10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(MARK ONE)

☒      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2020

OR

☐         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                   TO                  

Commission File No. 001-36875

EXTERRAN CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		47-3282259
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
11000 Equity Drive
Houston	Texas	77041
(Address of principal executive offices)		(Zip Code)

(281) 836-7000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Ticker symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	EXTN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of the common stock of the registrant outstanding as of August 3, 2020: 33,145,411 shares.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)	3
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Comprehensive Loss	5
Condensed Consolidated Statements of Stockholders’ Equity	6
Condensed Consolidated Statements of Cash Flows	7
Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	40
Item 4. Controls and Procedures	40
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	42
Item 1A. Risk Factors	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3. Defaults Upon Senior Securities	43
Item 4. Mine Safety Disclosures	43
Item 5. Other Information	43
Item 6. Exhibits	44
SIGNATURES	45

2

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

EXTERRAN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

(unaudited)

	June 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	27,051	$	16,683
Restricted cash	—		19
Accounts receivable, net of allowance of $9,999 and $6,019, respectively	213,857		202,337
Inventory (Note 4)	130,152		143,538
Contract assets (Note 2)	39,763		46,537
Other current assets	21,519		22,477
Current assets associated with discontinued operations (Note 3)	4,401		4,332
Total current assets	436,743		435,923
Property, plant and equipment, net (Note 5)	803,571		844,410
Operating lease right-of-use assets	27,145		26,783
Deferred income taxes	10,313		13,994
Intangible and other assets, net	75,139		93,300
Long-term assets held for sale	442		624
Long-term assets associated with discontinued operations (Note 3)	1,750		2,970
Total assets	$	1,355,103	$	1,418,004
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, trade	$	91,699	$	123,444
Accrued liabilities	99,617		104,081
Contract liabilities (Note 2)	100,069		82,854
Current operating lease liabilities	6,223		6,268
Current liabilities associated with discontinued operations (Note 3)	7,725		9,998
Total current liabilities	305,333		326,645
Long-term debt (Note 6)	483,843		443,587
Deferred income taxes	1,056		993
Long-term contract liabilities (Note 2)	136,571		156,262
Long-term operating lease liabilities	32,116		30,958
Other long-term liabilities	50,083		49,263
Long-term liabilities associated with discontinued operations (Note 3)	981		758
Total liabilities	1,009,983		1,008,466
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 50,000,000 shares authorized; zero issued	—		—
Common stock, $0.01 par value per share; 250,000,000 shares authorized; 37,763,679 and 37,508,286 shares issued, respectively	378		375
Additional paid-in capital	749,025		747,622
Accumulated deficit	(367,431)		(317,238)
Treasury stock — 4,609,834 and 4,467,600 common shares, at cost, respectively	(57,412)		(56,567)
Accumulated other comprehensive income	20,560		35,346
Total stockholders’ equity (Note 11)	345,120		409,538
Total liabilities and stockholders’ equity	$	1,355,103	$	1,418,004

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

EXTERRAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Revenues (Note 2):
Contract operations	$	77,945	$	89,684	$	172,733	$	175,384
Aftermarket services	24,993		30,113		52,902		57,415
Product sales	68,687		271,077		156,347		509,521
	171,625		390,874		381,982		742,320
Costs and expenses:
Cost of sales (excluding depreciation and amortization expense):
Contract operations	23,746		30,336		55,206		58,927
Aftermarket services	19,020		21,017		40,201		41,735
Product sales	70,824		240,606		155,263		450,141
Selling, general and administrative	34,407		45,636		72,459		89,088
Depreciation and amortization	32,958		36,319		65,568		74,536
Impairments (Note 8)	6,512		5,919		6,512		5,919
Restatement related charges (recoveries), net	—		(28)		—		20
Restructuring and other charges (Note 9)	7,677		5,788		8,865		6,172
Interest expense	9,638		9,928		19,591		18,091
Gain on extinguishment of debt (Note 6)	(2,644)		—		(2,644)		—
Other (income) expense, net	(2,641)		(477)		(2,347)		(1,722)
	199,497		395,044		418,674		742,907
Loss before income taxes	(27,872)		(4,170)		(36,692)		(587)
Provision for income taxes (Note 10)	3,895		10,592		13,225		19,732
Loss from continuing operations	(31,767)		(14,762)		(49,917)		(20,319)
Income (loss) from discontinued operations, net of tax (Note 3)	(122)		7,457		(276)		7,620
Net loss	$	(31,889)	$	(7,305)	$	(50,193)	$	(12,699)
Basic net loss per common share (Note 13):
Loss from continuing operations per common share	$	(0.97)	$	(0.42)	$	(1.53)	$	(0.57)
Income from discontinued operations per common share	—		0.21		—		0.21
Net loss per common share	$	(0.97)	$	(0.21)	$	(1.53)	$	(0.36)
Diluted net loss per common share (Note 13):
Loss from continuing operations per common share	$	(0.97)	$	(0.42)	$	(1.53)	$	(0.57)
Income from discontinued operations per common share	—		0.21		—		0.21
Net loss per common share	$	(0.97)	$	(0.21)	$	(1.53)	$	(0.36)
Weighted average common shares outstanding used in net loss per common share (Note 13):
Basic	32,803		35,149		32,720		35,393
Diluted	32,803		35,149		32,720		35,393

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

EXTERRAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net loss	$	(31,889)	$	(7,305)	$	(50,193)	$	(12,699)
Other comprehensive income (loss):
Foreign currency translation adjustment	(3,730)		420		(14,786)		(548)
Comprehensive loss	$	(35,619)	$	(6,885)	$	(64,979)	$	(13,247)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

EXTERRAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(unaudited)

	Common Stock		Additional Paid-in Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Income		Total
Balance, January 1, 2019	$	369	$	734,458	$	(208,677)	$	(11,560)	$	38,231	$	552,821
Cumulative-effect adjustment from adoption of ASC 842 Leases					(6,184)						(6,184)
Net loss					(5,394)						(5,394)
Foreign currency translation adjustment									(968)		(968)
Treasury stock purchased							(7,087)				(7,087)
Stock-based compensation, net of forfeitures	6		3,990								3,996
Balance, March 31, 2019	$	375	$	738,448	$	(220,255)	$	(18,647)	$	37,263	$	537,184
Net loss					(7,305)						(7,305)
Foreign currency translation adjustment									420		420
Transfers from Archrock, Inc.			420								420
Treasury stock purchased							(14,224)				(14,224)
Stock-based compensation, net of forfeitures			3,487								3,487
Balance, June 30, 2019	$	375	$	742,355	$	(227,560)	$	(32,871)	$	37,683	$	519,982
Balance, January 1, 2020	$	375	$	747,622	$	(317,238)	$	(56,567)	$	35,346	$	409,538
Net loss					(18,304)						(18,304)
Foreign currency translation adjustment									(11,056)		(11,056)
Treasury stock purchased							(835)				(835)
Stock-based compensation, net of forfeitures	2		283								285
Balance, March 31, 2020	$	377	$	747,905	$	(335,542)	$	(57,402)	$	24,290	$	379,628
Net loss					(31,889)						(31,889)
Foreign currency translation adjustment									(3,730)		(3,730)
Treasury stock purchased							(10)				(10)
Stock-based compensation, net of forfeitures	1		1,120								1,121
Balance, June 30, 2020	$	378	$	749,025	$	(367,431)	$	(57,412)	$	20,560	$	345,120

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

EXTERRAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(50,193)	$	(12,699)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization	65,568		74,536
Impairments	6,512		5,919
Amortization of deferred financing costs	1,256		1,256
(Income) loss from discontinued operations, net of tax	276		(7,620)
Provision for doubtful accounts	3,980		—
Gain on sale of property, plant and equipment	(166)		(1,132)
Gain on remeasurement of intercompany balances	(3,198)		(1,037)
Loss on foreign currency derivatives	—		794
Gain on extinguishment of debt	(2,644)		—
Stock-based compensation expense	1,406		7,483
Deferred income tax expense (benefit)	3,892		(4,281)
Changes in assets and liabilities:
Accounts receivable and notes	(16,753)		(15,746)
Inventory	8,857		(29,260)
Contract assets	7,677		44,049
Other current assets	3,622		7,721
Accounts payable and other liabilities	(37,824)		(13,808)
Contract liabilities	14,225		33,123
Other	5,374		(5,472)
Net cash provided by continuing operations	11,867		83,826
Net cash provided by (used in) discontinued operations	(1,176)		3,102
Net cash provided by operating activities	10,691		86,928
Cash flows from investing activities:
Capital expenditures	(41,251)		(126,116)
Proceeds from sale of property, plant and equipment	236		4,149
Settlement of foreign currency derivatives	—		(794)
Net cash used in investing activities	(41,015)		(122,761)
Cash flows from financing activities:
Proceeds from borrowings of debt	225,500		386,000
Repayments of debt	(183,316)		(331,225)
Transfer from Archrock, Inc.	—		420
Purchases of treasury stock (Note 11)	(845)		(21,311)
Net cash provided by financing activities	41,339		33,884
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(666)		(332)
Net increase (decrease) in cash, cash equivalents and restricted cash	10,349		(2,281)
Cash, cash equivalents and restricted cash at beginning of period	16,702		19,478
Cash, cash equivalents and restricted cash at end of period	$	27,051	$	17,197
Supplemental disclosure of non-cash transactions:
Accrued capital expenditures	$	5,205	$	14,758

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

EXTERRAN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Description of Business and Basis of Presentation

Description of Business

Exterran Corporation (together with its subsidiaries, “Exterran Corporation,” the “Company,” “our,” “we” or “us”), a Delaware corporation formed in March 2015, is a global systems and process company offering solutions in the oil, gas, water and power markets. We are a leader in natural gas processing and treatment and compression products and services, providing critical midstream infrastructure solutions to customers throughout the world. We provide our products and services to a global customer base consisting of companies engaged in all aspects of the oil and natural gas industry, including large integrated oil and natural gas companies, national oil and natural gas companies, independent oil and natural gas producers and oil and natural gas processors, gatherers and pipeline operators. Our manufacturing facilities are located in the U.S., Singapore and the United Arab Emirates. We operate in three primary business lines: contract operations, aftermarket services and product sales.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Exterran Corporation included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.”) (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are not required in these interim financial statements and have been condensed or omitted. Management believes that the information furnished includes all adjustments of a normal recurring nature that are necessary to fairly state our consolidated financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements presented in our Annual Report on Form 10-K for the year ended December 31, 2019. That report contains a comprehensive summary of our accounting policies. The interim results reported herein are not necessarily indicative of results for a full year. Certain reclassifications have been made for the prior year period to conform to the current year presentation.

We refer to the condensed consolidated financial statements collectively as “financial statements,” and individually as “balance sheets,” “statements of operations,” “statements of comprehensive income (loss),” “statements of stockholders’ equity” and “statements of cash flows” herein.

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption across most industries. Efforts to mitigate the spread of COVID-19 have also resulted in decreased energy demand and additional weakness in energy pricing. To help control the spread of the virus and protect the health and safety of our employees and customers, we began temporarily closing our locations or modifying operating hours in our locations around the world. This was in response to governmental requirements including “stay-at-home” orders and similar mandates and in some of our locations we voluntarily went beyond the requirements of local government authorities. The broader implications of COVID-19 on our long-term future results of operations and overall financial condition remains uncertain. Due to the rapid market deterioration during the three months ended March 31, 2020, we concluded that a trigger existed and that we should evaluate our long-term assets for impairment. Therefore, we updated our impairment analysis and concluded that no impairment existed during the three months ended March 31, 2020. However, see Note 8 for discussion of impairment recorded on assets related to our U.S. compression business.

Recent Accounting Pronouncements

We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined to be not applicable.

8

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326). The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. On January 1, 2020, we adopted this update using a modified retrospective approach. The adoption of this update was immaterial to our financial statements. For more information regarding the allowance for doubtful accounts, see Note 2.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The update modifies the disclosure requirements on fair value measurements by removing, modifying and adding certain disclosure requirements. On January 1, 2020, we adopted this update. The adoption of this update was immaterial to our financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update simplifies the accounting for income taxes and is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the potential impact of the update on our financial statements.

Note 2 - Revenue

Disaggregation of Revenue

The following tables present disaggregated revenue by products and services lines and by geographical regions for the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Revenue by Products and Services	2020		2019		2020		2019
Contract Operations Segment:
Contract operations services (1)	$	77,945	$	89,684	$	172,733	$	175,384
Aftermarket Services Segment:
Operation and maintenance services (1)	$	12,279	$	14,102	$	25,218	$	26,775
Part sales (2)	9,685		12,193		20,509		21,989
Other services (1)	3,029		3,818		7,175		8,651
Total aftermarket services	$	24,993	$	30,113	$	52,902	$	57,415
Product Sales Segment:
Compression equipment (1)	$	54,766	$	170,263	$	123,485	$	315,702
Processing and treating equipment (1)	8,807		99,863		20,616		189,083
Production equipment (2)	—		23		578		2,458
Other product sales (1) (2)	5,114		928		11,668		2,278
Total product sales revenues	$	68,687	$	271,077	$	156,347	$	509,521
Total revenues	$	171,625	$	390,874	$	381,982	$	742,320

⁽¹⁾Revenue recognized over time.

⁽²⁾Revenue recognized at a point in time.

9

	Three Months Ended June 30,				Six Months Ended June 30,
Revenue by Geographical Regions	2020		2019		2020		2019
North America	$	49,922	$	202,751	$	108,461	$	383,756
Latin America	58,352		76,161		135,149		154,648
Middle East and Africa	52,373		100,469		108,086		183,260
Asia Pacific	10,978		11,493		30,286		20,656
Total revenues	$	171,625	$	390,874	$	381,982	$	742,320

The North America region is primarily comprised of our operations in the U.S. The Latin America region is primarily comprised of our operations in Argentina, Bolivia, Brazil and Mexico. The Middle East and Africa region is primarily comprised of our operations in Bahrain, Iraq, Oman, Nigeria and the United Arab Emirates. The Asia Pacific region is primarily comprised of our operations in China, Indonesia, Singapore and Thailand.

The following table summarizes the expected timing of revenue recognition from unsatisfied performance obligations (commonly referred to as backlog) as of June 30, 2020 (in thousands):

	Contract Operations Segment		Product Sales Segment
Remainder of 2020	$	133,697	$	158,924
2021	245,022		263,709
2022	195,696		103,321
2023	172,890		12,000
2024	148,288		9,000
Thereafter	358,369		29,316
Total backlog	$	1,253,962	$	576,270

Certain of our aftermarket services contracts are subject to cancellation or modification at the election of the customer.

If the primary component of our contract operations contracts is the lease component, the contracts are accounted for as operating leases. For these contracts, revenues are recognized on a straight-line basis. As of June 30, 2020, the total value of our contracts operations backlog accounted for as operating leases was approximately $167 million, of which $18 million is expected to be recognized in the remainder of 2020, $36 million is expected to be recognized in 2021, $39 million is expected to be recognized in 2022, $44 million is expected to be recognized in 2023 and $26 million is expected to be recognized in 2024. Contract operations revenue recognized as operating leases for the six months ended June 30, 2020 was approximately $16 million. Our product sales backlog includes contracts where there is a significant financing component. As of June 30, 2020, we had approximately $43 million expected to be recognized in future periods as interest income within our product sales segment.

Contract Assets and Contract Liabilities

The following table provides information about accounts receivables, net, contract assets and contract liabilities from contracts with customers (in thousands):

	June 30, 2020		December 31, 2019
Accounts receivables, net	$	213,857	$	202,337
Contract assets and contract liabilities:
Current contract assets	39,763		46,537
Long-term contract assets	6,726		16,280
Current contract liabilities	100,069		82,854
Long-term contract liabilities	136,571		156,262

10

During the six months ended June 30, 2020, revenue recognized from contract operations services included $15.3 million of revenue deferred in previous periods. Revenue recognized during the six months ended June 30, 2020 from product sales performance obligations partially satisfied in previous periods was $129.5 million, of which $29.3 million was included in billings in excess of costs at the beginning of the period. The decrease in current contract assets during the six months ended June 30, 2020 was primarily driven by the timing of billings on product sales in North America. The increase in current contract liabilities during the six months ended June 30, 2020 was primarily driven by the progression of product sales projects in the Middle East and Africa region. The decrease in long-term contract liabilities during the six months ended June 30, 2020 was primarily driven by recognition of revenue previously received from customers in the Latin America region.

Allowance for Doubtful Accounts

The Company estimates its reserves using information about past events, current conditions and risk characteristics of each customer, and reasonable and supportable forecasts relevant to assessing risk associated with the collectability of accounts receivables, contract assets and long-term note receivables. The Company’s customer base have generally similar collectability risk characteristics, although larger customers may have lower risk than smaller independent customers. As a result of the expected impact of COVID-19 on our customers, in the six months ended June 30, 2020, we recorded an additional allowance for doubtful accounts of approximately $4.0 million. The allowance for doubtful accounts as of June 30, 2020 and changes for the six months then ended are as follows (in thousands):

Balance at December 31, 2019	$	6,019
Current period provision for expected credit losses	3,980
Balance at June 30, 2020	$	9,999

Note 3 - Discontinued Operations

In the first quarter of 2016, we began executing the exit of our Belleli EPC business that has historically been comprised of engineering, procurement and construction for the manufacture of tanks for tank farms and the manufacture of evaporators and brine heaters for desalination plants in the Middle East (referred to as “Belleli EPC” or the “Belleli EPC business” herein) by ceasing the bookings of new orders. As of the fourth quarter of 2017, we had substantially exited our Belleli EPC business and, in accordance with GAAP, it is reflected as discontinued operations in our financial statements for all periods presented. Although we have reached mechanical completion on all remaining Belleli EPC contracts, we are still subject to risks and uncertainties potentially resulting from warranty obligations, customer or supplier claims against us, settlement of claims against customers, completion of demobilization activities and litigation developments. The facility previously utilized to manufacture products for our Belleli EPC business has been repurposed to manufacture product sales equipment. As such, certain personnel, buildings, equipment and other assets that were previously related to our Belleli EPC business remain a part of our continuing operations. As a result, activities associated with our ongoing operations at our repurposed facility are included in continuing operations.

The following table summarizes the operating results of discontinued operations (in thousands):

	Three Months Ended June 30, 2020		Three Months Ended June 30, 2019
	Belleli EPC		Venezuela		Belleli EPC		Total
Revenue	$	—	$	—	$	97	$	97
Cost of sales (excluding depreciation and amortization expense)	88		—		(1,283)		(1,283)
Selling, general and administrative	101		33		149		182
Other (income) expense, net	5		—		(4)		(4)
Benefit from income taxes	(72)		—		(6,255)		(6,255)
Income (loss) from discontinued operations, net of tax	$	(122)	$	(33)	$	7,490	$	7,457

11

	Six Months Ended June 30, 2020		Six Months Ended June 30, 2019
	Belleli EPC		Venezuela		Belleli EPC		Total
Revenue	$	124	$	—	$	234	$	234
Cost of sales (excluding depreciation and amortization expense)	184		—		(1,599)		(1,599)
Selling, general and administrative	214		68		690		758
Other (income) expense, net	49		—		(332)		(332)
Benefit from income taxes	(47)		—		(6,213)		(6,213)
Income (loss) from discontinued operations, net of tax	$	(276)	$	(68)	$	7,688	$	7,620

The following table summarizes the balance sheet data for discontinued operations (in thousands):

	June 30, 2020		December 31, 2019
	Belleli EPC		Belleli EPC
Accounts receivable	$	3,852	$	3,990
Contract assets	459		46
Other current assets	90		296
Total current assets associated with discontinued operations	4,401		4,332
Intangible and other assets, net	1,750		2,970
Total assets associated with discontinued operations	$	6,151	$	7,302
Accounts payable	$	318	$	1,503
Accrued liabilities	4,909		5,959
Contract liabilities	2,498		2,536
Total current liabilities associated with discontinued operations	7,725		9,998
Other long-term liabilities	981		758
Total liabilities associated with discontinued operations	$	8,706	$	10,756

Note 4 - Inventory

Inventory consisted of the following amounts (in thousands):

	June 30, 2020		December 31, 2019
Parts and supplies	$	75,532	$	92,005
Work in progress	45,964		44,565
Finished goods	8,656		6,968
Inventory	$	130,152	$	143,538

Note 5 - Property, Plant and Equipment, Net

Property, plant and equipment, net, consisted of the following (in thousands):

	June 30, 2020		December 31, 2019
Compression equipment, processing facilities and other fleet assets	$	1,571,949	$	1,607,769
Land and buildings	67,136		67,187
Transportation and shop equipment	58,303		59,693
Computer software	50,827		51,663
Other	40,028		38,111
	1,788,243		1,824,423
Accumulated depreciation	(984,672)		(980,013)
Property, plant and equipment, net	$	803,571	$	844,410

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Note 6 - Debt

Debt consisted of the following (in thousands):

	June 30, 2020		December 31, 2019
Revolving credit facility due October 2023	$	132,500	$	74,000
8.125% senior notes due May 2025	356,000		375,000
Other debt	29		237
Unamortized deferred financing costs of 8.125% senior notes	(4,657)		(5,413)
Total debt	483,872		443,824
Less: Amounts due within one year (1)	(29)		(237)
Long-term debt	$	483,843	$	443,587

⁽¹⁾ Short-term debt and the current portion of long-term debt are included in accrued liabilities in our balance sheets.

Revolving Credit Facility Due October 2023

We and our wholly owned subsidiary, Exterran Energy Solutions, L.P. (“EESLP”), are parties to an amended and restated credit agreement (the “Credit Agreement”) consisting of a $700.0 million revolving credit facility expiring in October 2023.

As of June 30, 2020, we had $132.5 million in outstanding borrowings and $14.2 million in outstanding letters of credit under our revolving credit facility. At June 30, 2020, taking into account guarantees through letters of credit, we had undrawn capacity of $553.3 million under our revolving credit facility. Our Credit Agreement limits our Total Debt to EBITDA ratio (as defined in the Credit Agreement) on the last day of the fiscal quarter to no greater than 4.50 to 1.0. As a result of this limitation, $239.4 million of the $553.3 million of undrawn capacity under our revolving credit facility was available for additional borrowings as of June 30, 2020.

