HOUSTON--(BUSINESS WIRE)--April 28, 2005--Hanover Compressor
Company (NYSE:HC), a global market leader in full service natural gas
compression and a leading provider of service, fabrication and
equipment for oil and natural gas production, processing and
transportation applications, today reported financial results for the
quarter ended March 31, 2005.
Summary
First quarter 2005 revenue increased to $301.6 million, a 12%
increase over first quarter 2004 revenue of $269.8 million. Revenue
for the fourth quarter 2004 was $310.1 million.
EBITDA(1) from continuing operations for the first quarter 2005
and 2004 was $73.7 million. EBITDA increased $6.3 million from the
fourth quarter 2004.
Net loss for the first quarter 2005 was $12.5 million, or $0.15
per share, compared with a net loss of $9.5 million, or $0.11 per
share, in the first quarter 2004. Net loss for the fourth quarter 2004
was $20.2 million, or $0.24 per share. The company's provision for
income taxes for the first quarter of 2005 and 2004 does not include a
tax benefit for the company's tax losses in the U.S. and certain
international jurisdictions.
"In general, I am pleased with the sequential improvement in our
operational results, particularly in our U.S. rental gross profit,"
said John Jackson, President and Chief Executive Officer. "While this
progress and the visible opportunities are exciting, we are by no
means satisfied with our operating financial performance. We recently
implemented a new organizational structure to sharpen our focus on
U.S. operating results and to take advantage of worldwide growth
opportunities. We are encouraged by several international projects
scheduled for delivery during the second half of 2005."
Summary of Business Segment Results
U.S. Rentals
(in thousands)
Three months ended
March 31,
----------------------------
Increase
2005 2004 (Decrease)
------------- ------------- -----------
Revenue $87,154 $86,592 1%
Operating expense 34,076 35,539 (4)%
------------- -------------
Gross profit $53,078 $51,053 4%
Gross margin 61% 59% 2%
U.S. rental revenue and gross profit increased in the first quarter
2005 primarily due to improvement in market conditions that has led to
an improvement in pricing. In addition, gross margin and gross profit
increased due to Hanover's efforts to reduce maintenance and repair
expense.
International Rentals
(in thousands)
Three months ended
March 31,
----------------------------
Increase
2005 2004 (Decrease)
------------- ------------- -----------
Revenue $53,915 $51,500 5%
Operating expense 17,502 14,773 18%
------------- -------------
Gross profit $36,413 $36,727 (1)%
Gross margin 68% 71% (3)%
During the first quarter of 2005, international rental revenue
increased, compared to the first quarter of 2004, due to increased
rental activity, primarily in Brazil. Gross margin decreased primarily
due to expected start-up costs related to two major projects in
Nigeria.
Parts, Service and Used Equipment
(in thousands)
Three months ended
March 31,
----------------------------
Increase
2005 2004 (Decrease)
------------- ------------- -----------
Revenue $33,437 $44,382 (25)%
Operating expense 25,060 32,969 (24)%
------------- -------------
Gross profit $8,377 $11,413 (27)%
Gross margin 25% 26% (1)%
Parts, service and used equipment revenue, gross profit and gross
margin for the first quarter 2005 were lower than the same period a
year earlier due primarily to lower installation sales that were
partially offset by increased parts and service revenue and gross
margin. Parts, service and used equipment includes two business
components: parts and service; and used rental equipment and
installation sales. For the first quarter 2005, parts and service
revenue was $31.2 million with a gross margin of 26%, compared to
$25.2 million and 24%, respectively, for the same period a year ago.
Used rental equipment and installation sales revenue in the 2005 first
quarter was $2.3 million with a gross margin of 7%, compared to $19.2
million at a 28% gross margin for the same period a year earlier. The
company's used rental equipment and installation sales and gross
margin vary significantly from period to period and are dependent upon
the exercise of purchase options on rental equipment by customers and
the completion of new installation projects.
Compression and Accessory Fabrication
(in thousands)
Three months ended
March 31,
----------------------------
Increase
2005 2004 (Decrease)
------------- ------------- -----------
Revenue $32,524 $28,150 16%
Operating expense 29,617 25,913 14%
------------- -------------
Gross profit $2,907 $2,237 30%
Gross margin 9% 8% 1%
For the first quarter 2005, compression fabrication revenue and gross
profit increased, compared to 2004, due primarily to increased sales
activity and improved business conditions. As of March 31, 2005, the
company had compression fabrication backlog of $63.9 million compared
to $52.0 million at March 31, 2004.
