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Reportable Segments
 3 Months Ended
Mar. 31, 2015
Reportable Segments  
Reportable Segments

 

17.  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, 2015 and 2014 (in thousands):

 

Three months ended

 

North
America
Contract
Operations

 

International
Contract
Operations

 

Aftermarket
Services

 

Fabrication

 

Reportable
Segments
Total

 

March 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

Revenue from external customers

 

$
202,261 

 

$
120,691 

 

$
86,856 

 

$
319,274 

 

$
729,082 

 

Gross margin(1)

 
119,582 

 
76,352 

 
20,922 

 
52,156 

 
269,012 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 

 

 

 

(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,

 

 

 

2015

 

2014

 

Net income 

 

$
41,085

 

$
34,894

 

Selling, general and administrative

 
86,686

 
92,578

 

Depreciation and amortization

 
95,808

 
85,522

 

Long-lived asset impairment

 
12,732

 
3,807

 

Restructuring charges

 
4,790

 
4,822

 

Interest expense

 
27,298

 
28,308

 

Equity in income of non-consolidated affiliates

 
(5,006

)
(4,693

)

Other (income) expense, net

 
7,841

 
(2,434

)

Provision for income taxes

 
16,491

 
9,409

 

Income from discontinued operations, net of tax

 
(18,713

)
(18,727

)

Gross margin 

 

$
269,012

 

$
233,486