8.125% Senior Notes Due May 2025

In April 2017, our 100% owned subsidiaries EESLP and EES Finance Corp. issued $375.0 million aggregate principal amount of 8.125% senior unsecured notes due 2025 (the “2017 Notes”). We guarantee the 2017 Notes on a senior unsecured basis. We may redeem the 2017 Notes at any time in cash, in whole or part, at certain redemption prices, including the applicable make-whole premium plus accrued and unpaid interest, if any, to the date of redemption. During the second quarter of 2020, we purchased and retired $19.0 million principal amount of our 2017 Notes for $16.3 million (including $0.2 million of accrued interest) resulting in a gain on extinguishment of debt of $2.6 million. The gain was calculated as the difference between the repurchase price and the carrying amount of the 2017 Notes, partially offset by $0.2 million in related deferred financing costs. The gain on extinguishment of debt is included as a separate item in our statements of operations. During July 2020, we purchased and retired an additional $5.0 million of our 2017 Notes for $4.3 million including $0.1 million of accrued interest.

Note 7 - Fair Value Measurements

The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the following three categories:

•Level 1 — Quoted unadjusted prices for identical instruments in active markets to which we have access at the date of measurement.

•Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered market makers.

•Level 3 — Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information.

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Nonrecurring Fair Value Measurements

The following table presents our assets and liabilities measured at fair value on a nonrecurring basis during the six months ended June 30, 2020 and 2019, with pricing levels as of the date of valuation (in thousands):

	Six months ended June 30, 2020						Six months ended June 30, 2019
	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)
Inventory (1)	$	—	$	—	$	11,625	$	—	$	—	$	—
Impaired long-lived assets (1)	—		—		19,080		—		—		—
Impaired assets- assets held for sale (2)	—		—		—		—		—		5,445
Long-term note receivable (3)	—		—		15,039		—		—		14,899

(1)Our estimate of the fair value of the inventory and long-lived assets as of June 30, 2020 are part of the U.S. compression fabrication business and was based on the expected values upon winding down the business.

(2)Our estimated fair value of the impaired assets held for sale during the six months ended June 30, 2019 was based on the expected proceeds from the sale of the assets.

(3)Our estimate of the fair value of a note receivable was discounted based on a settlement period of eight years and a discount rate of 6.2%. The undiscounted value of the note receivable, including interest, as of June 30, 2020 was $15.5 million.

Financial Instruments

Our financial instruments consists of cash, restricted cash, receivables, payables and debt. At June 30, 2020 and December 31, 2019, the estimated fair values of cash, restricted cash, receivables and payables approximated their carrying amounts as reflected in our balance sheets due to the short-term nature of these financial instruments.

The fair value of the 2017 Notes was estimated based on model derived calculations using market yields observed in active markets, which are Level 2 inputs. As of June 30, 2020 and December 31, 2019, the carrying amount of the 2017 Notes, excluding unamortized deferred financing costs, of $356.0 million and $375.0 million was estimated to have a fair value of $295.0 million and $371.0 million, respectively. Due to the variable rate nature of our revolving credit facility, the carrying value as of June 30, 2020 and December 31, 2019 approximated the fair value as the rate was comparable to the then-current market rate at which debt with similar terms could have been obtained.

Note 8 - Impairments

We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressor units from our active fleet, indicate that the carrying amount of an asset may not be recoverable.

During the second quarter of 2020, in connection with our review of options for our U.S. compression fabrication business within our product sales segment, we reviewed the assets in this business compared to our estimate of future cash flows and recorded a $6.5 million impairment charge for the three and six months ended June 30, 2020 to adjust the carrying value to our estimate of fair market value.

During the second quarter of 2019, we classified certain long-lived assets as assets held for sale in our balance sheets. In conjunction with the planned disposition of these units, we recorded impairment charges of $5.9 million to write-down these assets to their approximate fair values for the three and six months ended June 30, 2019 based on the expected net proceeds. The fair value of these long-lived assets after impairment was $5.4 million.

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Note 9 - Restructuring and Other Charges

The energy industry’s focus on cash flow, capital discipline and improving returns has caused delays in the timing of new equipment orders. As a result, in the second quarter of 2019, we began the consolidation of two of our manufacturing facilities located in Houston, Texas into one facility and announced a cost reduction plan primarily focused on workforce reductions. We incurred restructuring and other charges associated with these activities of $7.7 million and $8.9 million for the three and six months ended June 30, 2020, respectively and $5.9 million for the three and six months ended June 30, 2019. These charges are reflected as restructuring and other charges in our statements of operations and accrued liabilities on our balance sheets. The cost reduction plan is expected to be completed in the second half of 2020 and we expect to settle these charges within the next twelve months in cash. At this time, we cannot currently estimate the total restructuring costs that will be incurred as a result of this cost reduction plan.

In the second quarter of 2018, we initiated a relocation plan in the Latin American region to better align our contract operations business with our customers. As a result of this plan, during the six months ended June 30, 2019, we incurred restructuring and other charges of $0.2 million related to relocation costs. The charges incurred in conjunction with this relocation plan are included in restructuring and other charges in our statements of operations. In the second quarter of 2019, we completed restructuring activities related to the relocation plan.

The following table summarizes the changes to our accrued liability balance related to restructuring and other charges for the six months ended June 30, 2020 and 2019 (in thousands):

	Cost Reduction Plan		Relocation Plan		Total
Beginning balance at January 1, 2019	$	—	$	309	$	309
Additions for costs expensed	5,928		244		6,172
Reductions for payments	(336)		(553)		(889)
Ending balance at June 30, 2019	$	5,592	$	—	$	5,592
Beginning balance at January 1, 2020	$	2,281	$	—	$	2,281
Additions for costs expensed, net	8,865		—		8,865
Reductions for payments	(3,214)		—		(3,214)
Foreign exchange impact	(404)		—		(404)
Ending balance at June 30, 2020	$	7,528	$	—	$	7,528

The following table summarizes the components of charges included in restructuring and other charges in our statements of operations for the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Employee termination benefits	$	4,924	$	5,928	$	5,259	$	5,928
Consulting fees	2,364		—		2,564		—
Relocation costs	—		(140)		165		244
Other	389		—		877		—
Total restructuring and other charges	$	7,677	$	5,788	$	8,865	$	6,172

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The following table summarizes the components of charges included in restructuring and other charges incurred since the announcement of the cost reduction plan in the second quarter of 2019 (in thousands):

	Total
Employee termination benefits	$	12,295
Consulting fees	3,205
Relocation costs	907
Other	877
Total restructuring and other charges	$	17,284

Note 10 - Provision for Income Taxes

Our effective tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn, or losses we incur, in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. Our effective tax rate is also affected by valuation allowances recorded against loss carryforwards in the U.S. and certain other jurisdictions, foreign withholding taxes and changes in foreign currency exchange rates.

The following items had the most significant impact on the difference between our statutory U.S. federal income tax rate of 21.0% and our effective tax rate of (14.0)% for the three months ended June 30, 2020: (i) a (9.8)% negative impact resulting from unrecognized tax benefits under FASB’s Interpretation No. 48 of Financial Accounting Standard 109 (“FIN 48”), (ii) a (3.4)% negative impact resulting from foreign currency devaluations in Argentina, and (iii) a (14.7)% negative impact resulting from the recording of valuation allowances against U.S. deferred tax assets.

The following items had the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% and our effective tax rate of (36.0)% for the six months ended June 30, 2020: (i) a (16.3)% negative impact resulting primarily from rate differences between U.S. and foreign jurisdictions including foreign withholding taxes, (ii) a (9.2)% negative impact resulting from unrecognized tax benefits under FIN 48, and (iii) a (20.2)% negative impact resulting from the recording of valuation allowances against U.S. deferred tax assets.

Our effective tax rate decreased for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to an increase in valuation allowances recorded in the U.S., a decrease in foreign withholding tax, an increase in the FIN 48 reserve and a decrease in tax related to foreign exchange movement in Argentina in 2019.

Note 11 - Stockholders’ Equity

Share Repurchase Program

On February 20, 2019, our board of directors approved a share repurchase program under which the Company is authorized to purchase up to $100.0 million of its outstanding common stock through February 2022. The timing and method of any repurchases under the program will depend on a variety of factors, including prevailing market conditions among others. Purchases under the program may be suspended or discontinued at any time and we have no obligation to repurchase any amount of our common shares under the program. Shares of common stock acquired through the repurchase program are held in treasury at cost. During the six months ended June 30, 2019, we repurchased 1,290,078 shares of our common stock for $18.8 million in connection with our share repurchase program. During the six months ended June 30, 2020, we did not repurchase any shares under this program. As of June 30, 2020, the remaining authorized repurchase amount under the share repurchase program was $57.7 million.

Additionally, treasury stock purchased during the six months ended June 30, 2020 and 2019 included shares withheld to satisfy employees’ tax withholding obligations in connection with vesting of restricted stock awards.

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Note 12 - Stock-Based Compensation

Stock Options

There were no stock options granted during the six months ended June 30, 2020 and 2019.

Restricted Stock, Restricted Stock Units and Performance Units

For grants of restricted stock, restricted stock units and performance units, we recognize compensation expense over the applicable vesting period equal to the fair value of our common stock at the grant date. Grants of restricted stock, restricted stock units and performance units generally vest one third per year on each of the first three anniversaries of the grant date. Certain grants of restricted stock vest on the third anniversary of the grant date and certain grants of performance units vest on the second anniversary of the grant date.

The table below presents the changes in restricted stock, restricted stock units and performance units for our common stock during the six months ended June 30, 2020.

	Equity Awards			Liability Awards
	Shares (in thousands)	Weighted Average Grant-Date Fair  Value Per Share		Shares (in thousands)	Weighted Average Grant-Date Fair  Value Per Share
Non-vested awards, January 1, 2020	842	$	22.79	318	$	17.01
Granted	149	7.03		1,182	8.54
Vested	(411)	20.91		(80)	26.24
Cancelled	(208)	29.72		(22)	17.01
Non-vested awards, June 30, 2020	372	14.68		1,398	9.32

As of June 30, 2020, we estimate $13.3 million of unrecognized compensation cost related to unvested restricted stock, restricted stock units and performance units issued to our employees to be recognized over the weighted-average vesting period of 1.7 years.

Note 13 - Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed using the two-class method, which is an earnings allocation formula that determines net income (loss) per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Under the two-class method, basic net income (loss) per common share is determined by dividing net income (loss) after deducting amounts allocated to participating securities, by the weighted average number of common shares outstanding for the period. Participating securities include unvested restricted stock and restricted stock units that have non-forfeitable rights to receive dividends or dividend equivalents, whether paid or unpaid. During periods of net loss from continuing operations, no effect is given to participating securities because they do not have a contractual obligation to participate in our losses.

Diluted net income (loss) per common share is computed using the weighted average number of common shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding options to purchase common stock and non-participating restricted stock units, unless their effect would be anti-dilutive.

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The following table presents a reconciliation of basic and diluted net loss per common share for the three and six months ended June 30, 2020 and 2019 (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Numerator for basic and diluted net loss per common share:
Loss from continuing operations	$	(31,767)	$	(14,762)	$	(49,917)	$	(20,319)
Income (loss) from discontinued operations, net of tax	(122)		7,457		(276)		7,620
Less: Net income attributable to participating securities	—		—		—		—
Net loss — used in basic and diluted net loss per common share	$	(31,889)	$	(7,305)	$	(50,193)	$	(12,699)
Weighted average common shares outstanding including participating securities	33,175		35,944		33,161		36,198
Less: Weighted average participating securities outstanding	(372)		(795)		(441)		(805)
Weighted average common shares outstanding — used in basic net loss per common share	32,803		35,149		32,720		35,393
Net dilutive potential common shares issuable:
On exercise of options and vesting of restricted stock units	*		*		*		*
Weighted average common shares outstanding — used in diluted net loss per common share	32,803		35,149		32,720		35,393
Net loss per common share:
Basic	$	(0.97)	$	(0.21)	$	(1.53)	$	(0.36)
Diluted	$	(0.97)	$	(0.21)	$	(1.53)	$	(0.36)

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

The following table shows the potential shares of common stock issuable for the three and six months ended June 30, 2020 and 2019 that were excluded from computing diluted net loss per common share as their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended June 30,		Six Months Ended June 30,
	2020	2019	2020	2019
Net dilutive potential common shares issuable:
On exercise of options where exercise price is greater than average market value	30	69	43	71
Net dilutive potential common shares issuable	30	69	43	71

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Note 14 - Commitments and Contingencies

Contingencies

In addition to U.S. federal, state and local and foreign income taxes, we are subject to a number of taxes that are not income-based. As many of these taxes are subject to audit by the taxing authorities, it is possible that an audit could result in additional taxes due. We accrue for such additional taxes when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. As of June 30, 2020 and December 31, 2019, we had accrued $3.5 million and $3.7 million, respectively, for the outcomes of non-income-based tax audits. We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued. We do not accrue for unasserted claims for tax audits unless we believe the assertion of a claim is probable, it is probable that it will be determined that the claim is owed and we can reasonably estimate the claim or range of the claim. We do not have any unasserted claims from non-income based tax audits that we have determined are probable of assertion. We also believe the likelihood is remote that the impact of potential unasserted claims from non-income-based tax audits could be material to our financial position, but it is possible that the resolution of future audits could be material to our results of operations or cash flows for the period in which the resolution occurs.

Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions. As is customary in our industry, we review our safety equipment and procedures and carry insurance against some, but not all, risks of our business. Our insurance coverage includes property damage, general liability, commercial automobile liability and other coverage we believe is appropriate. We believe that our insurance coverage is customary for the industry and adequate for our business; however, losses and liabilities not covered by insurance would increase our costs.

Additionally, we are substantially self-insured for workers’ compensation and employee group health claims in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks. Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages.

Litigation and Claims

In the ordinary course of business, we are involved in various pending or threatened legal actions. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from any of these actions will not have a material adverse effect on our financial position, results of operations or cash flows. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our financial position, results of operations or cash flows.

Indemnifications

On November 3, 2015, Archrock, Inc. (named Exterran Holdings, Inc. prior to November 3, 2015) (“Archrock”) completed the spin-off (the ‘‘Spin-off”) of its international contract operations, international aftermarket services and global fabrication businesses into an independent, publicly traded company named Exterran Corporation.

In conjunction with, and effective as of the completion of, the Spin-off, we entered into the separation and distribution agreement with Archrock, which governs, among other things, the treatment between Archrock and us relating to certain aspects of indemnification, insurance, confidentiality and cooperation. Generally, the separation and distribution agreement provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of Archrock’s business with Archrock. Pursuant to the agreement, we and Archrock will generally release the other party from all claims arising prior to the Spin-off that relate to the other party’s business, subject to certain exceptions. Additionally, in conjunction with, and effective as of the completion of, the Spin-off, we entered into the tax matters agreement with Archrock. Under the tax matters agreement and subject to certain exceptions, we are generally liable for, and indemnify Archrock against, taxes attributable to our business, and Archrock is generally liable for, and indemnify us against, all taxes attributable to its business. We are generally liable for, and indemnify Archrock against, 50% of certain taxes that are not clearly attributable to our business or Archrock’s business. Any payment made by us to Archrock, or by Archrock to us, is treated by all parties for tax purposes as a nontaxable distribution or capital contribution, respectively, made immediately prior to the Spin-off.

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Note 15 - Reportable Segments

Our chief operating decision maker manages business operations, evaluates performance and allocates resources based upon the type of product or service provided. We have three reportable segments: contract operations, aftermarket services and product sales. In our contract operations segment, we provide processing, treating, compression and water treatment services through the operation of our natural gas compression equipment, crude oil and natural gas production and process equipment and water treatment equipment for our customers. In our aftermarket services segment, we sell parts and components and provide operations, maintenance, repair, overhaul, upgrade, startup and commissioning and reconfiguration services to customers who own their own oil and natural gas compression, production, processing, treating and related equipment. In our product sales segment, we design, engineer, manufacture, install and sell equipment used in the treating and processing of crude oil, natural gas and water as well natural gas compression packages to our customers throughout the world and for use in our contract operations business line.

We evaluate the performance of our segments based on gross margin for each segment. Revenue only includes 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 for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended	Contract Operations		Aftermarket Services		Product Sales		Reportable Segments Total
June 30, 2020:
Revenue	$	77,945	$	24,993	$	68,687	$	171,625
Gross margin (1)	54,199		5,973		(2,137)		58,035
June 30, 2019:
Revenue	$	89,684	$	30,113	$	271,077	$	390,874
Gross margin (1)	59,348		9,096		30,471		98,915

Six Months Ended	Contract Operations		Aftermarket Services		Product Sales		Reportable Segments Total
June 30, 2020:
Revenue	$	172,733	$	52,902	$	156,347	$	381,982
Gross margin (1)	117,527		12,701		1,084		131,312
June 30, 2019:
Revenue	$	175,384	$	57,415	$	509,521	$	742,320
Gross margin (1)	116,457		15,680		59,380		191,517

⁽¹⁾ Gross margin is defined as revenue less cost of sales (excluding depreciation and amortization expense).

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The following table reconciles loss before income taxes to total gross margin (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Loss before income taxes	$	(27,872)	$	(4,170)	$	(36,692)	$	(587)
Selling, general and administrative	34,407		45,636		72,459		89,088
Depreciation and amortization	32,958		36,319		65,568		74,536
Impairments	6,512		5,919		6,512		5,919
Restatement related charges (recoveries), net	—		(28)		—		20
Restructuring and other charges	7,677		5,788		8,865		6,172
Interest expense	9,638		9,928		19,591		18,091
Gain on extinguishment of debt	(2,644)		—		(2,644)		—
Other (income) expense, net	(2,641)		(477)		(2,347)		(1,722)
Total gross margin	$	58,035	$	98,915	$	131,312	$	191,517

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes thereto included in the Condensed Consolidated Financial Statements in Part I, Item 1 (“Financial Statements”) of this report and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019.

Disclosure Regarding Forward-Looking Statements

This report contains “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this report are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, statements regarding our business growth strategy and projected costs; future financial position; the sufficiency of available cash flows to fund continuing operations; the expected amount of our capital expenditures; anticipated cost savings, future revenue, gross margin and other financial or operational measures related to our business and our primary business segments; the future value of our equipment; and plans and objectives of our management for our future operations. You can identify many of these statements by looking for words such as “believe,” “expect,” “intend,” “project,” “anticipate,” “estimate,” “will continue” or similar words or the negative thereof.

Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will prove to be correct. Known material factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2019, and those set forth from time to time in our filings with the Securities and Exchange Commission (“SEC”), which are available through our website at www.exterran.com and through the SEC’s website at www.sec.gov, as well as the following risks and uncertainties:

•conditions in the oil and natural gas industry, including a sustained imbalance in the level of supply or demand for oil or natural gas or a sustained low price of oil or natural gas, which could depress or reduce the demand or pricing for our natural gas compression and oil and natural gas production and processing equipment and services;

•reduced profit margins or the loss of market share resulting from competition or the introduction of competing technologies by other companies;

•economic or political conditions in the countries in which we do business, including civil developments such as uprisings, riots, terrorism, kidnappings, violence associated with drug cartels, legislative changes and the expropriation, confiscation or nationalization of property without fair compensation;

•risks associated with natural disasters, pandemics and other public health crisis and other catastrophic events outside our control, including the continued spread and impact of, and the response to, the novel coronavirus (“COVID-19”) pandemic which began in late 2019;

•changes in currency exchange rates, including the risk of currency devaluations by foreign governments, and restrictions on currency repatriation;

•risks associated with cyber-based attacks or network security breaches;

•changes in international trade relationships, including the imposition of trade restrictions or tariffs relating to any materials or products (such as aluminum and steel) used in the operation of our business;

•risks associated with our operations, such as equipment defects, equipment malfunctions and environmental discharges;

•the risk that counterparties will not perform their obligations under their contracts with us or other changes that could impact our ability to recover our fixed asset investment;

•the financial condition of our customers;

•our ability to timely and cost-effectively obtain components necessary to conduct our business;

•employment and workforce factors, including our ability to hire, train and retain key employees;

•our ability to implement our business and financial objectives, including:

•winning profitable new business;

•timely and cost-effective execution of projects;

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•enhancing or maintaining our asset utilization, particularly with respect to our fleet of compressors and other assets;

•integrating acquired businesses;

•generating sufficient cash to satisfy our operating needs, existing capital commitments and other contractual cash obligations, including our debt obligations; and

•accessing the financial markets at an acceptable cost;

•our ability to accurately estimate our costs and time required under our fixed price contracts;

•liability related to the use of our products and services;

•changes in governmental safety, health, environmental or other regulations, which could require us to make significant expenditures; and

•risks associated with our level of indebtedness and our ability to fund our business.

All forward-looking statements included in this report are based on information available to us on the date of this report. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this report.

General

Exterran Corporation (together with its subsidiaries, “Exterran Corporation,” the “Company,” “our,” “we” or “us”), a Delaware corporation formed in March 2015, is a global systems and process company offering solutions in the oil, gas, water and power markets. We are a leader in natural gas processing and treatment and compression products and services, providing critical midstream infrastructure solutions to customers throughout the world. Our manufacturing facilities are located in the United States of America (“U.S.”), Singapore and the United Arab Emirates.

We provide our products and services to a global customer base consisting of companies engaged in all aspects of the oil and natural gas industry, including large integrated oil and natural gas companies, national oil and natural gas companies, independent oil and natural gas producers and oil and natural gas processors, gatherers and pipeline operators. We operate in three primary business lines: contract operations, aftermarket services and product sales. The nature and inherent interactions between and among our business lines provide us with opportunities to cross-sell and offer integrated product and service solutions to our customers.

In our contract operations business line, we provide processing, treating, compression and water treatment services through the operation of our natural gas compression equipment, crude oil and natural gas production and process equipment and water treatment equipment for our customers. In our aftermarket services business line, we sell parts and components and provide operations, maintenance, repair, overhaul, upgrade, startup and commissioning and reconfiguration services to customers who own their own oil and natural gas compression, production, processing, treating and related equipment. In our product sales business line, we design, engineer, manufacture, install, sell and finance equipment used in the treating and processing of crude oil, natural gas and water as well as natural gas compression packages to our customers throughout the world and for use in our contract operations business line. We also offer our customers, on either a contract operations basis or a sale basis, the engineering, design, project management, procurement and construction services necessary to incorporate our products into production, processing and compression facilities, which we refer to as integrated projects.