Production and Processing Equipment Fabrication
(in thousands)
Three months ended
March 31,
----------------------------
Increase
2005 2004 (Decrease)
------------- ------------- -----------
Revenue $89,571 $53,429 68%
Operating expense 79,125 47,696 66%
------------- -------------
Gross profit $10,446 $5,733 82%
Gross margin 12% 11% 1%
Production and processing equipment fabrication revenue and gross
profit for the first quarter 2005 increased over first quarter 2004
due to our increased focus on fabrication sales and an improvement in
market conditions. The company has focused on improving its sales
success ratio on new bid opportunities that has resulted in an
improvement in our production and processing equipment backlog over
the course of the last twelve months. As of March 31, 2005, we had a
production and processing equipment fabrication backlog of $206.6
million compared to $169.2 million at March 31, 2004.
Selling, general, and administrative expense ("SG&A") for the
first quarter 2005 was $42.2 million, compared to $40.4 million in the
first quarter 2004. As a percentage of revenue, SG&A expense was 14%
for the three months ended March 31, 2005 compared to 15% for the
three months ended March 31, 2004. SG&A expense, as a percentage of
revenue, decreased due to Hanover's efforts to manage SG&A costs.
Depreciation and amortization expense for the quarter increased to
$45.5 million, compared to $42.0 million for the same period a year
ago. First quarter 2005 depreciation and amortization increased due to
additions to the rental fleet placed in service since March 31, 2004.
Liquidity and Other
Hanover had capital expenditures of approximately $26.2 million in
the first quarter 2005, compared to approximately $16.9 million for
the same period last year. At March 31, 2005, the company had
approximately $1.68 billion in debt and compressor lease obligations
compared to $1.80 billion at March 31, 2004. At March 31, 2005,
borrowings include approximately $84 million outstanding under
Hanover's $350 million bank credit facility. The company had
approximately $38 million in cash on its balance sheet at March 31,
2005.
"We are beginning to see the operational benefits from the new
information and financial reporting systems and process improvements
that have been implemented over the past three years," commented Lee
Beckelman, Chief Financial Officer. "These tools are being utilized by
management in our continuing commitment to improve operating
performance and return on assets."
Total compression horsepower at March 31, 2005 was approximately
3,312,000, including approximately 2,538,000 horsepower in the United
States and approximately 774,000 horsepower internationally. Hanover's
compression horsepower utilization rate as of March 31, 2005 and
December 31, 2004 on a total horsepower basis was approximately 82%.
U.S. and international utilization at both March 31, 2005 and at
December 31, 2004 was approximately 77% and 98%, respectively.
Conference Call Details
Hanover Compressor Company will host a conference call at 11:00
a.m. Eastern Standard Time, Thursday, April 28, 2005, to discuss
financial results and other matters for the first quarter of 2005. To
access the call, United States and Canadian participants should dial
877-639-1065. International participants should dial 706-679-5932 at
least 10 minutes before the scheduled start time. Please reference
Hanover conference call number 5283820. For those unable to
participate, a replay will be available from 2:00 p.m. Eastern
Standard Time on Thursday, April 28, 2005, until midnight on
Wednesday, May 4, 2005. To listen to the replay, please dial
800-642-1687 in the U.S. and Canada, or 706-645-9291 internationally
and enter access code 5283820. Additionally, the conference call will
be broadcast live over the Internet. To access the webcast, log onto
the company's Web site (www.hanover-co.com) and click on the webcast
link located on the company's home page.
About Hanover Compressor
Hanover Compressor Company (www.hanover-co.com) is a global market
leader in full service natural gas compression and a leading provider
of service, fabrication and equipment for oil and natural gas
processing and transportation applications. Hanover sells and rents
this equipment and provides complete operation and maintenance
services, including run-time guarantees for both customer-owned
equipment and its fleet of rental equipment. Founded in 1990 and a
public company since 1997, Hanover's customers include both major and
independent oil and gas producers and distributors as well as national
oil and gas companies.
Forward-looking Statements
Certain matters discussed in this presentation are
"forward-looking statements" intended to qualify for the safe harbors
established by the Private Securities Litigation Reform Act of 1995
and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements can generally be identified as such
because of the context of the statement or because the statement
includes words such as "believes," "anticipates," "expects,"
"estimates," or words of similar import. Similarly, statements that
describe Hanover's future plans, objectives or goals or future
revenues or other financial measures are also forward-looking
statements. Such forward-looking statements are subject to risks and
uncertainties that could cause our actual results to differ materially
from those anticipated as of the date the statements were made. These
risks and uncertainties include, but are not limited to: our inability
to renew our short-term leases of equipment with our customers so as
to fully recoup our cost of the equipment; a prolonged substantial
reduction in oil and natural gas prices, which could cause a decline
in the demand for our compression and oil and natural gas production
equipment; reduced profit margins or the loss of market share
resulting from competition or the introduction of competing
technologies by other companies; changes in economic or political
conditions in the countries in which we do business, including civil
uprisings, riots, terrorism, the taking of property without fair
compensation and legislative changes; changes in currency exchange
rates; the inherent risks associated with our operations, such as
equipment defects, malfunctions and failures and natural disasters;
governmental safety, health, environmental and other regulations,
which could require us to make significant expenditures; our inability
to implement certain business objectives such as international
expansion, integrating acquired businesses, generating sufficient
cash, accessing capital markets, refinancing existing or incurring
additional indebtedness to fund our business, and executing our exit
and sale strategy with respect to assets classified on our balance
sheet as assets held for sale; risks associated with any significant
failure or malfunction of our enterprise resource planning system and
our inability to comply with covenants in our debt agreements and the
decreased financial flexibility associated with our substantial debt.
