that were excluded from computing diluted income attributable to Exterran common stockholders per common share as their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended September 30,		Nine Months Ended September 30,
	2014	2013	2014	2013
Net dilutive potential common shares issuable:
On exercise of options where exercise price is greater than average market value for the period	326	681	470	783
On exercise of options and vesting of restricted stock units	—	—	—	—
On settlement of employee stock purchase plan shares	—	—	—	—
On exercise of warrants	—	12,426	—	12,426
On conversion of 4.25% convertible senior notes due 2014	—	15,334	9,431	15,334
On conversion of 4.75% convertible senior notes due 2014	—	—	—	160
Net dilutive potential common shares issuable	326	28,441	9,901	28,703

Schedule of changes in accumulated other comprehensive income (loss) by component, net of tax, excluding noncontrolling interest

The following table presents the changes in accumulated other comprehensive income (loss) by component, net of tax, and excluding noncontrolling interest, during the nine months ended September 30, 2013 and 2014 (in thousands):

	Derivatives Cash Flow Hedges			Foreign Currency Translation Adjustment			Total
Accumulated other comprehensive income (loss), January 1, 2013	$	(2,984	)	$	26,893		$	23,909
Loss recognized in other comprehensive income (loss), net of tax	(633		)(1)	(3,640		)(3)	(4,273		)
Loss reclassified from accumulated other comprehensive income (loss), net of tax	1,643		(2)	7,491		(4)	9,134
Other comprehensive income attributable to Exterran stockholders	1,010			3,851			4,861
Accumulated other comprehensive income (loss), September 30, 2013	$	(1,974	)	$	30,744		$	28,770

Accumulated other comprehensive income (loss), January 1, 2014	$	(1,346	)	$	31,424		$	30,078
Loss recognized in other comprehensive income (loss), net of tax	(439		)(5)	(6,519		)(7)	(6,958		)
Loss reclassified from accumulated other comprehensive income (loss), net of tax	1,243		(6)	—			1,243
Other comprehensive income (loss) attributable to Exterran stockholders	804			(6,519		)	(5,715		)
Accumulated other comprehensive income (loss), September 30, 2014	$	(542	)	$	24,905		$	24,363

(1) During the three months ended September 30, 2013, we recognized a loss of $0.9 million and a tax benefit of $0.3 million, in other comprehensive income (loss), net of tax, related to changes in the fair value of derivative financial instruments. During the nine months ended September 30, 2013, we recognized a loss of $0.8 million and a tax benefit of $0.2 million, in other comprehensive income (loss), net of tax, related to changes in the fair value of derivative financial instruments.

(2) During the three months ended September 30, 2013, we reclassified a $0.8 million loss to interest expense and a tax benefit of $0.3 million to provision for income taxes in our condensed consolidated statements of operations from accumulated other comprehensive income (loss). During the nine months ended September 30, 2013, we reclassified a $2.5 million loss to interest expense and a tax benefit of $0.9 million to provision for income taxes in our condensed consolidated statements of operations from accumulated other comprehensive income (loss).

(3) During the three and nine months ended September 30, 2013, we recognized a gain of $2.5 million and a loss of $3.6 million, respectively, in other comprehensive income (loss), net of tax, related to changes in foreign currency translation adjustment.

(4) During the three months ended September 30, 2013, we reclassified a loss of $5.1 million related to foreign currency translation adjustment to income from discontinued operations, net of tax, in our condensed consolidated statement of operations. During the nine months ended September 30, 2013, we reclassified losses of $5.1 million and $2.4 million related to foreign currency translation adjustments to income from discontinued operations, net of tax, and long-lived asset impairment, respectively, in our condensed consolidated statements of operations. These amounts represent cumulative foreign currency translation adjustments associated with our contract operations and aftermarket services businesses in Canada (“Canadian Operations”) and a United Kingdom entity that previously had been recognized in accumulated other comprehensive income (loss). See Note 2 for further discussion of the sale of our Canadian Operations. Additionally, as discussed in Note 10, we sold the entity that owned our fabrication facility in the United Kingdom in July 2013 and, we recognized an impairment during the nine months ended September 30, 2013 based on the net transaction value set forth in our agreement to sell this entity.

(5) During the three months ended September 30, 2014, we recognized a gain of $0.3 million and a tax provision of $0.1 million, in other comprehensive income (loss), net of tax, related to changes in the fair value of derivative financial instruments. During the nine months ended September 30, 2014, we recognized a loss of $0.7 million and a tax benefit of $0.3 million, in other comprehensive income (loss), net of tax, related to changes in the fair value of derivative financial instruments.

(6) During the three months ended September 30, 2014, we reclassified a $0.7 million loss to interest expense and a tax benefit of $0.3 million to provision for income taxes in our condensed consolidated statements of operations from accumulated other comprehensive income (loss). During the nine months ended September 30, 2014, we reclassified a $1.9 million loss to interest expense and a tax benefit of $0.7 million to provision for income taxes in our condensed consolidated statements of operations from accumulated other comprehensive income (loss).

(7) During the three and nine months ended September 30, 2014, we recognized a loss of $6.3 million and $6.5 million, respectively, in other comprehensive income (loss), net of tax, related to changes in foreign currency translation adjustment.

Summary of carrying amount and fair value of debt

The following table summarizes the carrying amount and fair value of our debt as of September 30, 2014 and December 31, 2013 (in thousands):

	September 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Fixed rate debt	$	1,041,233	$	1,049,000	$	1,040,155	$	1,070,000
Floating rate debt	916,500		917,000		462,000		462,000
Total debt	$	1,957,733	$	1,966,000	$	1,502,155	$	1,532,000