Our chief operating decision maker manages business operations, evaluates performance and allocates resources based on the Company’s three primary business lines, which are also referred to as our segments. In order to more efficiently and effectively identify and serve our customer needs, we classify our worldwide operations into four geographic regions. The North America region is primarily comprised of our operations in the U.S. The Latin America region is primarily comprised of our operations in Argentina, Bolivia, Brazil and Mexico. The Middle East and Africa region is primarily comprised of our operations in Bahrain, Iraq, Oman, Nigeria and the United Arab Emirates. The Asia Pacific region is primarily comprised of our operations in China, Indonesia, Singapore and Thailand.

We refer to the condensed consolidated financial statements collectively as “financial statements,” and individually as “balance sheets,” “statements of operations,” “statements of comprehensive income (loss),” “statements of stockholders’ equity” and “statements of cash flows” herein.

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Financial Results of Operations

Overview

Industry Conditions and Trends

Our business environment and corresponding operating results are affected by the level of energy industry spending for the exploration, development and production of oil and natural gas reserves. Spending by oil and natural gas exploration and production companies is dependent upon these companies’ forecasts regarding the expected future supply, demand and pricing of oil and natural gas products as well as their estimates of risk-adjusted costs to find, develop and produce reserves. Although we believe our contract operations business is typically less impacted by short-term commodity prices than certain other energy products and service providers, changes in oil and natural gas exploration and production spending normally result in changes in demand for our products and services.

Recent global demand challenges presented by the COVID-19 pandemic and aggressive actions taken to contain it have caused severe downside volatility in the price for oil and a significant reduction in demand, as well as an oversupply, globally. In response, many energy companies are drastically reducing their capital spending in 2020 in order to maintain liquidity and returns. We expect this to constrain the amount of new projects that customers sanction in the coming year and has resulted in the shutting in of certain existing oil and natural gas wells in certain geographies. The timing of recovery of demand to pre-pandemic levels remains uncertain.

Our Performance Trends and Outlook

Our revenue, earnings and financial position are affected by, among other things, market conditions that impact demand and pricing for natural gas compression, oil and natural gas production and processing and produced water treatment solutions along with our customers’ decisions to use our products and services, use our competitors’ products and services or own and operate the equipment themselves.

We have continued to work toward our strategy to be a company that leverages technology and operational excellence to provide complete systems and process solutions in energy and industrial applications. Over the past several years, we have made significant progress in this journey by taking actions to protect our core business, develop important organizational capabilities, commercialize new products and services and implement new processes to position Exterran for success. We are focused on optimizing our portfolio of products and services to better serve our global customers while providing a more attractive investment option for our investors. As we continue on this path, we have decided that the U.S. compression fabrication business is non-core to our strategy going forward. We are now planning to exit the business and will look to wind down or sell the business or underlying assets. The U.S. compression fabrication business is included in our product sales segment and during the six months ended June 30, 2020 and 2019, we recognized revenue of $90.1 million and $309.9 million, respectively, and cost of sales of $83.7 million and $281.2 million, respectively. During the year ended December 31, 2019, we recognized revenue of $521.4 million and cost of sales of $472.5 million. We also recognized impairment charges of $6.5 million during the six months ended June 30, 2020. The remaining backlog tied to the business as of the end of the second quarter 2020 is $29.1 million.

Historically, oil, natural gas and natural gas liquids prices and the level of drilling and exploration activity in North America have been volatile. The Henry Hub spot price for natural gas was $1.76 per MMBtu at June 30, 2020, which was 16% and 27% lower than the prices at December 31, 2019 and June 30, 2019, respectively, and the U.S. natural gas liquid composite price was $2.85 per MMBtu for the month of April 2020, which was 47% and 37% lower than the prices for the month of December 2019 and June 2019, respectively. In addition, the West Texas Intermediate crude oil spot price as of June 30, 2020 was 36% and 33% lower than the price at December 31, 2019 and at June 30, 2019, respectively. Volatility in demand for energy and in commodity prices as well as an industry trend towards disciplined capital spending and improving returns have caused timing uncertainties in demand for our products recently. These uncertainties have caused delays in the timing of new equipment orders and lower bookings in our product sales segment. Booking activity levels for our product sales segment in North America during the six months ended June 30, 2020 were $13.9 million, which represents a decrease of 85% compared to the six months ended June 30, 2019.

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Longer-term fundamentals in our international markets partially depend on international oil and gas infrastructure projects, many of which are based on the longer-term plans of our customers that can be driven by their local market demand and local pricing for natural gas. As a result, we believe our international customers make decisions based on longer-term fundamentals that may be less tied to near term commodity prices than our North American customers. Over the long-term, we believe the demand for our products and services in international markets will continue, and we expect to have opportunities to grow our international businesses. Booking activity levels for our product sales segment in international markets during the six months ended June 30, 2020 were $440.8 million, which represents an increase of 519% compared to the six months ended June 30, 2019.

Aggregate booking activity levels for our product sales segment in North America and international markets during the six months ended June 30, 2020 were $454.7 million, which represents an increase of 175% compared to the six months ended June 30, 2019, respectively. Fluctuations in the size and timing of customers’ requests for bid proposals and awards of new contracts tend to create variability in booking activity levels from period to period.

The timing of customer order and change in activity levels by our customers is difficult to predict. As a result, our ability to project the anticipated activity level for our business, and particularly our product sales segment, is limited. Given the volatility of the global energy markets and industry capital spending activity levels, we plan to monitor and continue to control our expense levels as necessary to protect our profitability. Additionally, volatility in commodity prices could continue to delay investments by our customers in significant projects, which could result in a material adverse effect on our business, financial condition, results of operations and cash flows.

Our level of capital spending largely depends on the demand for our contract operations services and the equipment required to provide such services to our customers. Based on our current backlog of contracts, we currently expect to invest less capital in our contract operations business in 2020 than we did in 2019.

A decline in demand for oil and natural gas or prices for those commodities, or instability and rationalization of capital funding in the global energy markets could continue to cause a reduction in demand for our products and services. We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressor units from our active fleet, indicate that the carrying amount of an asset may not be recoverable.

Impact of COVID-19 on our Business

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption across most industries. Efforts to mitigate the spread of COVID-19 have also resulted in decreased energy demand and additional weakness in energy pricing.

The Company took proactive steps earlier in the first quarter to enable and verify the ability to ensure the safety of our employees while still carrying on the majority of business functions. These steps included:

•Establishing a daily global operating process to identify, monitor and discuss impacts to our business whether originating from governmental actions or as a direct result of employee illness;

•Investing in additional IT capabilities to enable employees to work remotely;

•Closing operations where and until assessments were completed to ensure we could operate in a safe manner; and

•Reestablishing operations once safety mechanisms were in place. This included the acquisition of additional personal protective equipment and establishing screening and other workplace processes.

To date our actions in response to the pandemic and the primary impacts on our business are summarized below:

•As most of our operations are considered essential by local government authorities, our service operations that are provided under long-term contracts have to a large extent continued to operate under substantially normal conditions;

•We are following local governmental guidance for viral spread mitigation, including having many of our employees who would traditionally work in an office work from home;

•We have put in place additional health and safety measures to protect our employees, customers and other parties who are working at our operating sites;

•Although early in the year we recorded significant new product sales bookings, more recently we have seen a decrease in purchasing activity from our customers which we believe is due to both the work at home mitigation measures our customers are also taking and weakness in commodity prices, causing us to lower our expectations for additional new bookings in 2020;

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•Given travel restrictions and other mitigation efforts, certain of our employees have not been able to travel to work assignments, therefore although we have taken additional steps to be able to continue to provide services required by our customers, some services will be delayed until mitigation measures are eased;

•While our operations have been impacted by lower product sale bookings in 2019 and we started cost reduction efforts even prior to the current pandemic, we have continued our efforts to optimize our cost structure to align with the expected demand in our business including making work force reductions and/or managing work hours at some of our manufacturing facilities;

•We are continuing to have discussions with customers at their request to save them costs by collaborating with them on how we can manage costs and/or optimize the projects performance to potentially improve our and their results;

•We evaluated our accounts receivable and given the current energy environment and expected impact to the financials of our customers, we increased our reserve for uncollectible accounts by $4.0 million;

•Given COVID-19’s impact on demand for energy and decreased commodity prices which impact our customer’s capital spending, during the three months ended March 31, 2020, we tested our long-term assets for impairment and concluded that no impairment was indicated;

•As many of our suppliers have increased delivery times including as a result of disruptions in shipping, we are working with customers on revising expected due-dates for delivery, and expect to push out the timing of our recognition of revenue and gross margin on certain projects as a result of these delays; and

•We have participated in certain COVID-19 tax incentive programs in certain jurisdictions in which we operate. These primarily allowed a delay in filing and/or paying of taxes for short periods of time. In the U.S., we filed a request for refund and received a $2.5 million Alternative Minimum Tax refund in June 2020, which was earlier than originally scheduled due to the provisions of the CARES Act. We have not participated in any government sponsored loan programs under the CARES Act.

We are unable to predict the impact that COVID-19 will have on our long-term financial position and operating results due to numerous uncertainties. The long-term impact of the pandemic on our customers and the global economy will depend on various factors, including the scope, severity and duration of the pandemic. A prolonged economic downturn or recession resulting from the pandemic could adversely affect many of our customers which could, in turn, adversely impact our business, financial condition and results of operations. We will continue to assess the evolving impact of the COVID-19 pandemic and intend to make adjustments to its responses accordingly.

Operating Highlights

The following table summarizes our contract operations and product sales backlog (in thousands):

	June 30, 2020		December 31, 2019		June 30, 2019
Contract Operations Backlog:
Contract operations services	$	1,253,962	$	1,252,001	$	1,318,985
Product Sales Backlog:
Compression equipment	$	87,510	$	160,946	$	241,237
Processing and treating equipment	453,729		69,912		94,758
Other product sales	35,031		47,094		25,679
Total product sales backlog	$	576,270	$	277,952	$	361,674

Summary of Results

Revenue. 

Revenue during the three months ended June 30, 2020 and 2019 was $171.6 million and $390.9 million, respectively. The decrease in revenue during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was due to decreases in revenue in our product sales, contract operations and aftermarket services segments. The decrease in our product sales segment was primarily due to an overall decline in bookings as a consequence of market conditions in North America.

Revenue during the six months ended June 30, 2020 and 2019 was $382.0 million and $742.3 million, respectively. The decrease in revenue during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was due to decreases in revenue in our product sales, aftermarket services and contract operations segments. The decrease in our product sales segment was primarily due to an overall decline in bookings as a consequence of market conditions in North America.

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Net loss.  

We generated a net loss of $31.9 million and $7.3 million during the three months ended June 30, 2020 and 2019, respectively. The increase in net loss during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to decreases in gross margin for our product sales, contract operations and aftermarket services segments, a decrease in income from discontinued operations, net of tax, and an increase in restructuring and other charges, partially offset by a decrease in selling, general and administrative (“SG&A”) expense, a decrease in income taxes, a decrease in depreciation and amortization expense, a gain in extinguishment of debt of $2.6 million and an increase in foreign currency gain of $2.1 million. Net loss during the three months ended June 30, 2020 included loss from discontinued operations, net of tax, of $0.1 million and net loss during the three months ended June 30, 2019 included income from discontinued operations, net of tax, of $7.5 million due to a $6.5 million tax benefit related to a settlement of Italian tax litigation previously recorded as an unrecognized tax benefit.

We generated a net loss of $50.2 million and $12.7 million during the six months ended June 30, 2020 and 2019, respectively. The increase in net loss during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to a decrease in gross margin for our product sales segment, a decrease in income from discontinued operations, net of tax, and increases in restructuring and other charges and interest expenses, partially offset by decreases in SG&A expense, depreciation and amortization expenses and income taxes, and a gain on extinguishment of debt of $2.6 million. Net loss during the six months ended June 30, 2020 included loss from discontinued operations, net of tax, of $0.3 million and net loss during the six months ended June 30, 2019 included income from discontinued operations, net of tax of $7.6 million due to a $6.5 million tax benefit related to a settlement of Italian tax litigation previously recorded as an unrecognized tax benefit.

EBITDA, as adjusted. 

Our EBITDA, as adjusted, was $24.2 million and $53.2 million during the three months ended June 30, 2020 and 2019, respectively. EBITDA, as adjusted, during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 decreased primarily due to decreases in gross margin for our product sales, contract operations and aftermarket services segments, partially offset by a decrease in SG&A expense.

Our EBITDA, as adjusted, was $58.0 million and $103.3 million during the six months ended June 30, 2020 and 2019, respectively. EBITDA, as adjusted, during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 decreased primarily due to a decrease in gross margin for our product sales segment, partially offset by a decrease in SG&A expense.

EBITDA, as adjusted, is a non-GAAP financial measure. For a reconciliation of EBITDA, as adjusted, to net loss, its most directly comparable financial measure calculated and presented in accordance with GAAP, please read “— Non-GAAP Financial Measures” included elsewhere in this Quarterly Report.

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The Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019

Contract Operations

(dollars in thousands)

	Three Months Ended June 30,
	2020			2019			Change			% Change
Revenue	$	77,945		$	89,684		$	(11,739)		(13)	%
Cost of sales (excluding depreciation and amortization expense)	23,746			30,336			(6,590)			(22)	%
Gross margin	$	54,199		$	59,348		$	(5,149)		(9)	%
Gross margin percentage (1)	70		%	66		%	4		%	6	%

___________________

⁽¹⁾ Defined as gross margin divided by revenue.

The decrease in revenue during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to a decrease in revenue of $16.0 million in the Latin America region, partially offset by an increase in revenue of $4.3 million in the Middle East and Africa region. The revenue decrease in the Latin America region was primarily driven by a decrease of $9.6 million in Mexico from the sale of equipment pursuant to a purchase option exercised by a customer during the fourth quarter of 2019, a $5.4 million decrease in Argentina primarily due to a devaluation of the Argentine Peso during the current period and contract stops, and a $3.8 million decrease in Brazil from the impact of foreign currency exchange rates and contract stops. These revenue decreases in the Latin America region were partially offset by an increase of $3.4 million primarily driven by the start-up of a project during the second half of 2019. The revenue increase in the Middle East and Africa region was primarily due to the start-up of projects that were not operating in the prior year period. Gross margin decreased during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 due to the revenue decreases explained above. Gross margin percentage during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 increased primarily due to reduced operating expenses relative to the prior year and the impact of the projects that started up in the current year period.

Aftermarket Services

(dollars in thousands)

	Three Months Ended June 30,
	2020			2019			Change			% Change
Revenue	$	24,993		$	30,113		$	(5,120)		(17)	%
Cost of sales (excluding depreciation and amortization expense)	19,020			21,017			(1,997)			(10)	%
Gross margin	$	5,973		$	9,096		$	(3,123)		(34)	%
Gross margin percentage	24		%	30		%	(6)		%	(20)	%

The decrease in revenue during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to decreases in part sales and operation and maintenance services. Gross margin and gross margin percentage decreased during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the revenue decrease explained above and a shift in product mix in the Asia Pacific region during the current year period.

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Product Sales

(dollars in thousands)

	Three Months Ended June 30,
	2020			2019			Change			% Change
Revenue	$	68,687		$	271,077		$	(202,390)		(75)	%
Cost of sales (excluding depreciation and amortization expense)	70,824			240,606			(169,782)			(71)	%
Gross margin	$	(2,137)		$	30,471		$	(32,608)		(107)	%
Gross margin percentage	(3)		%	11		%	(14)		%	(127)	%

The decrease in revenue during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to decreases in revenue of $153.3 million and $50.1 million in the North America and Middle East and Africa regions, respectively. The decrease in revenue in the North America region was primarily due to decreases of $124.3 million and $29.0 million in compression revenue and processing and treating equipment revenue, respectively, due to an overall decline in bookings. The decrease in revenue in the Middle East and Africa region was primarily due to a decrease of $62.0 million in processing and treating equipment revenue due to nearing completion on a specific project, partially offset by increases of $7.7 million and $3.9 million in compression revenue and water solutions revenue, respectively. Gross margin decreased during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 due to the revenue decreases explained above and higher expenses on a specific project in the Middle East and Africa region. Gross margin percentage decreased during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 due to the higher expenses discussed above and a shift in product mix in the North America region during the current year period.

Costs and Expenses

(dollars in thousands)

	Three Months Ended June 30,
	2020		2019		Change		% Change
Selling, general and administrative	$	34,407	$	45,636	$	(11,229)	(25)	%
Depreciation and amortization	32,958		36,319		(3,361)		(9)	%
Impairments	6,512		5,919		593		10	%
Restatement recoveries	—		(28)		28		(100)	%
Restructuring and other charges	7,677		5,788		1,889		33	%
Interest expense	9,638		9,928		(290)		(3)	%
Gain on extinguishment of debt	(2,644)		—		(2,644)		N/A
Other (income) expense, net	(2,641)		(477)		(2,164)		454	%

Selling, general and administrative

SG&A expense decreased during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to a decrease in compensation costs. SG&A expense as a percentage of revenue was 20% and 12% during the three months ended June 30, 2020 and 2019, respectively.

Depreciation and amortization

Depreciation and amortization expense during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 decreased primarily due to a decrease in depreciation expense of approximately $9.0 million in the current year period resulting from the sale of equipment on a contract operations contract in the Latin America region in the fourth quarter of 2019. This decrease was partially offset by an increase of approximately $6.4 million in depreciation for installation costs on contract operations projects that were not operating in the prior year period. Capitalized installation costs included, among other things, civil engineering, piping, electrical instrumentation and project management costs.

Impairments

During the second quarter of 2020, in connection with our review of options for our U.S. compression fabrication business within our product sales segment, we reviewed the assets in this business compared to our estimate of future cash flows and recorded a $6.5 million impairment charge for the three months ended June 30, 2020 to adjust the carrying value to our estimate of fair market value.

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During the second quarter of 2019, we classified certain long-lived assets as assets held for sale in our balance sheets. In conjunction with the planned disposition of these units, we recorded impairment charges of $5.9 million to write-down these assets to their approximate fair values for the three months ended June 30, 2019 based on the expected net proceeds.

Restructuring and other charges

The energy industry’s focus on capital discipline and improving returns has caused delays in the timing of new equipment orders. As a result, in the second quarter of 2019, we began the consolidation of two of our manufacturing facilities located in Houston, Texas into one facility and announced a cost reduction plan primarily focused on workforce reductions. We incurred restructuring and other charges associated with these activities of $7.7 million and $5.9 million during the three months ended June 30, 2020 and 2019.

Interest expense

The decrease in interest expense during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to a lower average balance of long-term debt. During the three months ended June 30, 2020 and 2019, the average daily outstanding borrowings of long-term debt were $497.9 million and $520.8 million, respectively.

Extinguishment of debt

During the second quarter of 2020, we purchased and retired $19.0 million principal amount of our 8.125% senior unsecured notes due 2025 (the “2017 Notes”) for $16.3 million including $0.2 million of accrued interest. During the three months ended June 30, 2020 we recognized a gain on extinguishment of debt of $2.6 million, which was calculated as the difference between the repurchase price and the carrying amount of the 2017 Notes, partially offset by $0.2 million in related deferred financing costs.

Other (income) expense, net

The change in other (income) expense, net, was primarily due to foreign currency gains of $1.6 million during the three months ended June 30, 2020 compared to foreign currency losses, net of losses on foreign currency derivatives, of $0.5 million during the three months ended June 30, 2019. Foreign currency losses and gains included translation gains of $2.1 million and translation gains, net of losses on foreign currency derivatives of $0.6 million during the three months ended June 30, 2020 and 2019, respectively, related to the currency remeasurement of our foreign subsidiaries’ non-functional currency denominated intercompany obligations.

Income Taxes

(dollars in thousands)

	Three Months Ended June 30,
	2020			2019			Change			% Change
Provision for income taxes	$	3,895		$	10,592		$	(6,697)		(63)	%
Effective tax rate	(14.0)		%	(254.0)		%	240.0		%	(94)	%

Our effective tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn, or losses we incur, in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. Our effective tax rate is also affected by valuation allowances recorded against loss carryforwards in the U.S. and certain other jurisdictions, foreign withholding taxes and changes in foreign currency exchange rates.

The following items had the most significant impact on the difference between our statutory U.S. federal income tax rate of 21.0% and our effective tax rate for the three months ended June 30, 2020: (i) a (9.8)% negative impact resulting from unrecognized tax benefits under FASB’s Interpretation No. 48 of Financial Accounting Standard 109 (“FIN 48”), (ii) a (3.4)% negative impact resulting from foreign currency devaluations in Argentina, and (iii) a (14.7)% negative impact resulting from the recording of valuation allowances against U.S. deferred tax assets.

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Discontinued Operations

(dollars in thousands)

	Three Months Ended June 30,
	2020		2019		Change		% Change
Income (loss) from discontinued operations, net of tax	$	(122)	$	7,457	$	(7,579)	(102)	%

Income (loss) from discontinued operations, net of tax, includes our Venezuelan subsidiary’s operations that were expropriated in June 2009 and our Belleli EPC business.

Income (loss) from discontinued operations, net of tax, during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 decreased primarily due to a $7.6 million decrease in income from Belleli EPC. During the three months ended June 30, 2019, we recorded a $6.5 million tax benefit related to a settlement of Italian tax litigation previously recorded as an unrecognized tax benefit. For further details on our discontinued operations, see Note 3 to the Financial Statements.

The Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019

Contract Operations

(dollars in thousands)

	Six Months Ended June 30,
	2020			2019			Change		% Change
Revenue	$	172,733		$	175,384		(2,651)		(2)	%
Cost of sales (excluding depreciation and amortization expense)	55,206			58,927			(3,721)		(6)	%
Gross margin	$	117,527		$	116,457		1,070		1	%
Gross margin percentage (1)	68		%	66		%	2	%	3	%

___________________

⁽¹⁾ Defined as gross margin divided by revenue.

The decrease in revenue during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to a decrease in revenue of $13.5 million in the Latin America region, partially offset by an increase in revenue of $10.4 million in the Middle East and Africa region. The revenue decrease in the Latin America region was primarily due to a decrease of $18.0 million in Mexico from the sale of equipment pursuant to a purchase options exercised by a customer during the fourth quarter of 2019 and the impact of renegotiations on a contract extension that resulted in lower revenue in the current year period, and a $6.4 million decrease in Argentina due to a devaluation on the Argentine Peso during the current year period and contract stops. These revenue decreases in the Latin America region were partially offset by an increase of $10.7 million primarily driven by the start-up of a project during the second half of 2019, and the sale of equipment pursuant to a customer purchase of contracted equipment during the current year period, net of the impact of foreign currency exchange rates and contract stops. The revenue increase in the Middle East and Africa region was primarily due to the start-up of projects that were not operating in the prior year period. Gross margin increased during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the start-up of new projects in the Middle East and Africa region and the Latin America region. Gross margin percentage during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 remained relatively flat.