A discussion of these and other factors is included in the Company's
periodic reports filed with the Securities and Exchange Commission.
(Tables Follow)
HANOVER COMPRESSOR COMPANY
CONSOLIDATED FINANCIAL DATA
AND EBITDA RECONCILIATION
(in thousands of dollars, except per share amounts)
(unaudited)
Three Months Ended
March 31,
-----------------------
2005 2004
----------- -----------
Revenues and other income:
U.S. rentals $87,154 $86,592
International rentals 53,915 51,500
Parts, service and used equipment 33,437 44,382
Compressor and accessory fabrication 32,524 28,150
Production and processing equipment
fabrication 89,571 53,429
Equity in income of non-consolidated
affiliates 4,574 4,683
Other 451 1,095
----------- -----------
301,626 269,831
Expenses:
U.S. rentals 34,076 35,539
International rentals 17,502 14,773
Parts, service and used equipment 25,060 32,969
Compressor and accessory fabrication 29,617 25,913
Production and processing equipment
fabrication 79,125 47,696
Selling, general and administrative 42,158 40,374
Foreign currency translation 271 (1,073)
Other 119 (100)
----------- -----------
227,928 196,091
----------- -----------
EBITDA from continuing operations (1) 73,698 73,740
Depreciation and amortization 45,453 42,030
Interest expense 35,940 35,250
----------- -----------
81,393 77,280
----------- -----------
Loss from continuing operations before income
taxes (7,695) (3,540)
Provision for income taxes 4,541 7,097
----------- -----------
Loss from continuing operations (12,236) (10,637)
Income (loss) from discontinued operations,
net of tax (228) 1,183
----------- -----------
Net loss $(12,464) $(9,454)
=========== ===========
Basic loss per common share:
Loss from continuing operations $(0.15) $(0.13)
Income (loss) from discontinued
operations, net of tax -- 0.02
----------- -----------
Net loss $(0.15) $(0.11)
=========== ===========
Diluted loss per common share:
Loss from continuing operations $(0.15) $(0.13)
Income (loss) from discontinued
operations, net of tax -- 0.02
----------- -----------
Net loss $(0.15) $(0.11)
=========== ===========
Weighted average common and common equivalent
shares outstanding:
Basic 85,691 83,035
=========== ===========
Diluted 85,691 83,035
=========== ===========
Gross profit percentage:
U.S. rentals 61% 59%
International rentals 68% 71%
Parts, service and used equipment 25% 26%
Compressor and accessory fabrication 9% 8%
Production and processing equipment
fabrication 12% 11%
(1) EBITDA from continuing operations consists of consolidated income
(loss) from continuing operations before interest expense,
provision for (benefit from) income taxes, and depreciation and
amortization. We believe that EBITDA is a commonly used measure of
financial performance for valuing companies in our industry.
EBITDA should not be considered as an alternative to measures
prescribed by generally accepted accounting principles and may not
be comparably calculated from one company to another.
Forward-looking information concerning Hanover's 2005 net income
(loss), which we believe is the most directly comparable GAAP
financial measure to Hanover's EBITDA is unavailable because the
following items are significantly uncertain so as to make a 2005
prediction inadvisable: interest expense, foreign currency
translation, taxes, depreciation and net results from and proceeds
of the sale of our assets held for sale. The ultimate outcome of
these uncertain items may have an impact on our net income (loss).
EBITDA Reconciliation Three Months Ended
------------------------------------
March 31, December 31,
----------------------- ------------
2005 2004 2004
----------------------- ------------
Loss from continuing operations $(12,236) $(10,637) $(26,209)
Add:
Depreciation and amortization 45,453 42,030 46,426
Interest expense 35,940 35,250 38,809
Provision for income taxes 4,541 7,097 8,352
----------- ----------- ------------
EBITDA from continuing operations $73,698 $73,740 $67,378
=========== =========== ============
CONTACT: Hanover Compressor Company, Houston
Media Relations Inquiries:
Richard Goins, 832-554-4918
rbgoins@hanover-co.com
or
Investor Relations Inquiries:
Stephen York, 832-554-4856
syork@hanover-co.com
SOURCE: Hanover Compressor Company