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Aftermarket Services

(dollars in thousands)

	Six Months Ended June 30,
	2020			2019			Change		% Change
Revenue	$	52,902		$	57,415		(4,513)		(8)	%
Cost of sales (excluding depreciation and amortization expense)	40,201			41,735			(1,534)		(4)	%
Gross margin	$	12,701		$	15,680		(2,979)		(19)	%
Gross margin percentage	24		%	27		%	(3)	%	(11)	%

The decrease in revenue during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to decreases in part sales and operation and maintenance services. Gross margin and gross margin percentage decreased during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the revenue decrease explained above and a shift in product mix in the Asia Pacific region during the current year period.

Product Sales

(dollars in thousands)

	Six Months Ended June 30,
	2020			2019			Change		% Change
Revenue	$	156,347		$	509,521		(353,174)		(69)	%
Cost of sales (excluding depreciation and amortization expense)	155,263			450,141			(294,878)		(66)	%
Gross margin	$	1,084		$	59,380		(58,296)		(98)	%
Gross margin percentage	1		%	12		%	(11)	%	(92)	%

The decrease in revenue during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to decreases in revenue of $276.7 million and $85.6 million in the North America and Middle East and Africa regions, respectively, partially offset by an increase in revenue of $11.6 million in the Asia Pacific region. The decrease in revenue in the North America region was primarily due to decreases of $219.8 million and $57.1 million in compression revenue and processing and treating equipment revenue, respectively, due to an overall decline in bookings. The decrease in revenue in the Middle East and Africa region was primarily due to a decrease of $111.3 million in processing and treating equipment revenue due to nearing completion on a specific project, partially offset by increases of $15.6 million and $9.4 million in compression revenue and water solutions revenue, respectively. The increase in revenue in the Asia Pacific region was primarily due to an increase of $12.0 million in compression revenue. Gross margin decreased during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 due to the revenue decrease explained above and higher expenses on a specific project in the Middle East and Africa region. Gross margin percentage during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 decreased primarily due to the higher expenses discussed above and a shift in product mix in the North America region during the current year period.

Costs and Expenses

(dollars in thousands)

	Six Months Ended June 30,
	2020		2019		Change	% Change
Selling, general and administrative	$	72,459	$	89,088	(16,629)	(19)	%
Depreciation and amortization	65,568		74,536		(8,968)	(12)	%
Impairments	6,512		5,919		593	10	%
Restatement related charges	—		20		(20)	(100)	%
Restructuring and other charges	8,865		6,172		2,693	44	%
Interest expense	19,591		18,091		1,500	8	%
Gain on extinguishment of debt	(2,644)		—		(2,644)	N/A
Other (income) expense, net	(2,347)		(1,722)		(625)	36	%

Selling, general and administrative

SG&A expense decreased during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to a decrease in compensation costs. SG&A expense as a percentage of revenue was 19% and 12% during the six months ended June 30, 2020 and 2019, respectively.

Depreciation and amortization

Depreciation and amortization expense during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 decreased primarily due to a decrease in depreciation expense of approximately $18.4 million in the current year period resulting from the sale of equipment on a contract operations contract in the Latin America region in the fourth quarter of 2019 and a decrease of approximately $2.0 million in compressor equipment for equipment that was impaired in the fourth quarter of 2019. This decrease was partially offset by an increase of approximately $11.7 million in depreciation for installation costs on contract operations projects that were not operating in the prior year period. Capitalized installation costs included, among other things, civil engineering, piping, electrical instrumentation and project management costs.

Impairments

During the second quarter of 2020, in connection with our review of options for our U.S. compression fabrication business within our product sales segment, we reviewed the assets in this business compared to our estimate of future cash flows and recorded a $6.5 million impairment charge for the six months ended June 30, 2020 to adjust the carrying value to our estimate of fair market value.

During the second quarter of 2019, we classified certain long-lived assets as assets held for sale in our balance sheets. In conjunction with the planned disposition of these units, we recorded impairment charges of $5.9 million to write-down these assets to their approximate fair values for the six months ended June 30, 2019 based on the expected net proceeds.

Restructuring and other charges

The energy industry’s focus on capital discipline and improving returns has caused delays in the timing of new equipment orders. As a result, in the second quarter of 2019, we began the consolidation of two of our manufacturing facilities located in Houston, Texas into one facility and announced a cost reduction plan primarily focused on workforce reductions. We incurred restructuring and other charges associated with these activities of $8.9 million and $5.9 million during the six months ended June 30, 2020 and 2019.

In the second quarter of 2018, we initiated a relocation plan in the Latin America region to better align our contract operations business with our customers. As a result of this plan, during the six months ended June 30, 2019, we incurred restructuring and other charges of $0.2 million primarily related to relocation costs.

Interest expense

The increase in interest expense during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to a lower average balance of long-term debt, partially offset by a decrease in capitalized interest. During the six months ended June 30, 2020 and 2019, the average daily outstanding borrowings of long-term debt were $493.2 million and $502.9 million, respectively.

Extinguishment of debt

During the second quarter of 2020, we purchased and retired $19.0 million principal amount of our 2017 Notes for $16.3 million including $0.2 million of accrued interest. During the six months ended June 30, 2020, we recognized a gain on extinguishment of debt of $2.6 million, which was calculated as the difference between the repurchase price and the carrying amount of the 2017 Notes, partially offset by $0.2 million in related deferred financing costs.

Other (income) expense, net

The change in other (income) expense, net, was primarily due to foreign currency gains of $0.3 million during the six months ended June 30, 2020 compared to foreign currency losses, net of losses on foreign currency derivatives, of $0.4 million during the six months ended June 30, 2019. Foreign currency losses and gains included translation gains of $3.2 million and translation gains, net of losses on foreign currency derivatives of $0.8 million during the six months ended June 30, 2020 and 2019, respectively, related to the currency remeasurement of our foreign subsidiaries’ non-functional currency denominated intercompany obligations.

Income Taxes

(dollars in thousands)

	Six Months Ended June 30,
	2020			2019			Change		% Change
Provision for income taxes	$	13,225		$	19,732		(6,507)		(33)	%
Effective tax rate	(36.0)		%	(3,361.5)		%	3,325.5	%	(99)	%

Our effective tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn, or losses we incur, in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. Our effective tax rate is also affected by valuation allowances recorded against loss carryforwards in the U.S. and certain other jurisdictions, foreign withholding taxes and changes in foreign currency exchange rates.

The following items had the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% and our effective tax rate for the six months ended June 30, 2020: (i) a (16.3)% negative impact resulting primarily from rate differences between U.S. and foreign jurisdictions including foreign withholding taxes, (ii) a (9.2)% negative impact resulting from unrecognized tax benefits under FIN 48, and (iii) a (20.2)% negative impact resulting from the recording of valuation allowances against U.S. deferred tax assets.

Discontinued Operations

(dollars in thousands)

	Six Months Ended June 30,
	2020		2019		Change	% Change
Income (loss) from discontinued operations, net of tax	$	(276)	$	7,620	(7,896)	(104)	%

Income (loss) from discontinued operations, net of tax, includes our Venezuelan subsidiary’s operations that were expropriated in June 2009 and our Belleli EPC business.

Income (loss) from discontinued operations, net of tax, during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 decreased primarily due to an $8.0 million decrease in income from Belleli EPC. During the six months ended June 30, 2019, we recorded a $6.5 million tax benefit related to a settlement of Italian tax litigation previously recorded as an unrecognized tax benefit. For further details on our discontinued operations, see Note 3 to the Financial Statements.

Liquidity and Capital Resources

Our unrestricted cash balance was $27.1 million at June 30, 2020 compared to $16.7 million at December 31, 2019. Working capital increased to $131.4 million at June 30, 2020 from $109.3 million at December 31, 2019. The increase in working capital was primarily due to a decrease in accounts payable, an increase in accounts receivables and a decrease in accrued liabilities, partially offset by an increase in contract liabilities and decreases in inventory and contract assets. The decrease in accounts payable was largely caused by the timing of purchases and payments to suppliers during the current year period. The increase in accounts receivables was primarily driven by the timing of milestone billings on product sales projects in the Middle East and Africa region. The decrease in accrued liabilities was due to a decrease in accrued compensation benefits. The increase in contract liabilities was primarily driven by the progression of product sales activity in the Middle East and Africa region. The decrease in inventory was primarily due to the U.S. compression fabrication business and the decrease in contract assets was primarily driven by the timing of billings on product sales projects in North America.

Our cash flows from operating, investing and financing activities, as reflected in the statements of cash flows, are summarized in the following table (in thousands):

	Six Months Ended June 30,
	2020		2019
Net cash provided by (used in) continuing operations:
Operating activities	$	11,867	$	83,826
Investing activities	(41,015)		(122,761)
Financing activities	41,339		33,884
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(666)		(332)
Discontinued operations	(1,176)		3,102
Net change in cash, cash equivalents and restricted cash	$	10,349	$	(2,281)

Operating Activities.  The decrease in net cash provided by operating activities during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily attributable to a decrease in gross margin for our product sales segment and a decrease in cash received from upfront billings on contract operations projects. Working capital changes during the six months ended June 30, 2020 included a decrease of $37.8 million in accounts payable and other liabilities, an increase of $16.8 million in accounts receivable and notes and an increase of $14.2 million in contract liabilities. Working capital changes during the six months ended June 30, 2019 included an increase of $33.1 million in contract liabilities, an increase of $29.3 million in inventory and a decrease of $44.0 million in contract assets.

Investing Activities.  The decrease in net cash used in investing activities during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily attributable to an $84.9 million decrease in capital expenditures. The decrease in capital expenditures was primarily driven by the timing of awards and growth capital expenditures for new contract operations projects.

Financing Activities.  The increase in net cash provided by financing activities during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily attributable to a decrease of $20.5 million in purchases of treasury stock, partially offset by a decrease in net borrowings of $12.6 million on our long-term debt.

Capital Requirements.  Our contract operations business is capital intensive, requiring significant investment to maintain and upgrade existing operations. Our capital spending is primarily dependent on the demand for our contract operations services and the availability of the type of equipment required for us to render those contract operations services to our customers. Our capital requirements have consisted primarily of, and we anticipate will continue to consist of, the following:

•growth capital expenditures, which are made to expand or to replace partially or fully depreciated assets or to expand the operating capacity or revenue generating capabilities of existing or new assets, whether through construction, acquisition or modification; and

•maintenance capital expenditures, which are made to maintain the existing operating capacity of our assets and related cash flows further extending the useful lives of the assets.

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The majority of our growth capital expenditures are related to installation costs on contract operations services projects and acquisition costs of new compressor units and processing and treating equipment that we add to our contract operations fleet. In addition, growth capital expenditures can include the upgrading of major components on an existing compressor unit where the current configuration of the compressor unit is no longer in demand and the compressor unit is not likely to return to an operating status without the capital expenditures. These latter expenditures substantially modify the operating parameters of the compressor unit such that it can be used in applications for which it previously was not suited. Maintenance capital expenditures are related to major overhauls of significant components of a compressor unit, such as the engine, compressor and cooler, that return the components to a “like new” condition, but do not modify the applications for which the compressor unit was designed.

We generally invest funds necessary to manufacture contract operations fleet additions when our idle equipment cannot be reconfigured to economically fulfill a project’s requirements and the new equipment expenditure is expected to generate economic returns over its expected useful life that exceeds our targeted return on capital. We currently plan to spend approximately $85 million to $95 million in capital expenditures during 2020, including (1) approximately $65 million to $75 million on contract operations growth capital expenditures and (2) approximately $20 million on equipment maintenance capital related to our contract operations business and other capital expenditures.

Historically, we have financed capital expenditures with a combination of net cash provided by operating and financing activities. Our ability to access the capital markets may be restricted at the time when we would like, or need, to do so, which could have an adverse impact on the cost and access to capital and our ability to maintain our operations and to grow. For example, COVID-19 disrupted the broader financial markets and the capital markets for energy service related companies continue to be impacted. If any of our lenders become unable to perform their obligations under the Credit Agreement, our borrowing capacity under our revolving credit facility could be reduced. Inability to borrow additional amounts under our revolving credit facility could limit our ability to fund our future growth and operations. Based on current market conditions, we expect that net cash provided by operating activities and borrowings under our revolving credit facility will be sufficient to finance our operating expenditures, capital expenditures and other contractual cash obligations, including our debt obligations. However, if net cash provided by operating activities and borrowings under our revolving credit facility are not sufficient, we may seek additional debt or equity financing.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and financial markets and created significant volatility and disruption across most industries. Efforts to mitigate the spread of COVID-19 have also resulted in decreased energy demand and additional weakness in energy pricing. The broader implications of COVID-19 on our long-term future results of operations and overall financial condition remains uncertain.

Long-Term Debt. We and our wholly owned subsidiary, Exterran Energy Solutions, L.P. (“EESLP”), are parties to an amended and restated credit agreement (the “Credit Agreement”) consisting of a $700.0 million revolving credit facility expiring in October 2023.

During the six months ended June 30, 2020 and 2019, the average daily outstanding borrowings of long-term debt were $493.2 million and $502.9 million, respectively. The weighted average annual interest rate on outstanding borrowings under our revolving credit facility at June 30, 2020 and 2019 was 2.2% and 4.2%, respectively. LIBOR and certain other “benchmarks” have been the subject of national, international and other regulatory guidance and proposals for reform. In particular, on July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, publicly announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. Central banks and regulators in a number of major jurisdictions (for example, U.S., United Kingdom, European Union, Switzerland, and Japan) have convened working groups to find and implement the transition to suitable replacement benchmarks. In the U.S. the Alternative Reference Rates Committee, a group convened by the Federal Reserve Board and the Federal Reserve Bank of New York, identified the Secured Overnight Financing Rate, a rate based on U.S. report trading, as its preferred alternative rate for LIBOR. We are in the beginning stages of creating a program that focuses on identifying, evaluating, and monitoring financial and non-financial risks that may result if LIBOR rates are no longer published after 2021.

As of June 30, 2020, we had $132.5 million in outstanding borrowings and $14.2 million in outstanding letters of credit under our revolving credit facility. At June 30, 2020, taking into account guarantees through letters of credit, we had undrawn capacity of $553.3 million under our revolving credit facility. Our Amended Credit Agreement limits our Total Debt to EBITDA ratio (as defined in the Amended Credit Agreement) on the last day of the fiscal quarter to no greater than 4.50 to 1.0. As a result of this limitation, $239.4 million of the $553.3 million of undrawn capacity under our revolving credit facility was available for additional borrowings as of June 30, 2020.

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The Credit Agreement contains various covenants with which we, EESLP and our respective restricted subsidiaries must comply, including, but not limited to, limitations on the incurrence of indebtedness, investments, liens on assets, repurchasing equity, making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. We are required to maintain, on a consolidated basis, a minimum interest coverage ratio (as defined in the Credit Agreement) of 2.25 to 1.00; a maximum total leverage ratio (as defined in the Credit Agreement) of 4.50 to 1.00; and a maximum senior secured leverage ratio (as defined in the Credit Agreement) of 2.75 to 1.00. As of June 30, 2020, we maintained a 4.6 to 1.0 interest coverage ratio, a 3.0 to 1.0 total leverage ratio and a 0.8 to 1.0 senior secured leverage ratio. As of June 30, 2020, we were in compliance with all financial covenants under the Credit Agreement.

In April 2017, our 100% owned subsidiaries EESLP and EES Finance Corp. issued $375.0 million aggregate principal amount of the 2017 Notes. We guarantee the 2017 Notes on a senior unsecured basis. We may redeem the 2017 Notes at any time in cash, in whole or part, at certain redemption prices, including the applicable make-whole premium plus accrued and unpaid interest, if any, to the date of redemption.

During the second quarter of 2020, we purchased and retired $19.0 million principal amount of our 2017 Notes for $16.3 million (including $0.2 million of accrued interest) resulting in a gain on extinguishment of debt of $2.6 million. The gain was calculated as the difference between the repurchase price and the carrying amount of the 2017 Notes, partially offset by $0.2 million in related deferred financing costs.

We may from time to time seek to retire, extend or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such extensions, repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Unrestricted Cash. Of our $27.1 million unrestricted cash balance at June 30, 2020, $22.8 million was held by our non-U.S. subsidiaries. In the event of a distribution of earnings to the U.S. in the form of dividends, we may be subject to foreign withholding taxes. We do not believe that the cash held by our non-U.S. subsidiaries has an adverse impact on our liquidity because we expect that the cash we generate in the U.S., the available borrowing capacity under our revolving credit facility and the repayment of intercompany liabilities from our non-U.S. subsidiaries will be sufficient to fund the cash needs of our U.S. operations for the foreseeable future.

Share Repurchase Program. On February 20, 2019, our board of directors approved a share repurchase program under which the Company is authorized to purchase up to $100.0 million of its outstanding common stock through February 2022. The timing and method of any repurchases under the program will depend on a variety of factors, including prevailing market conditions among others. Purchases under the program may be suspended or discontinued at any time and we have no obligation to repurchase any amount of our common shares under the program. Shares of common stock acquired through the repurchase program are held in treasury at cost. During the six months ended June 30, 2019, we repurchased 1,290,078 shares of our common stock for $18.8 million in connection with our share repurchase program. During the six months ended June 30, 2020, we did not repurchase any shares under this program. As of June 30, 2020, the remaining authorized repurchase amount under the share repurchase program was $57.7 million.

Dividends.  We do not currently anticipate paying cash dividends on our common stock. We currently intend to retain our future earnings to support the growth and development of our business. The declaration of any future cash dividends and, if declared, the amount of any such dividends, will be subject to our financial condition, earnings, capital requirements, financial covenants, applicable law and other factors our board of directors deems relevant.

Supplemental Guarantor Financial Information

In April 2017, our 100% owned subsidiaries EESLP and EES Finance Corp. (together, the “Issuers”) issued the 2017 Notes, which consists of $375.0 million aggregate principal amount senior unsecured notes. The 2017 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Exterran Corporation (“Parent”). The 2017 Notes and Parent’s guarantee are:

•Senior unsecured obligations of each of the Issuers and the Parent, as applicable;

•Equal in right of payment with all of the existing and future senior unsecured indebtedness and senior unsecured guarantees of each of the Issuers and the Parent, as applicable;

•Senior in right of payment to all subordinated indebtedness and subordinated guarantees of each of the Issuers and the Parent, as applicable;

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•Effectively junior in right of payment to all existing and future secured indebtedness and secured guarantees of each of the Issuers and the Parent, as applicable, to the extent of the value of the assets securing such indebtedness or guarantees; and

•Structurally junior in right of payment to all existing and future indebtedness, guarantees and other liabilities (including trade payables) and any preferred equity of each of the Parent’s subsidiaries (other than the Issuers) that are not guarantors of the 2017 Notes.

Parent’s guarantee will be automatically and unconditionally released and discharged upon (i) the merger of the Parent into the Issuers, (ii) a legal defeasance, covenant defeasance or satisfaction and discharge of the indenture governing the 2017 Notes or (iii) the liquidation or dissolution of the Parent, provided in each case no default or event of default has occurred and is continuing under the indenture governing the 2017 Notes.

Federal bankruptcy and state fraudulent transfer laws permit a court to void all or a portion of the obligations of the Parent pursuant to its guarantee, or to subordinate the Parent’s obligations under its guarantee to claims of the Parent’s other creditors, reducing or eliminating the ability to recover under the guarantee. Although laws differ among jurisdictions, in general, under applicable fraudulent transfer or conveyance laws, the guarantee could be voided as a fraudulent transfer or conveyance if (i) the guarantee was incurred with the intent of hindering, delaying or defrauding creditors or (ii) the Parent received less than reasonably equivalent value or fair consideration in return for incurring the guarantee and either (x) the Parent was insolvent or rendered insolvent by reason of the incurrence of the guarantee or subsequently became insolvent for other reasons, (y) the incurrence of the guarantee left the Parent with an unreasonably small amount of capital to carry on the business, or (z) the Parent intended to, or believed that it would, incur debts beyond its ability to pay such debts as they mature. A court would likely find that Parent did not receive reasonably equivalent value or fair consideration for its guarantee if it determined that the Parent did not substantially benefit directly or indirectly from the issuance of the 2017 Notes. If a court were to void a guarantee, noteholders would no longer have a claim against the Parent. In addition, the court might direct noteholders to repay any amounts that you already received from the Parent. Parent’s guarantee contains a provision intended to limit the Parent’s liability under the guarantee to the maximum amount that the Parent could incur without causing the incurrence of obligations under its guarantee to be deemed a fraudulent transfer. This provision may not be effective to protect the guarantee from being voided under fraudulent transfer law.

All consolidated subsidiaries of Exterran other than the Issuers are collectively referred to as the “Non-Guarantor Subsidiaries.” The 2017 Notes are structurally subordinated to any indebtedness and other liabilities (including trade payables) of any of the Non-Guarantor Subsidiaries. The Non-Guarantor Subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the 2017 Notes, or to make any funds available therefor, whether by dividends, loans, distributions or other payments. Holders of the 2017 Notes will have no claim as a creditor against any Non-Guarantor Subsidiaries. In the event of bankruptcy, liquidation or reorganization of any of the Non-Guarantor Subsidiaries, such subsidiaries will pay current outstanding obligations to the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Parent or the Issuers. As a result, in the context of a bankruptcy, liquidation or reorganization, holders of the 2017 Notes would likely receive less, ratably, than holders of indebtedness and other liabilities (including trade payables of such entities).

The Parent and EESLP are also parties to our credit agreement, which covenants with which the Parent, EESLP and our respective restricted subsidiaries must comply, including, but not limited to, limitations on the incurrence of indebtedness, investments, liens on assets, repurchasing equity, making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. These covenants may impact the ability of the Parent and EESLP to repay the 2017 Notes or amounts owing under Parent’s guarantee.

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Summarized Financial Information (in thousands)

As a result of the Parent’s guarantee, we are presenting the following summarized financial information for the Issuers’ and Parent (collectively referred to as the “Obligated Group”) pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. For purposes of the following summarized financial information, transactions between the Parent and the Issuers, presented on a combined basis, have been eliminated and information for the Non-Guarantor Subsidiaries have been excluded. Amounts due from or due to the Non-Guarantor Subsidiaries and other related parties, as applicable, have been separately presented within the summarized financial information.

	Six Months Ended June 30, 2020
Summarized Statement of Operations:
Revenues(1)	$	182,664
Cost of sales(1)	154,645
Loss from continuing operations	(99,540)
Net loss	(99,540)

⁽¹⁾Includes $51.5 million of revenue and $37.6 million of cost of sales for intercompany sales from the Obligated Group the Non-Guarantor Subsidiaries during the six months ended June 30, 2020.

	June 30, 2020		December 31, 2019
Summarized Balance Sheet:
ASSETS
Intercompany receivables due from non-guarantors	$	199,177	$	177,649
Total current assets	345,529		353,431
Total long-term assets	244,060		249,732
LIABILITIES AND STOCKHOLDERS’ EQUITY
Intercompany payables due to non-guarantors	$	366,112	$	399,645
Total current liabilities	503,263		552,941
Long-term liabilities	539,461		495,829

Non-GAAP Financial Measures

We define EBITDA, as adjusted, as net income (loss) excluding income (loss) from discontinued operations (net of tax), cumulative effect of accounting changes (net of tax), income taxes, interest expense (including debt extinguishment costs), depreciation and amortization expense, impairment charges, restructuring and other charges, non-cash gains or losses from foreign currency exchange rate changes recorded on intercompany obligations, expensed acquisition costs, gain on extinguishment of debt and other items. We believe EBITDA, as adjusted, is an important measure of operating performance because it allows management, investors and others to evaluate and compare our core operating results from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization), our subsidiaries’ capital structure (non-cash gains or losses from foreign currency exchange rate changes on intercompany obligations), tax consequences, impairment charges, restructuring and other charges, expensed acquisition costs, gain on extinguishment of debt and other items. Management uses EBITDA, as adjusted, as a supplemental measure to review current period operating performance, comparability measures and performance measures for period to period comparisons. In addition, the compensation committee has used EBITDA, as adjusted, in evaluating the performance of the Company and management and in evaluating certain components of executive compensation, including performance-based annual incentive programs. Our EBITDA, as adjusted, may not be comparable to a similarly titled measure of another company because other entities may not calculate EBITDA in the same manner.

EBITDA, as adjusted, is not a measure of financial performance under GAAP, and should not be considered in isolation or as an alternative to net income (loss), cash flows from operating activities or any other measure determined in accordance with GAAP. Items excluded from EBITDA, as adjusted, are significant and necessary components to the operation of our business, and, therefore, EBITDA, as adjusted, should only be used as a supplemental measure of our operating performance.

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The following table reconciles our net loss to EBITDA, as adjusted (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net loss	$	(31,889)	$	(7,305)	$	(50,193)	$	(12,699)
(Income) loss from discontinued operations, net of tax	122		(7,457)		276		(7,620)
Depreciation and amortization	32,958		36,319		65,568		74,536
Impairments	6,512		5,919		6,512		5,919
Restatement related charges (recoveries), net	—		(28)		—		20
Restructuring and other charges	7,677		5,788		8,865		6,172
Interest expense	9,638		9,928		19,591		18,091
Gain on extinguishment of debt	(2,644)		—		(2,644)		—
Gain on currency exchange rate remeasurement of intercompany balances	(2,077)		(591)		(3,198)		(829)
Provision for income taxes	3,895		10,592		13,225		19,732
EBITDA, as adjusted	$	24,192	$	53,165	$	58,002	$	103,322

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks associated with changes in foreign currency exchange rates due to our significant international operations. While the majority of our revenue contracts are denominated in the U.S. dollar, certain contracts or portions of certain contracts, most notably within our contract operations segment, are exposed to foreign currency fluctuations. Approximately 15% of revenues in our contract operations segment are denominated in a currency other than the U.S. dollar. The currencies for which we have our largest exchange rate exposures are related to changes in the Argentine Peso and the Brazilian Real. During the six months ended June 30, 2020, the Argentine Peso depreciated by approximately 15% and Brazilian Real depreciated by approximately 26%. The impact of foreign currency risk on income for these contracts is generally mitigated by matching costs with revenues in the same currency.

Additionally, the net assets and liabilities of these operations are exposed to changes in currency exchange rates. These operations may also have net assets and liabilities not denominated in their functional currency, which exposes us to changes in foreign currency exchange rates that impact income. We recorded foreign currency gains of $0.3 million and foreign currency losses of $0.4 million in our statements of operations during the six months ended June 30, 2020 and 2019, respectively. Our foreign currency gains and losses are primarily due to exchange rate fluctuations related to monetary asset balances denominated in currencies other than the functional currency, including foreign currency exchange rate changes recorded on intercompany obligations. Our material exchange rate exposure relates to intercompany loans to subsidiaries whose functional currency are the Brazilian Real and Canadian Dollar, which loans carried U.S. dollars balances of $5.6 million and $26.5 million, respectively, as of June 30, 2020. Foreign currency losses included translation gains of $3.2 million and $0.8 million during the six months ended June 30, 2020 and 2019, respectively, related to the functional currency remeasurement of our foreign subsidiaries’ non-functional currency denominated intercompany obligations. During the six months ended June 30, 2019, we entered into forward currency exchange contracts to mitigate exposures in U.S. dollars related to the Argentine Peso, Brazilian Real and Indonesian Rupiah. As a result of entering into these contracts, we recognized losses of $0.8 million during the six months ended June 30, 2019. Changes in exchange rates may create gains or losses in future periods to the extent we maintain net assets and liabilities not denominated in the functional currency.

Item 4.  Controls and Procedures

This Item 4 includes information concerning the controls and controls evaluation referred to in the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Exchange Act included in this Quarterly Report as Exhibits 31.1 and 31.2.

40

Management’s Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

In connection with the preparation of this Quarterly Report on Form 10-Q, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2020. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our principal executive officer and principle financial officer, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

41

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

In the ordinary course of business, we are involved in various pending or threatened legal actions. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from any of these actions will not have a material adverse effect on our financial position, results of operations or cash flows. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our financial position, results of operations or cash flows.

Item 1A.  Risk Factors

There have been no material changes or updates to our risk factors that were previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, except as follows:

Natural disasters, public health crises, including the COVID-19 pandemic, and other catastrophic events outside of our control may adversely affect our business or the business of third parties on which we depend.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. In response to the pandemic, governmental authorities have mandated shutdowns, travel restrictions, social distancing requirements, stay at home orders and advisories and other restrictions. The COVID-19 pandemic and aggressive actions taken in response to it have negatively impacted the global economy, disrupted global supply chains and financial markets and created significant volatility and disruption across most industries, including ours.

The extent to which the coronavirus pandemic will continue to impact our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; the effect on our customers and customer demand for our products, solutions, and services; our ability to sell and provide our products, solutions, and services, including as a result of supplier disruptions, travel restrictions and people working from home; the ability of our customers to pay for our products, solutions, and services; and any closures of our and our customers’ offices and facilities.

We are following local governmental guidance for viral spread mitigation, including having many of our employees who would traditionally work in an office work from home, and have put in place additional health and safety measures to protect our employees, customers and other parties who are working at our operating sites. While some of our employees can work remotely, many of our projects require our employees to travel to operating sites. Certain of our customers and significant projects are located in areas where travel restrictions have been imposed and we may be unable to fulfill our obligations to those customers as a result. The ability of our employees and our suppliers’ and customers’ employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, or by their inability to travel as a result of the mitigation measures noted above, which may affect our ability to fulfill our obligations to our customers. See Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of COVID-19 on our Business for further discussion of our response to, and the impact of, the COVID-19 pandemic on our business.

Many countries have significantly shut down their economies to mitigate the spreading of the virus, thus impacting consumer spending including reduced demand for oil and natural gas. Although certain economies are reopening, shutdowns or partial reopenings could directly or indirectly impact the demand for and pricing of our products and services and negatively impact our operating results especially if there are returns to shutdowns in the future. Further deterioration in economic conditions, as a result of the COVID-19 pandemic or otherwise, could lead to a further or prolonged decline in demand for our products and services and negatively impact our business. For example, some customers that have been impacted by COVID-19 have slowed down decision making, delayed planned work and have sought to terminate or renegotiate existing agreements. The pandemic may also impact financial markets and corporate credit markets which could adversely impact our access to financing or the terms of any such financing. These types of events are unpredictable and can materially affect our business, financial condition, results of operations and cash flows.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

(a)  Not applicable.

42

(b)  Not applicable.

(c)  The following table summarizes our repurchases of equity securities during the three months ended June 30, 2020:

Period	Total Number  of Shares  Repurchased(1)	Average Price Paid Per Unit		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares yet to be Purchased Under the Publicly Announced Plans or Programs (2)
April 1, 2020 - April 30, 2020	434	$	3.52	—	$	57,726,011
May 1, 2020 - May 31, 2020	1,880	4.77		—	57,726,011
June 1, 2020 - June 30, 2020	—	—		—	57,726,011
Total	2,314	$	4.54	—	$	57,726,011

____________________

⁽¹⁾  Total number of shares repurchased includes 2,314 shares withheld to satisfy employees’ tax withholding obligations in connection with vesting of restricted stock awards during the period.

⁽²⁾  On February 20, 2019, our board of directors approved a share repurchase program, under which the Company is authorized to purchase up to $100.0 million of its outstanding common stock through February 2022. The timing and method of any repurchases under the program will depend on a variety of factors, including prevailing market conditions among others. Purchases under the program may be suspended or discontinued at any time, and we have no obligation to repurchase any amount of our common shares under the program. Shares of common stock acquired through the repurchase program are held in treasury at cost.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

None.

43

Item 6.  Exhibits

Exhibit No.	Description
2.1	Separation and Distribution Agreement, dated as of November 3, 2015, by and among Exterran Holdings, Inc., Exterran General Holdings LLC, Exterran Energy Solutions, L.P., Exterran Corporation, AROC Corp., EESLP LP LLC, AROC Services GP LLC, AROC Services LP LLC and Archrock Services, L.P., incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015
2.2	First Amendment to Separation and Distribution Agreement, dated as of December 15, 2015, by and among Archrock, Inc., Exterran General Holdings LLC, Exterran Energy Solutions, L.P., Exterran Corporation, AROC Corp., EESLP LP LLC, AROC Services GP LLC, AROC Services LP LLC and Archrock Services, L.P., incorporated by reference to Exhibit 2.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015
22.1*	List of Guarantor Subsidiaries
31.1*	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 1010).

________________________________

†	Management contract or compensation plan or arrangement.
*	Filed herewith.
**	Furnished, not filed.

44

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Exterran Corporation
Date: August 10, 2020	By:	/s/ DAVID A. BARTA
		David A. Barta
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

45

EX-22.1

Exhibit 22.1

List of Guarantor and Issuer to the 8.125% Senior Notes due May 2025

As of June 30, 2020

Company		Incorporation
Exterran Corporation	Parent Guarantor	United States
EESLP LP LLC	Issuer	United States
EES Finance Corp.	Issuer	United States

EX-31.1

Exhibit 31.1

Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Andrew J. Way, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Exterran Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2020

By:	/s/ ANDREW J. WAY
	Name:	Andrew J. Way
	Title:	Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David A. Barta, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Exterran Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2020

By:	/s/ DAVID A. BARTA
	Name:	David A. Barta
	Title:	Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification of CEO Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Exterran Corporation (the “Company”) for the quarter ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Andrew J. Way, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ANDREW J. WAY
Name:	Andrew J. Way
Title:	President and Chief Executive Officer
Date: August 10, 2020

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification of CFO Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Exterran Corporation (the “Company”) for the quarter ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), David A. Barta, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ DAVID A. BARTA
Name:	David A. Barta
Title:	Senior Vice President and Chief Financial Officer
Date: August 10, 2020

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2020	Aug. 03, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2020
Document Transition Report	false
Entity File Number	001-36875
Entity Registrant Name	EXTERRAN CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	47-3282259
Entity Address, Address Line One	11000 Equity Drive
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77041
City Area Code	281
Local Phone Number	836-7000
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	EXTN
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		33,145,411
Entity Central Index Key	0001635881
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 27,051	$ 16,683
Restricted cash	0	19
Accounts receivable, net of allowance of $9,999 and $6,019, respectively	213,857	202,337
Inventory, net	130,152	143,538
Contract assets	39,763	46,537
Other current assets	21,519	22,477
Current assets associated with discontinued operations	4,401	4,332
Total current assets	436,743	435,923
Property, plant, and equipment, net	803,571	844,410
Operating lease right-of-use assets	27,145	26,783
Deferred income taxes	10,313	13,994
Intangible and other assets, net	75,139	93,300
Long-term assets held for sale	442	624
Long-term assets associated with discontinued operations	1,750	2,970
Total assets	1,355,103	1,418,004
Current liabilities:
Accounts payable, trade	91,699	123,444
Accrued liabilities	99,617	104,081
Contract liabilities	100,069	82,854
Current operating lease liabilities	6,223	6,268
Current liabilities associated with discontinued operations	7,725	9,998
Total current liabilities	305,333	326,645
Long-term debt	483,843	443,587
Deferred income taxes	1,056	993
Long-term contract liabilities	136,571	156,262
Long-term operating lease liabilities	32,116	30,958
Other long-term liabilities	50,083	49,263
Long- term liabilities associated with discontinued operations	981	758
Total liabilities	1,009,983	1,008,466
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 50,000,000 shares authorized; zero issued	0	0
Common stock, $0.01 par value per share; 250,000,000 shares authorized; 37,763,679 and 37,508,286 shares issued, respectively	378	375
Additional paid-in capital	749,025	747,622
Accumulated deficit	(367,431)	(317,238)
Treasury stock — 4,609,834 and 4,467,600 common shares, at cost, respectively	(57,412)	(56,567)
Accumulated other comprehensive income	20,560	35,346
Total stockholders' equity	345,120	409,538
Liabilities and Equity, Total	$ 1,355,103	$ 1,418,004

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Accounts receivable, allowance (US dollars)	$ 9,999	$ 6,019
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	37,763,679	37,508,286
Treasury stock, common shares	4,609,834	4,467,600

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues
Revenues	$ 171,625	$ 390,874	$ 381,982	$ 742,320
Costs and expenses:
Selling, general and administrative	34,407	45,636	72,459	89,088
Depreciation and amortization	32,958	36,319	65,568	74,536
Impairments	6,512	5,919	6,512	5,919
Restatement related charges (recoveries), net	0	(28)	0	20
Restructuring and other charges	7,677	5,788	8,865	6,172
Interest expense	9,638	9,928	19,591	18,091
Gain on extinguishment of debt	(2,644)	0	(2,644)	0
Other (income) expense, net	(2,641)	(477)	(2,347)	(1,722)
Total costs and expenses	199,497	395,044	418,674	742,907
Loss before income taxes	(27,872)	(4,170)	(36,692)	(587)
Provision for income taxes	3,895	10,592	13,225	19,732
Loss from continuing operations	(31,767)	(14,762)	(49,917)	(20,319)
Income (loss) from discontinued operations, net of tax	(122)	7,457	(276)	7,620
Net loss	$ (31,889)	$ (7,305)	$ (50,193)	$ (12,699)
Basic net loss per common share
Loss from continuing operations per common share (in dollars per share)	$ (0.97)	$ (0.42)	$ (1.53)	$ (0.57)
Income from discontinued operations per common share (in dollars per share)	0	0.21	0	0.21
Net loss per common share (in dollars per share)	(0.97)	(0.21)	(1.53)	(0.36)
Diluted net loss per common share
Loss from continuing operations per common share (in dollars per share)	(0.97)	(0.42)	(1.53)	(0.57)
Income from discontinued operations per common share (in dollars per share)	0	0.21	0	0.21
Net loss per common share (in dollars per share)	$ (0.97)	$ (0.21)	$ (1.53)	$ (0.36)
Weighted average common shares outstanding used in net loss per common share
Basic (in shares)	32,803	35,149	32,720	35,393
Diluted (in shares)	32,803	35,149	32,720	35,393
Contract operations
Revenues
Revenues	$ 77,945	$ 89,684	$ 172,733	$ 175,384
Costs and expenses:
Cost of sales	23,746	30,336	55,206	58,927
Aftermarket services
Revenues
Revenues	24,993	30,113	52,902	57,415
Costs and expenses:
Cost of sales	19,020	21,017	40,201	41,735
Product sales
Revenues
Revenues	68,687	271,077	156,347	509,521
Costs and expenses:
Cost of sales	$ 70,824	$ 240,606	$ 155,263	$ 450,141

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement of Comprehensive Income [Abstract]
Net loss	$ (31,889)	$ (7,305)	$ (50,193)	$ (12,699)
Other comprehensive income (loss):
Foreign currency translation adjustment	(3,730)	420	(14,786)	(548)
Comprehensive loss	$ (35,619)	$ (6,885)	$ (64,979)	$ (13,247)

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands	Total	Cumulative-effect adjustment from adoption of ASC 842 Leases	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Deficit Cumulative-effect adjustment from adoption of ASC 842 Leases	Treasury Stock	Accumulated Other Comprehensive Income
Beginning balance at Dec. 31, 2018	$ 552,821	$ (6,184)	$ 369	$ 734,458	$ (208,677)	$ (6,184)	$ (11,560)	$ 38,231
Increase (Decrease) in Stockholders' Equity
Net loss	(5,394)				(5,394)
Foreign currency translation adjustment	(968)							(968)
Treasury stock purchased	(7,087)						(7,087)
Stock-based compensation, net of forfeitures	3,996		6	3,990
Ending balance at Mar. 31, 2019	537,184		375	738,448	(220,255)		(18,647)	37,263
Beginning balance at Dec. 31, 2018	552,821	$ (6,184)	369	734,458	(208,677)	$ (6,184)	(11,560)	38,231
Increase (Decrease) in Stockholders' Equity
Net loss	(12,699)
Foreign currency translation adjustment	(548)
Ending balance at Jun. 30, 2019	519,982		375	742,355	(227,560)		(32,871)	37,683
Beginning balance at Mar. 31, 2019	537,184		375	738,448	(220,255)		(18,647)	37,263
Increase (Decrease) in Stockholders' Equity
Net loss	(7,305)				(7,305)
Foreign currency translation adjustment	420							420
Transfers from Archrock, Inc.	420			420
Treasury stock purchased	(14,224)						(14,224)
Stock-based compensation, net of forfeitures	3,487			3,487
Ending balance at Jun. 30, 2019	519,982		375	742,355	(227,560)		(32,871)	37,683
Beginning balance at Dec. 31, 2019	409,538		375	747,622	(317,238)		(56,567)	35,346
Increase (Decrease) in Stockholders' Equity
Net loss	(18,304)				(18,304)
Foreign currency translation adjustment	(11,056)							(11,056)
Treasury stock purchased	(835)						(835)
Stock-based compensation, net of forfeitures	285		2	283
Ending balance at Mar. 31, 2020	379,628		377	747,905	(335,542)		(57,402)	24,290
Beginning balance at Dec. 31, 2019	409,538		375	747,622	(317,238)		(56,567)	35,346
Increase (Decrease) in Stockholders' Equity
Net loss	(50,193)
Foreign currency translation adjustment	(14,786)
Ending balance at Jun. 30, 2020	345,120		378	749,025	(367,431)		(57,412)	20,560
Beginning balance at Mar. 31, 2020	379,628		377	747,905	(335,542)		(57,402)	24,290
Increase (Decrease) in Stockholders' Equity
Net loss	(31,889)				(31,889)
Foreign currency translation adjustment	(3,730)							(3,730)
Treasury stock purchased	(10)						(10)
Stock-based compensation, net of forfeitures	1,121		1	1,120
Ending balance at Jun. 30, 2020	$ 345,120		$ 378	$ 749,025	$ (367,431)		$ (57,412)	$ 20,560

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities:
Net loss	$ (50,193)	$ (12,699)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization	65,568	74,536
Impairments	6,512	5,919
Amortization of deferred financing costs	1,256	1,256
(Income) loss from discontinued operations, net of tax	276	(7,620)
Provision for doubtful accounts	3,980	0
Gain on sale of property, plant and equipment	(166)	(1,132)
Gain on remeasurement of intercompany balances	(3,198)	(1,037)
Loss on foreign currency derivatives	0	794
Gain on extinguishment of debt	(2,644)	0
Stock-based compensation expense	1,406	7,483
Deferred income tax expense (benefit)	3,892	(4,281)
Changes in assets and liabilities:
Accounts receivable and notes	(16,753)	(15,746)
Inventory	8,857	(29,260)
Contract assets	7,677	44,049
Other current assets	3,622	7,721
Accounts payable and other liabilities	(37,824)	(13,808)
Contract liabilities	14,225	33,123
Other	5,374	(5,472)
Net cash provided by continuing operations	11,867	83,826
Net cash provided by (used in) discontinued operations	(1,176)	3,102
Net cash provided by operating activities	10,691	86,928
Cash flows from investing activities:
Capital expenditures	(41,251)	(126,116)
Proceeds from sale of property, plant and equipment	236	4,149
Settlement of foreign currency derivatives	0	(794)
Net cash used in investing activities	(41,015)	(122,761)
Cash flows from financing activities:
Proceeds from borrowings of debt	225,500	386,000
Repayments of debt	(183,316)	(331,225)
Transfer from Archrock, Inc.	0	420
Purchases of treasury stock	(845)	(21,311)
Net cash provided by financing activities	41,339	33,884
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(666)	(332)
Net increase (decrease) in cash, cash equivalents and restricted cash	10,349	(2,281)
Cash, cash equivalents and restricted cash at beginning of period	16,702	19,478
Cash, cash equivalents and restricted cash at end of period	27,051	17,197
Supplemental disclosure of non-cash transactions:
Accrued capital expenditures	$ 5,205	$ 14,758

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Description of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Description of Business and Basis of Presentation

Note 1 - Description of Business and Basis of Presentation

Description of Business

Exterran Corporation (together with its subsidiaries, “Exterran Corporation,” the “Company,” “our,” “we” or “us”), a Delaware corporation formed in March 2015, is a global systems and process company offering solutions in the oil, gas, water and power markets. We are a leader in natural gas processing and treatment and compression products and services, providing critical midstream infrastructure solutions to customers throughout the world. We provide our products and services to a global customer base consisting of companies engaged in all aspects of the oil and natural gas industry, including large integrated oil and natural gas companies, national oil and natural gas companies, independent oil and natural gas producers and oil and natural gas processors, gatherers and pipeline operators. Our manufacturing facilities are located in the U.S., Singapore and the United Arab Emirates. We operate in three primary business lines: contract operations, aftermarket services and product sales.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Exterran Corporation included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.”) (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are not required in these interim financial statements and have been condensed or omitted. Management believes that the information furnished includes all adjustments of a normal recurring nature that are necessary to fairly state our consolidated financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements presented in our Annual Report on Form 10-K for the year ended December 31, 2019. That report contains a comprehensive summary of our accounting policies. The interim results reported herein are not necessarily indicative of results for a full year. Certain reclassifications have been made for the prior year period to conform to the current year presentation.

We refer to the condensed consolidated financial statements collectively as “financial statements,” and individually as “balance sheets,” “statements of operations,” “statements of comprehensive income (loss),” “statements of stockholders’ equity” and “statements of cash flows” herein.

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption across most industries. Efforts to mitigate the spread of COVID-19 have also resulted in decreased energy demand and additional weakness in energy pricing. To help control the spread of the virus and protect the health and safety of our employees and customers, we began temporarily closing our locations or modifying operating hours in our locations around the world. This was in response to governmental requirements including “stay-at-home” orders and similar mandates and in some of our locations we voluntarily went beyond the requirements of local government authorities. The broader implications of COVID-19 on our long-term future results of operations and overall financial condition remains uncertain. Due to the rapid market deterioration during the three months ended March 31, 2020, we concluded that a trigger existed and that we should evaluate our long-term assets for impairment. Therefore, we updated our impairment analysis and concluded that no impairment existed during the three months ended March 31, 2020. However, see Note 8 for discussion of impairment recorded on assets related to our U.S. compression business.

Recent Accounting Pronouncements

We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined to be not applicable.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326). The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. On January 1, 2020, we adopted this update using a modified retrospective approach. The adoption of this update was immaterial to our financial statements. For more information regarding the allowance for doubtful accounts, see Note 2.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The update modifies the disclosure requirements on fair value measurements by removing, modifying and adding certain disclosure requirements. On January 1, 2020, we adopted this update. The adoption of this update was immaterial to our financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update simplifies the accounting for income taxes and is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the potential impact of the update on our financial statements.

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Revenue

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue

Note 2 - Revenue

Disaggregation of Revenue

The following tables present disaggregated revenue by products and services lines and by geographical regions for the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Revenue by Products and Services	2020		2019		2020		2019
Contract Operations Segment:
Contract operations services (1)	$	77,945	$	89,684	$	172,733	$	175,384
Aftermarket Services Segment:
Operation and maintenance services (1)	$	12,279	$	14,102	$	25,218	$	26,775
Part sales (2)	9,685		12,193		20,509		21,989
Other services (1)	3,029		3,818		7,175		8,651
Total aftermarket services	$	24,993	$	30,113	$	52,902	$	57,415
Product Sales Segment:
Compression equipment (1)	$	54,766	$	170,263	$	123,485	$	315,702
Processing and treating equipment (1)	8,807		99,863		20,616		189,083
Production equipment (2)	—		23		578		2,458
Other product sales (1) (2)	5,114		928		11,668		2,278
Total product sales revenues	$	68,687	$	271,077	$	156,347	$	509,521
Total revenues	$	171,625	$	390,874	$	381,982	$	742,320

⁽¹⁾Revenue recognized over time.

⁽²⁾Revenue recognized at a point in time.

	Three Months Ended June 30,				Six Months Ended June 30,
Revenue by Geographical Regions	2020		2019		2020		2019
North America	$	49,922	$	202,751	$	108,461	$	383,756
Latin America	58,352		76,161		135,149		154,648
Middle East and Africa	52,373		100,469		108,086		183,260
Asia Pacific	10,978		11,493		30,286		20,656
Total revenues	$	171,625	$	390,874	$	381,982	$	742,320

The North America region is primarily comprised of our operations in the U.S. The Latin America region is primarily comprised of our operations in Argentina, Bolivia, Brazil and Mexico. The Middle East and Africa region is primarily comprised of our operations in Bahrain, Iraq, Oman, Nigeria and the United Arab Emirates. The Asia Pacific region is primarily comprised of our operations in China, Indonesia, Singapore and Thailand.

The following table summarizes the expected timing of revenue recognition from unsatisfied performance obligations (commonly referred to as backlog) as of June 30, 2020 (in thousands):

	Contract Operations Segment		Product Sales Segment
Remainder of 2020	$	133,697	$	158,924
2021	245,022		263,709
2022	195,696		103,321
2023	172,890		12,000
2024	148,288		9,000
Thereafter	358,369		29,316
Total backlog	$	1,253,962	$	576,270

Certain of our aftermarket services contracts are subject to cancellation or modification at the election of the customer.

If the primary component of our contract operations contracts is the lease component, the contracts are accounted for as operating leases. For these contracts, revenues are recognized on a straight-line basis. As of June 30, 2020, the total value of our contracts operations backlog accounted for as operating leases was approximately $167 million, of which $18 million is expected to be recognized in the remainder of 2020, $36 million is expected to be recognized in 2021, $39 million is expected to be recognized in 2022, $44 million is expected to be recognized in 2023 and $26 million is expected to be recognized in 2024. Contract operations revenue recognized as operating leases for the six months ended June 30, 2020 was approximately $16 million. Our product sales backlog includes contracts where there is a significant financing component. As of June 30, 2020, we had approximately $43 million expected to be recognized in future periods as interest income within our product sales segment.

Contract Assets and Contract Liabilities

The following table provides information about accounts receivables, net, contract assets and contract liabilities from contracts with customers (in thousands):

	June 30, 2020		December 31, 2019
Accounts receivables, net	$	213,857	$	202,337
Contract assets and contract liabilities:
Current contract assets	39,763		46,537
Long-term contract assets	6,726		16,280
Current contract liabilities	100,069		82,854
Long-term contract liabilities	136,571		156,262

During the six months ended June 30, 2020, revenue recognized from contract operations services included $15.3 million of revenue deferred in previous periods. Revenue recognized during the six months ended June 30, 2020 from product sales performance obligations partially satisfied in previous periods was $129.5 million, of which $29.3 million was included in billings in excess of costs at the beginning of the period. The decrease in current contract assets during the six months ended June 30, 2020 was primarily driven by the timing of billings on product sales in North America. The increase in current contract liabilities during the six months ended June 30, 2020 was primarily driven by the progression of product sales projects in the Middle East and Africa region. The decrease in long-term contract liabilities during the six months ended June 30, 2020 was primarily driven by recognition of revenue previously received from customers in the Latin America region.

Allowance for Doubtful Accounts

The Company estimates its reserves using information about past events, current conditions and risk characteristics of each customer, and reasonable and supportable forecasts relevant to assessing risk associated with the collectability of accounts receivables, contract assets and long-term note receivables. The Company’s customer base have generally similar collectability risk characteristics, although larger customers may have lower risk than smaller independent customers. As a result of the expected impact of COVID-19 on our customers, in the six months ended June 30, 2020, we recorded an additional allowance for doubtful accounts of approximately $4.0 million. The allowance for doubtful accounts as of June 30, 2020 and changes for the six months then ended are as follows (in thousands):

Balance at December 31, 2019	$	6,019
Current period provision for expected credit losses	3,980
Balance at June 30, 2020	$	9,999

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Discontinued Operations

6 Months Ended

Jun. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Note 3 - Discontinued Operations

In the first quarter of 2016, we began executing the exit of our Belleli EPC business that has historically been comprised of engineering, procurement and construction for the manufacture of tanks for tank farms and the manufacture of evaporators and brine heaters for desalination plants in the Middle East (referred to as “Belleli EPC” or the “Belleli EPC business” herein) by ceasing the bookings of new orders. As of the fourth quarter of 2017, we had substantially exited our Belleli EPC business and, in accordance with GAAP, it is reflected as discontinued operations in our financial statements for all periods presented. Although we have reached mechanical completion on all remaining Belleli EPC contracts, we are still subject to risks and uncertainties potentially resulting from warranty obligations, customer or supplier claims against us, settlement of claims against customers, completion of demobilization activities and litigation developments. The facility previously utilized to manufacture products for our Belleli EPC business has been repurposed to manufacture product sales equipment. As such, certain personnel, buildings, equipment and other assets that were previously related to our Belleli EPC business remain a part of our continuing operations. As a result, activities associated with our ongoing operations at our repurposed facility are included in continuing operations.

The following table summarizes the operating results of discontinued operations (in thousands):

	Three Months Ended June 30, 2020		Three Months Ended June 30, 2019
	Belleli EPC		Venezuela		Belleli EPC		Total
Revenue	$	—	$	—	$	97	$	97
Cost of sales (excluding depreciation and amortization expense)	88		—		(1,283)		(1,283)
Selling, general and administrative	101		33		149		182
Other (income) expense, net	5		—		(4)		(4)
Benefit from income taxes	(72)		—		(6,255)		(6,255)
Income (loss) from discontinued operations, net of tax	$	(122)	$	(33)	$	7,490	$	7,457

	Six Months Ended June 30, 2020		Six Months Ended June 30, 2019
	Belleli EPC		Venezuela		Belleli EPC		Total
Revenue	$	124	$	—	$	234	$	234
Cost of sales (excluding depreciation and amortization expense)	184		—		(1,599)		(1,599)
Selling, general and administrative	214		68		690		758
Other (income) expense, net	49		—		(332)		(332)
Benefit from income taxes	(47)		—		(6,213)		(6,213)
Income (loss) from discontinued operations, net of tax	$	(276)	$	(68)	$	7,688	$	7,620

The following table summarizes the balance sheet data for discontinued operations (in thousands):

	June 30, 2020		December 31, 2019
	Belleli EPC		Belleli EPC
Accounts receivable	$	3,852	$	3,990
Contract assets	459		46
Other current assets	90		296
Total current assets associated with discontinued operations	4,401		4,332
Intangible and other assets, net	1,750		2,970
Total assets associated with discontinued operations	$	6,151	$	7,302
Accounts payable	$	318	$	1,503
Accrued liabilities	4,909		5,959
Contract liabilities	2,498		2,536
Total current liabilities associated with discontinued operations	7,725		9,998
Other long-term liabilities	981		758
Total liabilities associated with discontinued operations	$	8,706	$	10,756

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Inventory

6 Months Ended

Jun. 30, 2020

Inventory Disclosure [Abstract]

Inventory

Note 4 - Inventory

Inventory consisted of the following amounts (in thousands):

	June 30, 2020		December 31, 2019
Parts and supplies	$	75,532	$	92,005
Work in progress	45,964		44,565
Finished goods	8,656		6,968
Inventory	$	130,152	$	143,538

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Property, Plant and Equipment, Net

6 Months Ended

Jun. 30, 2020

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment, Net

Note 5 - Property, Plant and Equipment, Net

Property, plant and equipment, net, consisted of the following (in thousands):

	June 30, 2020		December 31, 2019
Compression equipment, processing facilities and other fleet assets	$	1,571,949	$	1,607,769
Land and buildings	67,136		67,187
Transportation and shop equipment	58,303		59,693
Computer software	50,827		51,663
Other	40,028		38,111
	1,788,243		1,824,423
Accumulated depreciation	(984,672)		(980,013)
Property, plant and equipment, net	$	803,571	$	844,410

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Debt

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Debt

Note 6 - Debt

Debt consisted of the following (in thousands):

	June 30, 2020		December 31, 2019
Revolving credit facility due October 2023	$	132,500	$	74,000
8.125% senior notes due May 2025	356,000		375,000
Other debt	29		237
Unamortized deferred financing costs of 8.125% senior notes	(4,657)		(5,413)
Total debt	483,872		443,824
Less: Amounts due within one year (1)	(29)		(237)
Long-term debt	$	483,843	$	443,587

⁽¹⁾ Short-term debt and the current portion of long-term debt are included in accrued liabilities in our balance sheets.

Revolving Credit Facility Due October 2023

We and our wholly owned subsidiary, Exterran Energy Solutions, L.P. (“EESLP”), are parties to an amended and restated credit agreement (the “Credit Agreement”) consisting of a $700.0 million revolving credit facility expiring in October 2023.

As of June 30, 2020, we had $132.5 million in outstanding borrowings and $14.2 million in outstanding letters of credit under our revolving credit facility. At June 30, 2020, taking into account guarantees through letters of credit, we had undrawn capacity of $553.3 million under our revolving credit facility. Our Credit Agreement limits our Total Debt to EBITDA ratio (as defined in the Credit Agreement) on the last day of the fiscal quarter to no greater than 4.50 to 1.0. As a result of this limitation, $239.4 million of the $553.3 million of undrawn capacity under our revolving credit facility was available for additional borrowings as of June 30, 2020.

8.125% Senior Notes Due May 2025

In April 2017, our 100% owned subsidiaries EESLP and EES Finance Corp. issued $375.0 million aggregate principal amount of 8.125% senior unsecured notes due 2025 (the “2017 Notes”). We guarantee the 2017 Notes on a senior unsecured basis. We may redeem the 2017 Notes at any time in cash, in whole or part, at certain redemption prices, including the applicable make-whole premium plus accrued and unpaid interest, if any, to the date of redemption. During the second quarter of 2020, we purchased and retired $19.0 million principal amount of our 2017 Notes for $16.3 million (including $0.2 million of accrued interest) resulting in a gain on extinguishment of debt of $2.6 million. The gain was calculated as the difference between the repurchase price and the carrying amount of the 2017 Notes, partially offset by $0.2 million in related deferred financing costs. The gain on extinguishment of debt is included as a separate item in our statements of operations. During July 2020, we purchased and retired an additional $5.0 million of our 2017 Notes for $4.3 million including $0.1 million of accrued interest.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 7 - Fair Value Measurements

The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the following three categories:

•Level 1 — Quoted unadjusted prices for identical instruments in active markets to which we have access at the date of measurement.

•Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered market makers.

•Level 3 — Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information.

Nonrecurring Fair Value Measurements

The following table presents our assets and liabilities measured at fair value on a nonrecurring basis during the six months ended June 30, 2020 and 2019, with pricing levels as of the date of valuation (in thousands):

	Six months ended June 30, 2020						Six months ended June 30, 2019
	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)
Inventory (1)	$	—	$	—	$	11,625	$	—	$	—	$	—
Impaired long-lived assets (1)	—		—		19,080		—		—		—
Impaired assets- assets held for sale (2)	—		—		—		—		—		5,445
Long-term note receivable (3)	—		—		15,039		—		—		14,899

(1)Our estimate of the fair value of the inventory and long-lived assets as of June 30, 2020 are part of the U.S. compression fabrication business and was based on the expected values upon winding down the business.

(2)Our estimated fair value of the impaired assets held for sale during the six months ended June 30, 2019 was based on the expected proceeds from the sale of the assets.

(3)Our estimate of the fair value of a note receivable was discounted based on a settlement period of eight years and a discount rate of 6.2%. The undiscounted value of the note receivable, including interest, as of June 30, 2020 was $15.5 million.

Financial Instruments

Our financial instruments consists of cash, restricted cash, receivables, payables and debt. At June 30, 2020 and December 31, 2019, the estimated fair values of cash, restricted cash, receivables and payables approximated their carrying amounts as reflected in our balance sheets due to the short-term nature of these financial instruments.

The fair value of the 2017 Notes was estimated based on model derived calculations using market yields observed in active markets, which are Level 2 inputs. As of June 30, 2020 and December 31, 2019, the carrying amount of the 2017 Notes, excluding unamortized deferred financing costs, of $356.0 million and $375.0 million was estimated to have a fair value of $295.0 million and $371.0 million, respectively. Due to the variable rate nature of our revolving credit facility, the carrying value as of June 30, 2020 and December 31, 2019 approximated the fair value as the rate was comparable to the then-current market rate at which debt with similar terms could have been obtained.

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Impairments

6 Months Ended

Jun. 30, 2020

Asset Impairment Charges [Abstract]

Impairments

Note 8 - Impairments

We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressor units from our active fleet, indicate that the carrying amount of an asset may not be recoverable.

During the second quarter of 2020, in connection with our review of options for our U.S. compression fabrication business within our product sales segment, we reviewed the assets in this business compared to our estimate of future cash flows and recorded a $6.5 million impairment charge for the three and six months ended June 30, 2020 to adjust the carrying value to our estimate of fair market value.

During the second quarter of 2019, we classified certain long-lived assets as assets held for sale in our balance sheets. In conjunction with the planned disposition of these units, we recorded impairment charges of $5.9 million to write-down these assets to their approximate fair values for the three and six months ended June 30, 2019 based on the expected net proceeds. The fair value of these long-lived assets after impairment was $5.4 million.

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Restructuring and Other Charges

6 Months Ended

Jun. 30, 2020

Restructuring and Related Activities [Abstract]

Restructuring and Other Charges

Note 9 - Restructuring and Other Charges

The energy industry’s focus on cash flow, capital discipline and improving returns has caused delays in the timing of new equipment orders. As a result, in the second quarter of 2019, we began the consolidation of two of our manufacturing facilities located in Houston, Texas into one facility and announced a cost reduction plan primarily focused on workforce reductions. We incurred restructuring and other charges associated with these activities of $7.7 million and $8.9 million for the three and six months ended June 30, 2020, respectively and $5.9 million for the three and six months ended June 30, 2019. These charges are reflected as restructuring and other charges in our statements of operations and accrued liabilities on our balance sheets. The cost reduction plan is expected to be completed in the second half of 2020 and we expect to settle these charges within the next twelve months in cash. At this time, we cannot currently estimate the total restructuring costs that will be incurred as a result of this cost reduction plan.

In the second quarter of 2018, we initiated a relocation plan in the Latin American region to better align our contract operations business with our customers. As a result of this plan, during the six months ended June 30, 2019, we incurred restructuring and other charges of $0.2 million related to relocation costs. The charges incurred in conjunction with this relocation plan are included in restructuring and other charges in our statements of operations. In the second quarter of 2019, we completed restructuring activities related to the relocation plan.

The following table summarizes the changes to our accrued liability balance related to restructuring and other charges for the six months ended June 30, 2020 and 2019 (in thousands):

	Cost Reduction Plan		Relocation Plan		Total
Beginning balance at January 1, 2019	$	—	$	309	$	309
Additions for costs expensed	5,928		244		6,172
Reductions for payments	(336)		(553)		(889)
Ending balance at June 30, 2019	$	5,592	$	—	$	5,592
Beginning balance at January 1, 2020	$	2,281	$	—	$	2,281
Additions for costs expensed, net	8,865		—		8,865
Reductions for payments	(3,214)		—		(3,214)
Foreign exchange impact	(404)		—		(404)
Ending balance at June 30, 2020	$	7,528	$	—	$	7,528

The following table summarizes the components of charges included in restructuring and other charges in our statements of operations for the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Employee termination benefits	$	4,924	$	5,928	$	5,259	$	5,928
Consulting fees	2,364		—		2,564		—
Relocation costs	—		(140)		165		244
Other	389		—		877		—
Total restructuring and other charges	$	7,677	$	5,788	$	8,865	$	6,172

The following table summarizes the components of charges included in restructuring and other charges incurred since the announcement of the cost reduction plan in the second quarter of 2019 (in thousands):

	Total
Employee termination benefits	$	12,295
Consulting fees	3,205
Relocation costs	907
Other	877
Total restructuring and other charges	$	17,284

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Provision for Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Provision for Income Taxes

Note 10 - Provision for Income Taxes

Our effective tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn, or losses we incur, in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. Our effective tax rate is also affected by valuation allowances recorded against loss carryforwards in the U.S. and certain other jurisdictions, foreign withholding taxes and changes in foreign currency exchange rates.

The following items had the most significant impact on the difference between our statutory U.S. federal income tax rate of 21.0% and our effective tax rate of (14.0)% for the three months ended June 30, 2020: (i) a (9.8)% negative impact resulting from unrecognized tax benefits under FASB’s Interpretation No. 48 of Financial Accounting Standard 109 (“FIN 48”), (ii) a (3.4)% negative impact resulting from foreign currency devaluations in Argentina, and (iii) a (14.7)% negative impact resulting from the recording of valuation allowances against U.S. deferred tax assets.

The following items had the most significant impact on the difference between our statutory U.S. federal income tax rate of 21% and our effective tax rate of (36.0)% for the six months ended June 30, 2020: (i) a (16.3)% negative impact resulting primarily from rate differences between U.S. and foreign jurisdictions including foreign withholding taxes, (ii) a (9.2)% negative impact resulting from unrecognized tax benefits under FIN 48, and (iii) a (20.2)% negative impact resulting from the recording of valuation allowances against U.S. deferred tax assets.

Our effective tax rate decreased for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to an increase in valuation allowances recorded in the U.S., a decrease in foreign withholding tax, an increase in the FIN 48 reserve and a decrease in tax related to foreign exchange movement in Argentina in 2019.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2020

Equity [Abstract]

Stockholders' Equity

Note 11 - Stockholders’ Equity

Share Repurchase Program

On February 20, 2019, our board of directors approved a share repurchase program under which the Company is authorized to purchase up to $100.0 million of its outstanding common stock through February 2022. The timing and method of any repurchases under the program will depend on a variety of factors, including prevailing market conditions among others. Purchases under the program may be suspended or discontinued at any time and we have no obligation to repurchase any amount of our common shares under the program. Shares of common stock acquired through the repurchase program are held in treasury at cost. During the six months ended June 30, 2019, we repurchased 1,290,078 shares of our common stock for $18.8 million in connection with our share repurchase program. During the six months ended June 30, 2020, we did not repurchase any shares under this program. As of June 30, 2020, the remaining authorized repurchase amount under the share repurchase program was $57.7 million.

Additionally, treasury stock purchased during the six months ended June 30, 2020 and 2019 included shares withheld to satisfy employees’ tax withholding obligations in connection with vesting of restricted stock awards.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Note 12 - Stock-Based Compensation

Stock Options

There were no stock options granted during the six months ended June 30, 2020 and 2019.

Restricted Stock, Restricted Stock Units and Performance Units

For grants of restricted stock, restricted stock units and performance units, we recognize compensation expense over the applicable vesting period equal to the fair value of our common stock at the grant date. Grants of restricted stock, restricted stock units and performance units generally vest one third per year on each of the first three anniversaries of the grant date. Certain grants of restricted stock vest on the third anniversary of the grant date and certain grants of performance units vest on the second anniversary of the grant date.

The table below presents the changes in restricted stock, restricted stock units and performance units for our common stock during the six months ended June 30, 2020.

	Equity Awards			Liability Awards
	Shares (in thousands)	Weighted Average Grant-Date Fair  Value Per Share		Shares (in thousands)	Weighted Average Grant-Date Fair  Value Per Share
Non-vested awards, January 1, 2020	842	$	22.79	318	$	17.01
Granted	149	7.03		1,182	8.54
Vested	(411)	20.91		(80)	26.24
Cancelled	(208)	29.72		(22)	17.01
Non-vested awards, June 30, 2020	372	14.68		1,398	9.32

As of June 30, 2020, we estimate $13.3 million of unrecognized compensation cost related to unvested restricted stock, restricted stock units and performance units issued to our employees to be recognized over the weighted-average vesting period of 1.7 years.

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Net Income (Loss) Per Common Share

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Net Income (Loss) Per Common Share

Note 13 - Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed using the two-class method, which is an earnings allocation formula that determines net income (loss) per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Under the two-class method, basic net income (loss) per common share is determined by dividing net income (loss) after deducting amounts allocated to participating securities, by the weighted average number of common shares outstanding for the period. Participating securities include unvested restricted stock and restricted stock units that have non-forfeitable rights to receive dividends or dividend equivalents, whether paid or unpaid. During periods of net loss from continuing operations, no effect is given to participating securities because they do not have a contractual obligation to participate in our losses.

Diluted net income (loss) per common share is computed using the weighted average number of common shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding options to purchase common stock and non-participating restricted stock units, unless their effect would be anti-dilutive.

The following table presents a reconciliation of basic and diluted net loss per common share for the three and six months ended June 30, 2020 and 2019 (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Numerator for basic and diluted net loss per common share:
Loss from continuing operations	$	(31,767)	$	(14,762)	$	(49,917)	$	(20,319)
Income (loss) from discontinued operations, net of tax	(122)		7,457		(276)		7,620
Less: Net income attributable to participating securities	—		—		—		—
Net loss — used in basic and diluted net loss per common share	$	(31,889)	$	(7,305)	$	(50,193)	$	(12,699)
Weighted average common shares outstanding including participating securities	33,175		35,944		33,161		36,198
Less: Weighted average participating securities outstanding	(372)		(795)		(441)		(805)
Weighted average common shares outstanding — used in basic net loss per common share	32,803		35,149		32,720		35,393
Net dilutive potential common shares issuable:
On exercise of options and vesting of restricted stock units	*		*		*		*
Weighted average common shares outstanding — used in diluted net loss per common share	32,803		35,149		32,720		35,393
Net loss per common share:
Basic	$	(0.97)	$	(0.21)	$	(1.53)	$	(0.36)
Diluted	$	(0.97)	$	(0.21)	$	(1.53)	$	(0.36)

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

The following table shows the potential shares of common stock issuable for the three and six months ended June 30, 2020 and 2019 that were excluded from computing diluted net loss per common share as their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended June 30,		Six Months Ended June 30,
	2020	2019	2020	2019
Net dilutive potential common shares issuable:
On exercise of options where exercise price is greater than average market value	30	69	43	71
Net dilutive potential common shares issuable	30	69	43	71

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 14 - Commitments and Contingencies

Contingencies

In addition to U.S. federal, state and local and foreign income taxes, we are subject to a number of taxes that are not income-based. As many of these taxes are subject to audit by the taxing authorities, it is possible that an audit could result in additional taxes due. We accrue for such additional taxes when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. As of June 30, 2020 and December 31, 2019, we had accrued $3.5 million and $3.7 million, respectively, for the outcomes of non-income-based tax audits. We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued. We do not accrue for unasserted claims for tax audits unless we believe the assertion of a claim is probable, it is probable that it will be determined that the claim is owed and we can reasonably estimate the claim or range of the claim. We do not have any unasserted claims from non-income based tax audits that we have determined are probable of assertion. We also believe the likelihood is remote that the impact of potential unasserted claims from non-income-based tax audits could be material to our financial position, but it is possible that the resolution of future audits could be material to our results of operations or cash flows for the period in which the resolution occurs.

Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions. As is customary in our industry, we review our safety equipment and procedures and carry insurance against some, but not all, risks of our business. Our insurance coverage includes property damage, general liability, commercial automobile liability and other coverage we believe is appropriate. We believe that our insurance coverage is customary for the industry and adequate for our business; however, losses and liabilities not covered by insurance would increase our costs.

Additionally, we are substantially self-insured for workers’ compensation and employee group health claims in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks. Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages.

Litigation and Claims

In the ordinary course of business, we are involved in various pending or threatened legal actions. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from any of these actions will not have a material adverse effect on our financial position, results of operations or cash flows. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our financial position, results of operations or cash flows.

Indemnifications

On November 3, 2015, Archrock, Inc. (named Exterran Holdings, Inc. prior to November 3, 2015) (“Archrock”) completed the spin-off (the ‘‘Spin-off”) of its international contract operations, international aftermarket services and global fabrication businesses into an independent, publicly traded company named Exterran Corporation.

In conjunction with, and effective as of the completion of, the Spin-off, we entered into the separation and distribution agreement with Archrock, which governs, among other things, the treatment between Archrock and us relating to certain aspects of indemnification, insurance, confidentiality and cooperation. Generally, the separation and distribution agreement provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of Archrock’s business with Archrock. Pursuant to the agreement, we and Archrock will generally release the other party from all claims arising prior to the Spin-off that relate to the other party’s business, subject to certain exceptions. Additionally, in conjunction with, and effective as of the completion of, the Spin-off, we entered into the tax matters agreement with Archrock. Under the tax matters agreement and subject to certain exceptions, we are generally liable for, and indemnify Archrock against, taxes attributable to our business, and Archrock is generally liable for, and indemnify us against, all taxes attributable to its business. We are generally liable for, and indemnify Archrock against, 50% of certain taxes that are not clearly attributable to our business or Archrock’s business. Any payment made by us to Archrock, or by Archrock to us, is treated by all parties for tax purposes as a nontaxable distribution or capital contribution, respectively, made immediately prior to the Spin-off.

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Reportable Segments

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Reportable Segments

Note 15 - Reportable Segments

Our chief operating decision maker manages business operations, evaluates performance and allocates resources based upon the type of product or service provided. We have three reportable segments: contract operations, aftermarket services and product sales. In our contract operations segment, we provide processing, treating, compression and water treatment services through the operation of our natural gas compression equipment, crude oil and natural gas production and process equipment and water treatment equipment for our customers. In our aftermarket services segment, we sell parts and components and provide operations, maintenance, repair, overhaul, upgrade, startup and commissioning and reconfiguration services to customers who own their own oil and natural gas compression, production, processing, treating and related equipment. In our product sales segment, we design, engineer, manufacture, install and sell equipment used in the treating and processing of crude oil, natural gas and water as well natural gas compression packages to our customers throughout the world and for use in our contract operations business line.

We evaluate the performance of our segments based on gross margin for each segment. Revenue only includes 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 for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended	Contract Operations		Aftermarket Services		Product Sales		Reportable Segments Total
June 30, 2020:
Revenue	$	77,945	$	24,993	$	68,687	$	171,625
Gross margin (1)	54,199		5,973		(2,137)		58,035
June 30, 2019:
Revenue	$	89,684	$	30,113	$	271,077	$	390,874
Gross margin (1)	59,348		9,096		30,471		98,915

Six Months Ended	Contract Operations		Aftermarket Services		Product Sales		Reportable Segments Total
June 30, 2020:
Revenue	$	172,733	$	52,902	$	156,347	$	381,982
Gross margin (1)	117,527		12,701		1,084		131,312
June 30, 2019:
Revenue	$	175,384	$	57,415	$	509,521	$	742,320
Gross margin (1)	116,457		15,680		59,380		191,517

⁽¹⁾ Gross margin is defined as revenue less cost of sales (excluding depreciation and amortization expense).

The following table reconciles loss before income taxes to total gross margin (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Loss before income taxes	$	(27,872)	$	(4,170)	$	(36,692)	$	(587)
Selling, general and administrative	34,407		45,636		72,459		89,088
Depreciation and amortization	32,958		36,319		65,568		74,536
Impairments	6,512		5,919		6,512		5,919
Restatement related charges (recoveries), net	—		(28)		—		20
Restructuring and other charges	7,677		5,788		8,865		6,172
Interest expense	9,638		9,928		19,591		18,091
Gain on extinguishment of debt	(2,644)		—		(2,644)		—
Other (income) expense, net	(2,641)		(477)		(2,347)		(1,722)
Total gross margin	$	58,035	$	98,915	$	131,312	$	191,517

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Description of Business and Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Exterran Corporation included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.”) (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are not required in these interim financial statements and have been condensed or omitted. Management believes that the information furnished includes all adjustments of a normal recurring nature that are necessary to fairly state our consolidated financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements presented in our Annual Report on Form 10-K for the year ended December 31, 2019. That report contains a comprehensive summary of our accounting policies. The interim results reported herein are not necessarily indicative of results for a full year. Certain reclassifications have been made for the prior year period to conform to the current year presentation.

We refer to the condensed consolidated financial statements collectively as “financial statements,” and individually as “balance sheets,” “statements of operations,” “statements of comprehensive income (loss),” “statements of stockholders’ equity” and “statements of cash flows” herein.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined to be not applicable.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326). The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. On January 1, 2020, we adopted this update using a modified retrospective approach. The adoption of this update was immaterial to our financial statements. For more information regarding the allowance for doubtful accounts, see Note 2.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The update modifies the disclosure requirements on fair value measurements by removing, modifying and adding certain disclosure requirements. On January 1, 2020, we adopted this update. The adoption of this update was immaterial to our financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update simplifies the accounting for income taxes and is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the potential impact of the update on our financial statements.

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Revenue (Tables)

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following tables present disaggregated revenue by products and services lines and by geographical regions for the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Revenue by Products and Services	2020		2019		2020		2019
Contract Operations Segment:
Contract operations services (1)	$	77,945	$	89,684	$	172,733	$	175,384
Aftermarket Services Segment:
Operation and maintenance services (1)	$	12,279	$	14,102	$	25,218	$	26,775
Part sales (2)	9,685		12,193		20,509		21,989
Other services (1)	3,029		3,818		7,175		8,651
Total aftermarket services	$	24,993	$	30,113	$	52,902	$	57,415
Product Sales Segment:
Compression equipment (1)	$	54,766	$	170,263	$	123,485	$	315,702
Processing and treating equipment (1)	8,807		99,863		20,616		189,083
Production equipment (2)	—		23		578		2,458
Other product sales (1) (2)	5,114		928		11,668		2,278
Total product sales revenues	$	68,687	$	271,077	$	156,347	$	509,521
Total revenues	$	171,625	$	390,874	$	381,982	$	742,320

⁽¹⁾Revenue recognized over time.

⁽²⁾Revenue recognized at a point in time.

	Three Months Ended June 30,				Six Months Ended June 30,
Revenue by Geographical Regions	2020		2019		2020		2019
North America	$	49,922	$	202,751	$	108,461	$	383,756
Latin America	58,352		76,161		135,149		154,648
Middle East and Africa	52,373		100,469		108,086		183,260
Asia Pacific	10,978		11,493		30,286		20,656
Total revenues	$	171,625	$	390,874	$	381,982	$	742,320

Schedule of Expected Timing of Revenue Recognition from Unsatisfied Performance Obligation

The following table summarizes the expected timing of revenue recognition from unsatisfied performance obligations (commonly referred to as backlog) as of June 30, 2020 (in thousands):

	Contract Operations Segment		Product Sales Segment
Remainder of 2020	$	133,697	$	158,924
2021	245,022		263,709
2022	195,696		103,321
2023	172,890		12,000
2024	148,288		9,000
Thereafter	358,369		29,316
Total backlog	$	1,253,962	$	576,270

Contract with Customer, Asset and Liability

The following table provides information about accounts receivables, net, contract assets and contract liabilities from contracts with customers (in thousands):

	June 30, 2020		December 31, 2019
Accounts receivables, net	$	213,857	$	202,337
Contract assets and contract liabilities:
Current contract assets	39,763		46,537
Long-term contract assets	6,726		16,280
Current contract liabilities	100,069		82,854
Long-term contract liabilities	136,571		156,262

Allowance for Doubtful Accounts

The allowance for doubtful accounts as of June 30, 2020 and changes for the six months then ended are as follows (in thousands):

Balance at December 31, 2019	$	6,019
Current period provision for expected credit losses	3,980
Balance at June 30, 2020	$	9,999

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Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

Summary of Operating Results and Balance Sheet Data for Discontinued Operations and Disposals

The following table summarizes the operating results of discontinued operations (in thousands):

	Three Months Ended June 30, 2020		Three Months Ended June 30, 2019
	Belleli EPC		Venezuela		Belleli EPC		Total
Revenue	$	—	$	—	$	97	$	97
Cost of sales (excluding depreciation and amortization expense)	88		—		(1,283)		(1,283)
Selling, general and administrative	101		33		149		182
Other (income) expense, net	5		—		(4)		(4)
Benefit from income taxes	(72)		—		(6,255)		(6,255)
Income (loss) from discontinued operations, net of tax	$	(122)	$	(33)	$	7,490	$	7,457

	Six Months Ended June 30, 2020		Six Months Ended June 30, 2019
	Belleli EPC		Venezuela		Belleli EPC		Total
Revenue	$	124	$	—	$	234	$	234
Cost of sales (excluding depreciation and amortization expense)	184		—		(1,599)		(1,599)
Selling, general and administrative	214		68		690		758
Other (income) expense, net	49		—		(332)		(332)
Benefit from income taxes	(47)		—		(6,213)		(6,213)
Income (loss) from discontinued operations, net of tax	$	(276)	$	(68)	$	7,688	$	7,620

The following table summarizes the balance sheet data for discontinued operations (in thousands):

	June 30, 2020		December 31, 2019
	Belleli EPC		Belleli EPC
Accounts receivable	$	3,852	$	3,990
Contract assets	459		46
Other current assets	90		296
Total current assets associated with discontinued operations	4,401		4,332
Intangible and other assets, net	1,750		2,970
Total assets associated with discontinued operations	$	6,151	$	7,302
Accounts payable	$	318	$	1,503
Accrued liabilities	4,909		5,959
Contract liabilities	2,498		2,536
Total current liabilities associated with discontinued operations	7,725		9,998
Other long-term liabilities	981		758
Total liabilities associated with discontinued operations	$	8,706	$	10,756

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Inventory (Tables)

6 Months Ended

Jun. 30, 2020

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory consisted of the following amounts (in thousands):

	June 30, 2020		December 31, 2019
Parts and supplies	$	75,532	$	92,005
Work in progress	45,964		44,565
Finished goods	8,656		6,968
Inventory	$	130,152	$	143,538

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Property, Plant and Equipment, Net (Tables)

6 Months Ended

Jun. 30, 2020

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment, Net

Property, plant and equipment, net, consisted of the following (in thousands):

	June 30, 2020		December 31, 2019
Compression equipment, processing facilities and other fleet assets	$	1,571,949	$	1,607,769
Land and buildings	67,136		67,187
Transportation and shop equipment	58,303		59,693
Computer software	50,827		51,663
Other	40,028		38,111
	1,788,243		1,824,423
Accumulated depreciation	(984,672)		(980,013)
Property, plant and equipment, net	$	803,571	$	844,410

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Debt (Tables)

6 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

Schedule of Debt

Debt consisted of the following (in thousands):

	June 30, 2020		December 31, 2019
Revolving credit facility due October 2023	$	132,500	$	74,000
8.125% senior notes due May 2025	356,000		375,000
Other debt	29		237
Unamortized deferred financing costs of 8.125% senior notes	(4,657)		(5,413)
Total debt	483,872		443,824
Less: Amounts due within one year (1)	(29)		(237)
Long-term debt	$	483,843	$	443,587

⁽¹⁾ Short-term debt and the current portion of long-term debt are included in accrued liabilities in our balance sheets.

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on Nonrecurring Basis

The following table presents our assets and liabilities measured at fair value on a nonrecurring basis during the six months ended June 30, 2020 and 2019, with pricing levels as of the date of valuation (in thousands):

	Six months ended June 30, 2020						Six months ended June 30, 2019
	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)
Inventory (1)	$	—	$	—	$	11,625	$	—	$	—	$	—
Impaired long-lived assets (1)	—		—		19,080		—		—		—
Impaired assets- assets held for sale (2)	—		—		—		—		—		5,445
Long-term note receivable (3)	—		—		15,039		—		—		14,899

(1)Our estimate of the fair value of the inventory and long-lived assets as of June 30, 2020 are part of the U.S. compression fabrication business and was based on the expected values upon winding down the business.

(2)Our estimated fair value of the impaired assets held for sale during the six months ended June 30, 2019 was based on the expected proceeds from the sale of the assets.

(3)Our estimate of the fair value of a note receivable was discounted based on a settlement period of eight years and a discount rate of 6.2%. The undiscounted value of the note receivable, including interest, as of June 30, 2020 was $15.5 million.

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Restructuring and Other Charges (Tables)

6 Months Ended

Jun. 30, 2020

Restructuring and Related Activities [Abstract]

Summary of Changes to Accrued Liability Balance Related to Restructuring and Other Charges

The following table summarizes the changes to our accrued liability balance related to restructuring and other charges for the six months ended June 30, 2020 and 2019 (in thousands):

	Cost Reduction Plan		Relocation Plan		Total
Beginning balance at January 1, 2019	$	—	$	309	$	309
Additions for costs expensed	5,928		244		6,172
Reductions for payments	(336)		(553)		(889)
Ending balance at June 30, 2019	$	5,592	$	—	$	5,592
Beginning balance at January 1, 2020	$	2,281	$	—	$	2,281
Additions for costs expensed, net	8,865		—		8,865
Reductions for payments	(3,214)		—		(3,214)
Foreign exchange impact	(404)		—		(404)
Ending balance at June 30, 2020	$	7,528	$	—	$	7,528

Summary of the Components of Charges Included in Restructuring and Other Charges

The following table summarizes the components of charges included in restructuring and other charges in our statements of operations for the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Employee termination benefits	$	4,924	$	5,928	$	5,259	$	5,928
Consulting fees	2,364		—		2,564		—
Relocation costs	—		(140)		165		244
Other	389		—		877		—
Total restructuring and other charges	$	7,677	$	5,788	$	8,865	$	6,172

The following table summarizes the components of charges included in restructuring and other charges incurred since the announcement of the cost reduction plan in the second quarter of 2019 (in thousands):

	Total
Employee termination benefits	$	12,295
Consulting fees	3,205
Relocation costs	907
Other	877
Total restructuring and other charges	$	17,284

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Schedule of Changes in Restricted Stock, Restricted Stock Units, and Performance Units

The table below presents the changes in restricted stock, restricted stock units and performance units for our common stock during the six months ended June 30, 2020.

	Equity Awards			Liability Awards
	Shares (in thousands)	Weighted Average Grant-Date Fair  Value Per Share		Shares (in thousands)	Weighted Average Grant-Date Fair  Value Per Share
Non-vested awards, January 1, 2020	842	$	22.79	318	$	17.01
Granted	149	7.03		1,182	8.54
Vested	(411)	20.91		(80)	26.24
Cancelled	(208)	29.72		(22)	17.01
Non-vested awards, June 30, 2020	372	14.68		1,398	9.32

Schedule of Changes in Restricted Stock, Restricted Stock Units, and Performance Units

The table below presents the changes in restricted stock, restricted stock units and performance units for our common stock during the six months ended June 30, 2020.

	Equity Awards			Liability Awards
	Shares (in thousands)	Weighted Average Grant-Date Fair  Value Per Share		Shares (in thousands)	Weighted Average Grant-Date Fair  Value Per Share
Non-vested awards, January 1, 2020	842	$	22.79	318	$	17.01
Granted	149	7.03		1,182	8.54
Vested	(411)	20.91		(80)	26.24
Cancelled	(208)	29.72		(22)	17.01
Non-vested awards, June 30, 2020	372	14.68		1,398	9.32

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Net Income (Loss) Per Common Share (Tables)

6 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

Reconciliation of Basic and Diluted Net Income (Loss) Per Common Share

The following table presents a reconciliation of basic and diluted net loss per common share for the three and six months ended June 30, 2020 and 2019 (in thousands, except per share data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Numerator for basic and diluted net loss per common share:
Loss from continuing operations	$	(31,767)	$	(14,762)	$	(49,917)	$	(20,319)
Income (loss) from discontinued operations, net of tax	(122)		7,457		(276)		7,620
Less: Net income attributable to participating securities	—		—		—		—
Net loss — used in basic and diluted net loss per common share	$	(31,889)	$	(7,305)	$	(50,193)	$	(12,699)
Weighted average common shares outstanding including participating securities	33,175		35,944		33,161		36,198
Less: Weighted average participating securities outstanding	(372)		(795)		(441)		(805)
Weighted average common shares outstanding — used in basic net loss per common share	32,803		35,149		32,720		35,393
Net dilutive potential common shares issuable:
On exercise of options and vesting of restricted stock units	*		*		*		*
Weighted average common shares outstanding — used in diluted net loss per common share	32,803		35,149		32,720		35,393
Net loss per common share:
Basic	$	(0.97)	$	(0.21)	$	(1.53)	$	(0.36)
Diluted	$	(0.97)	$	(0.21)	$	(1.53)	$	(0.36)

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

Schedule of Antidilutive Shares Excluded from Computation of Net Income Per Common Share

The following table shows the potential shares of common stock issuable for the three and six months ended June 30, 2020 and 2019 that were excluded from computing diluted net loss per common share as their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended June 30,		Six Months Ended June 30,
	2020	2019	2020	2019
Net dilutive potential common shares issuable:
On exercise of options where exercise price is greater than average market value	30	69	43	71
Net dilutive potential common shares issuable	30	69	43	71

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Reportable Segments (Tables)

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Schedule of Revenues and Other Financial Information

The following table presents revenue and other financial information by reportable segment for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended	Contract Operations		Aftermarket Services		Product Sales		Reportable Segments Total
June 30, 2020:
Revenue	$	77,945	$	24,993	$	68,687	$	171,625
Gross margin (1)	54,199		5,973		(2,137)		58,035
June 30, 2019:
Revenue	$	89,684	$	30,113	$	271,077	$	390,874
Gross margin (1)	59,348		9,096		30,471		98,915

Six Months Ended	Contract Operations		Aftermarket Services		Product Sales		Reportable Segments Total
June 30, 2020:
Revenue	$	172,733	$	52,902	$	156,347	$	381,982
Gross margin (1)	117,527		12,701		1,084		131,312
June 30, 2019:
Revenue	$	175,384	$	57,415	$	509,521	$	742,320
Gross margin (1)	116,457		15,680		59,380		191,517

⁽¹⁾ Gross margin is defined as revenue less cost of sales (excluding depreciation and amortization expense).

Reconciliation of Income (Loss) Before Income Taxes to Total Gross Margin

The following table reconciles loss before income taxes to total gross margin (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Loss before income taxes	$	(27,872)	$	(4,170)	$	(36,692)	$	(587)
Selling, general and administrative	34,407		45,636		72,459		89,088
Depreciation and amortization	32,958		36,319		65,568		74,536
Impairments	6,512		5,919		6,512		5,919
Restatement related charges (recoveries), net	—		(28)		—		20
Restructuring and other charges	7,677		5,788		8,865		6,172
Interest expense	9,638		9,928		19,591		18,091
Gain on extinguishment of debt	(2,644)		—		(2,644)		—
Other (income) expense, net	(2,641)		(477)		(2,347)		(1,722)
Total gross margin	$	58,035	$	98,915	$	131,312	$	191,517

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Description of Business and Basis of Presentation - Narrative (Details)	6 Months Ended
	Jun. 30, 2020 business_line
Accounting Policies [Abstract]
Number of business lines	3

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Revenue - Disaggregation by Products and Services (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue [Line Items]
Revenue	$ 171,625	$ 390,874	$ 381,982	$ 742,320
Contract operations
Disaggregation of Revenue [Line Items]
Revenue	77,945	89,684	172,733	175,384
Contract operations | Revenue recognized over time
Disaggregation of Revenue [Line Items]
Revenue	77,945	89,684	172,733	175,384
Aftermarket services
Disaggregation of Revenue [Line Items]
Revenue	24,993	30,113	52,902	57,415
Aftermarket services | Operation and maintenance services | Revenue recognized over time
Disaggregation of Revenue [Line Items]
Revenue	12,279	14,102	25,218	26,775
Aftermarket services | Part sales | Revenue recognized at a point in time
Disaggregation of Revenue [Line Items]
Revenue	9,685	12,193	20,509	21,989
Aftermarket services | Other services | Revenue recognized over time
Disaggregation of Revenue [Line Items]
Revenue	3,029	3,818	7,175	8,651
Product sales
Disaggregation of Revenue [Line Items]
Revenue	68,687	271,077	156,347	509,521
Product sales | Compression equipment | Revenue recognized over time
Disaggregation of Revenue [Line Items]
Revenue	54,766	170,263	123,485	315,702
Product sales | Processing and treating equipment | Revenue recognized over time
Disaggregation of Revenue [Line Items]
Revenue	8,807	99,863	20,616	189,083
Product sales | Production equipment | Revenue recognized at a point in time
Disaggregation of Revenue [Line Items]
Revenue	0	23	578	2,458
Product sales | Other product sales | Transferred over time and transferred at point in time
Disaggregation of Revenue [Line Items]
Revenue	$ 5,114	$ 928	$ 11,668	$ 2,278

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Revenue - Disaggregation by Geographical Regions (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Disaggregation of Revenue [Line Items]
Revenue	$ 171,625	$ 390,874	$ 381,982	$ 742,320
North America
Disaggregation of Revenue [Line Items]
Revenue	49,922	202,751	108,461	383,756
Latin America
Disaggregation of Revenue [Line Items]
Revenue	58,352	76,161	135,149	154,648
Middle East and Africa
Disaggregation of Revenue [Line Items]
Revenue	52,373	100,469	108,086	183,260
Asia Pacific
Disaggregation of Revenue [Line Items]
Revenue	$ 10,978	$ 11,493	$ 30,286	$ 20,656

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Revenue - Performance Obligations (Details) $ in Thousands	Jun. 30, 2020 USD ($)
Contract operations
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 1,253,962
Contract operations | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 133,697
Expected timing of satisfaction, period	6 months
Contract operations | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 245,022
Expected timing of satisfaction, period	1 year
Contract operations | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 195,696
Expected timing of satisfaction, period	1 year
Contract operations | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 172,890
Expected timing of satisfaction, period	1 year
Contract operations | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 148,288
Expected timing of satisfaction, period	1 year
Contract operations | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 358,369
Expected timing of satisfaction, period
Product sales
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 576,270
Product sales | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 158,924
Expected timing of satisfaction, period	6 months
Product sales | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 263,709
Expected timing of satisfaction, period	1 year
Product sales | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 103,321
Expected timing of satisfaction, period	1 year
Product sales | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 12,000
Expected timing of satisfaction, period	1 year
Product sales | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 9,000
Expected timing of satisfaction, period	1 year
Product sales | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 29,316
Expected timing of satisfaction, period

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Revenue - Expected Timing of Revenue Recognition (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Operating lease income	$ 16,000
Revenue recognized from contract operations services including revenue deferred in previous periods	15,300
Operating lease contracts
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	167,000
Product sales
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	576,270
Performance obligation satisfied in previous periods	129,500
Performance obligation satisfied in previous periods, included in billings in excess of costs	29,300
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01 | Operating lease contracts
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 18,000
Expected timing of satisfaction, period	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01 | Product sales
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 158,924
Expected timing of satisfaction, period	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | Operating lease contracts
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 36,000
Expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | Product sales
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 263,709
Expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | Operating lease contracts
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 39,000
Expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | Product sales
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 103,321
Expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | Operating lease contracts
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 44,000
Expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | Product sales
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 12,000
Expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | Operating lease contracts
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 26,000
Expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | Product sales
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 9,000
Expected timing of satisfaction, period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | Product sales
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 29,316
Expected timing of satisfaction, period
Financing | Product sales
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Expected timing of revenue recognition from unsatisfied performance obligations	$ 43,000

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Revenue - Contract Assets and Contract Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Revenue from Contract with Customer [Abstract]
Accounts receivables, net	$ 213,857	$ 202,337
Contract assets and contract liabilities:
Current contract assets	39,763	46,537
Long-term contract assets	6,726	16,280
Current contract liabilities	100,069	82,854
Long-term contract liabilities	$ 136,571	$ 156,262

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Revenue - Allowance for Doubtful Accounts (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance	$ 6,019
Current period provision for expected credit losses	3,980
Ending balance	$ 9,999

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Discontinued Operations - Summary of Operating Results (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Income (loss) from discontinued operations, net of tax	$ (122)	$ 7,457	$ (276)	$ 7,620
Discontinued Operations
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenue		97		234
Cost of sales (excluding depreciation and amortization expense)		(1,283)		(1,599)
Selling, general and administrative		182		758
Other (income) expense, net		(4)		(332)
Benefit from income taxes		(6,255)		(6,213)
Income (loss) from discontinued operations, net of tax		7,457		7,620
Belleli EPC | Exit of Business
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenue	0	97	124	234
Cost of sales (excluding depreciation and amortization expense)	88	(1,283)	184	(1,599)
Selling, general and administrative	101	149	214	690
Other (income) expense, net	5	(4)	49	(332)
Benefit from income taxes	(72)	(6,255)	(47)	(6,213)
Income (loss) from discontinued operations, net of tax	$ (122)	7,490	$ (276)	7,688
Venezuela Operations | Disposed of by Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenue		0		0
Cost of sales (excluding depreciation and amortization expense)		0		0
Selling, general and administrative		33		68
Other (income) expense, net		0		0
Benefit from income taxes		0		0
Income (loss) from discontinued operations, net of tax		$ (33)		$ (68)

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Discontinued Operations - Summary of Balance Sheet Data (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Contract assets	$ 39,763	$ 46,537
Total current assets associated with discontinued operations	4,401	4,332
Total current liabilities associated with discontinued operations	7,725	9,998
Belleli EPC | Exit of Business
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Accounts receivable	3,852	3,990
Contract assets	459	46
Other current assets	90	296
Total current assets associated with discontinued operations	4,401	4,332
Intangible and other assets, net	1,750	2,970
Total assets associated with discontinued operations	6,151	7,302
Accounts payable	318	1,503
Accrued liabilities	4,909	5,959
Contract liabilities	2,498	2,536
Total current liabilities associated with discontinued operations	7,725	9,998
Other long-term liabilities	981	758
Total liabilities associated with discontinued operations	$ 8,706	$ 10,756

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Inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Composition of Inventory net of reserves
Parts and supplies	$ 75,532	$ 92,005
Work in progress	45,964	44,565
Finished goods	8,656	6,968
Inventory	$ 130,152	$ 143,538

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Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Property, Plant and Equipment
Property, plant and equipment, gross	$ 1,788,243	$ 1,824,423
Accumulated depreciation	(984,672)	(980,013)
Property, plant and equipment, net	803,571	844,410
Compression equipment, processing facilities and other fleet assets
Property, Plant and Equipment
Property, plant and equipment, gross	1,571,949	1,607,769
Land and buildings
Property, Plant and Equipment
Property, plant and equipment, gross	67,136	67,187
Transportation and shop equipment
Property, Plant and Equipment
Property, plant and equipment, gross	58,303	59,693
Computer software
Property, Plant and Equipment
Property, plant and equipment, gross	50,827	51,663
Other
Property, Plant and Equipment
Property, plant and equipment, gross	$ 40,028	$ 38,111

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Debt - Schedule of Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Total debt	$ 483,872	$ 443,824
Less: Amounts due within one year	(29)	(237)
Long-term debt	483,843	443,587
Other debt
Debt Instrument [Line Items]
Long-term Debt	29	237
8.125% senior notes due May 2025 | Senior Notes
Debt Instrument [Line Items]
Long-term Debt	356,000	375,000
Unamortized deferred financing costs of 8.125% senior notes	$ (4,657)	(5,413)
Stated interest rate	8.125%
Revolving credit facility due October 2023
Debt Instrument [Line Items]
Long-term Debt	$ 132,500	$ 74,000

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Debt - Revolving Credit Facility (Narrative) (Details) - Revolving credit facility	Jun. 30, 2020 USD ($)
Amended Credit Agreement
Debt Instrument [Line Items]
Borrowing capacity under restated credit agreement	$ 700,000,000.0
Credit Agreement
Debt Instrument [Line Items]
Outstanding borrowings	132,500,000
Outstanding letters of credit	14,200,000
Undrawn capacity under revolving credit facility	$ 553,300,000
Total debt to EBITDA ratio	4.50
Undrawn capacity available	$ 239,400,000

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Debt - 8.125% Senior Notes Due May 2025 (Narrative) (Details) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Jul. 31, 2020	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Apr. 30, 2017
Debt Instrument [Line Items]
Repayments of debt				$ 183,316,000	$ 331,225,000
Gain on extinguishment of debt		$ 2,644,000	$ 0	$ 2,644,000	$ 0
Subsidiaries | Exterran Corporation | EESLP And EES Finance Corp.
Debt Instrument [Line Items]
Ownership percentage by parent						100.00%
8.125% senior notes due May 2025 | Senior unsecured notes
Debt Instrument [Line Items]
Stated interest rate		8.125%		8.125%
Amount of debt extinguished		$ 19,000,000.0
Repayments of debt		16,300,000
Payments for accrued interest		200,000
Gain on extinguishment of debt		2,600,000
Write off of deferred financing cost		$ 200,000
8.125% senior notes due May 2025 | Senior unsecured notes | Subsequent Event
Debt Instrument [Line Items]
Amount of debt extinguished	$ 5,000,000.0
Repayments of debt	4,300,000
Payments for accrued interest	$ 100,000
8.125% senior notes due May 2025 | Subsidiaries | Senior unsecured notes | EESLP And EES Finance Corp.
Debt Instrument [Line Items]
Stated interest rate						8.125%
Aggregate principal amount of senior unsecured notes						$ 375,000,000.0

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Fair Value Measurements - Nonrecurring Measurements (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jun. 30, 2019 USD ($)
Summary of assets and liabilities measured at fair value on nonrecurring basis
Impaired long-lived assets held for sale	$ 442	$ 624	$ 5,400
Undiscounted value of note receivable Including Interest	$ 15,500
Nonrecurring | Maturiy
Summary of assets and liabilities measured at fair value on nonrecurring basis
Settlement period	8 years
Nonrecurring | Discount rate
Summary of assets and liabilities measured at fair value on nonrecurring basis
Discount rate	0.062
Nonrecurring | (Level 1)
Summary of assets and liabilities measured at fair value on nonrecurring basis
Inventory	$ 0		0
Impaired long-lived assets	0		0
Impaired long-lived assets held for sale	0		0
Long-term note receivable	0		0
Nonrecurring | (Level 2)
Summary of assets and liabilities measured at fair value on nonrecurring basis
Inventory	0		0
Impaired long-lived assets	0		0
Impaired long-lived assets held for sale	0		0
Long-term note receivable	0		0
Nonrecurring | (Level 3)
Summary of assets and liabilities measured at fair value on nonrecurring basis
Inventory	11,625		0
Impaired long-lived assets	19,080		0
Impaired long-lived assets held for sale	0		5,445
Long-term note receivable	$ 15,039		$ 14,899

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Fair Value Measurements - Narrative (Details) - Senior Notes - 8.125% senior notes due May 2025 - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Reported Value Measurement
Summary of assets and liabilities measured at fair value
Fair value of notes	$ 356.0	$ 375.0
Estimate of Fair Value Measurement
Summary of assets and liabilities measured at fair value
Fair value of notes	$ 295.0	$ 371.0

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Impairments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Asset Impairment Charges [Abstract]
Impairments	$ 6,512	$ 5,919	$ 6,512	$ 5,919
Long-term assets held for sale	$ 442	$ 5,400	$ 442	$ 5,400	$ 624

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Restructuring and Other Charges - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Restructuring Cost and Reserve [Line Items]
Restructuring and other charges	$ 7,677	$ 5,788	$ 8,865	$ 6,172
Cost Reduction Plan
Restructuring Cost and Reserve [Line Items]
Restructuring and other charges	$ 7,700	$ 5,900	$ 8,900	5,900
Relocation Plan
Restructuring Cost and Reserve [Line Items]
Restructuring and other charges				$ 200

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Restructuring and Other Charges - Summary of Charges to Accrued Liability Balance (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Restructuring Reserve [Roll Forward]
Beginning balance			$ 2,281	$ 309
Additions for costs expensed, net			8,865	6,172
Reductions for payments			(3,214)	(889)
Foreign exchange impact			(404)
Ending balance	$ 7,528	$ 5,592	7,528	5,592
Restructuring and other charges	7,677	5,788	8,865	6,172
Restructuring and other charges incurred to date	17,284		17,284
Employee termination benefits
Restructuring Reserve [Roll Forward]
Restructuring and other charges	4,924	5,928	5,259	5,928
Restructuring and other charges incurred to date	12,295		12,295
Consulting fees
Restructuring Reserve [Roll Forward]
Restructuring and other charges	2,364	0	2,564	0
Restructuring and other charges incurred to date	3,205		3,205
Relocation costs
Restructuring Reserve [Roll Forward]
Restructuring and other charges	0	(140)	165	244
Restructuring and other charges incurred to date	907		907
Other
Restructuring Reserve [Roll Forward]
Restructuring and other charges	389	0	877	0
Restructuring and other charges incurred to date	877		877
Cost Reduction Plan
Restructuring Reserve [Roll Forward]
Beginning balance			2,281	0
Additions for costs expensed, net			8,865	5,928
Reductions for payments			(3,214)	(336)
Foreign exchange impact			(404)
Ending balance	7,528	5,592	7,528	5,592
Restructuring and other charges	7,700	5,900	8,900	5,900
Relocation Plan
Restructuring Reserve [Roll Forward]
Beginning balance			0	309
Additions for costs expensed, net			0	244
Reductions for payments			0	(553)
Foreign exchange impact			0
Ending balance	$ 0	$ 0	$ 0	0
Restructuring and other charges				$ 200

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Provision for Income Taxes (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020
Income Tax Disclosure [Abstract]
Federal income tax rate	21.00%	21.00%
Effective tax rate	(14.00%)	(36.00%)
Unrecognized tax benefits due to FIN 48	(9.80%)	(9.20%)
Foreign tax rate differences		(16.30%)
Foreign currency devaluation	(3.40%)
Deferred tax assets valuation	(14.70%)	(20.20%)

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Stockholders' Equity (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2020	Feb. 20, 2019
Equity [Abstract]
Share repurchase program, authorized purchase amount			$ 100,000,000.0
Shares repurchased (in shares)	1,290,078
Shares repurchased, value	$ 18,800,000
Remaining authorized share repurchase amount		$ 57,700,000

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Stock-Based Compensation - Narrative (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted (in shares)	0	0
Restricted stock, restricted stock units and performance units for common stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Estimated unrecognized compensation cost	$ 13.3
Weighted-average vesting period	1 year 8 months 12 days
PSUs | First anniversary
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%
PSUs | Second anniversary
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%
PSUs | Third anniversary
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%
RSUs | First anniversary
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%
RSUs | Second anniversary
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%
RSUs | Third anniversary
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%
Restricted Stock | First anniversary
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%
Restricted Stock | Second anniversary
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%
Restricted Stock | Third anniversary
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%

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Stock-Based Compensation - Schedule of Restricted Stock, Restricted Stock Units and Performance Units for Common Stock (Details) shares in Thousands	6 Months Ended
	Jun. 30, 2020 $ / shares shares
Equity Awards
Shares
Non-vested awards at the beginning of the period (in shares) | shares	842
Granted (in shares) | shares	149
Vested (in shares) | shares	(411)
Cancelled (in shares) | shares	(208)
Non-vested awards at the end of the period (in shares) | shares	372
Weighted Average Grant-Date Fair  Value Per Share
Non-vested awards at the beginning of the period (in dollars per share) | $ / shares	$ 22.79
Granted (in dollars per share) | $ / shares	7.03
Vested (in dollars per share) | $ / shares	20.91
Cancelled (in dollars per share) | $ / shares	29.72
Non-vested awards at the end of the period (in dollars per share) | $ / shares	$ 14.68
Liability Awards
Shares
Non-vested awards at the beginning of the period (in shares) | shares	318
Granted (in shares) | shares	1,182
Vested (in shares) | shares	(80)
Cancelled (in shares) | shares	(22)
Non-vested awards at the end of the period (in shares) | shares	1,398
Weighted Average Grant-Date Fair  Value Per Share
Non-vested awards at the beginning of the period (in dollars per share) | $ / shares	$ 17.01
Granted (in dollars per share) | $ / shares	8.54
Vested (in dollars per share) | $ / shares	26.24
Cancelled (in dollars per share) | $ / shares	17.01
Non-vested awards at the end of the period (in dollars per share) | $ / shares	$ 9.32

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Net Income (Loss) Per Common Share - Reconciliation of Basic and Diluted Net Income (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Numerator for basic and diluted net loss per common share:
Loss from continuing operations	$ (31,767)	$ (14,762)	$ (49,917)	$ (20,319)
Income (loss) from discontinued operations, net of tax	(122)	7,457	(276)	7,620
Less: Net income attributable to participating securities	0	0	0	0
Net loss — used in basic and diluted net loss per common share	$ (31,889)	$ (7,305)	$ (50,193)	$ (12,699)
Weighted average common shares outstanding including participating securities
Weighted average common shares outstanding including participating securities (in shares)	33,175	35,944	33,161	36,198
Less: Weighted average participating securities outstanding (in shares)	(372)	(795)	(441)	(805)
Weighted average common shares outstanding — used in basic net loss per common share (in shares)	32,803	35,149	32,720	35,393
Net dilutive potential common shares issuable:
Weighted average common shares outstanding — used in diluted net loss per common share (in shares)	32,803	35,149	32,720	35,393
Net loss per common share:
Basic (in dollars per share)	$ (0.97)	$ (0.21)	$ (1.53)	$ (0.36)
Diluted (in dollars per share)	$ (0.97)	$ (0.21)	$ (1.53)	$ (0.36)

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Net Income (Loss) Per Common Share - Schedule of Antidilutive Shares (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net dilutive potential common shares issuable (in shares)	30	69	43	71
On exercise of options where exercise price is greater than average market value
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net dilutive potential common shares issuable (in shares)	30	69	43	71

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Commitments and Contingencies - Contingencies (Details) - USD ($) $ in Millions	Jun. 30, 2020	Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
Amount accrued for the outcomes of non-income-based tax audits	$ 3.5	$ 3.7

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Commitments and Contingencies - Indemnifications (Details)	6 Months Ended
	Jun. 30, 2020
Tax Attributable to Business after Spin-off
Loss Contingencies [Line Items]
Liability for certain taxes not clearly attributable to the business (as a percent)	50.00%

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Reportable Segments - Narrative (Details)	6 Months Ended
	Jun. 30, 2020 segment
Segment Reporting [Abstract]
Number of reportable segments	3

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Reportable Segments - Schedule of Revenues and Other Financial Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment Reporting Information [Line Items]
Revenue	$ 171,625	$ 390,874	$ 381,982	$ 742,320
Total gross margin	58,035	98,915	131,312	191,517
Contract operations
Segment Reporting Information [Line Items]
Revenue	77,945	89,684	172,733	175,384
Total gross margin	54,199	59,348	117,527	116,457
Aftermarket Services
Segment Reporting Information [Line Items]
Revenue	24,993	30,113	52,902	57,415
Total gross margin	5,973	9,096	12,701	15,680
Product sales
Segment Reporting Information [Line Items]
Revenue	68,687	271,077	156,347	509,521
Total gross margin	$ (2,137)	$ 30,471	$ 1,084	$ 59,380

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Reportable Segments - Reconciliation of Income Before Income Taxes to Total Gross Margin (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Segment Reporting [Abstract]
Loss before income taxes	$ (27,872)	$ (4,170)	$ (36,692)	$ (587)
Selling, general and administrative	34,407	45,636	72,459	89,088
Depreciation and amortization	32,958	36,319	65,568	74,536
Impairments	6,512	5,919	6,512	5,919
Restatement related charges (recoveries), net	0	(28)	0	20
Restructuring and other charges	7,677	5,788	8,865	6,172
Interest expense	9,638	9,928	19,591	18,091
Gain on extinguishment of debt	(2,644)	0	(2,644)	0
Other (income) expense, net	(2,641)	(477)	(2,347)	(1,722)
Total gross margin	$ 58,035	$ 98,915	$ 131,312	$ 191,517

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Label	Element	Value
Accounting Standards Update [Extensible List]	us-gaap_AccountingStandardsUpdateExtensibleList	us-gaap:AccountingStandardsUpdate201602Member