Exterran Holdings, Inc. Financial Results
Exterran Holdings reported net income for the first quarter 2008
of $49.4 million, or $0.73 per share, compared to $58.5 million, or
$0.87 per share, for the fourth quarter 2007 and $25.4 million, or
$0.71 per share, for the first quarter 2007.
Merger and integration pretax charges related to the merger of
Hanover Compressor Company and Universal Compression Holdings, Inc.
into Exterran Holdings totaled $4.4 million, or $0.05 per share, in
the first quarter 2008 compared to $9.3 million, or $0.08 per share,
in the fourth quarter 2007 and $0.3 million in the first quarter 2007.
Revenue was $740.1 million for the first quarter 2008 compared to
$853.4 million for the fourth quarter 2007 and $448.0 million for the
first quarter 2007. EBITDA, as adjusted (as defined below), was $211.2
million for the first quarter 2008 compared to $212.5 million for the
fourth quarter 2007 and $117.9 million for the first quarter 2007.
The merger of Hanover and Universal was completed on August 20,
2007, and periods prior to the merger reflect only Hanover's results.
All share and per share amounts have been retroactively adjusted to
reflect the merger conversion ratio of 0.325 shares of Exterran
Holdings common stock for each share of Hanover common stock for all
periods discussed or presented.
Stephen A. Snider, Exterran Holdings' President and CEO, said, "We
are excited about the start of our first full year of operations as
Exterran and are very encouraged about the progress of our
international and total solutions businesses. Although merger
integration and operational challenges have slowed the performance of
our North American business, we are addressing these issues and expect
to deliver improvements in revenues and margins in this business by
the last half of 2008. We recently transferred key management team
members to our North American organization, bringing valuable
additional resources and experience to help us complete our merger
integration, further our service excellence initiative, and resume
growth in our North American business."
Exterran Partners, L.P. Financial Results
Exterran Partners reported revenue of $35.3 million in the first
quarter 2008 compared to $36.6 million in the fourth quarter 2007 and
$17.6 million in the first quarter 2007. Net income was $6.5 million
in the first quarter 2008 compared to $7.3 million in the fourth
quarter 2007 and $2.3 million in the first quarter 2007. EBITDA, as
further adjusted (as defined below), totaled $19.2 million in the
first quarter 2008 compared to $20.1 million in the fourth quarter
2007 and $9.5 million in the first quarter 2007. Distributable cash
flow (as defined below) totaled $14.0 million in the first quarter
2008 compared to $14.1 million in the fourth quarter 2007 and $6.0
million in the first quarter 2007.
On April 28, 2008, Exterran Partners announced a cash distribution
of $0.425 per limited partner unit for the first quarter 2008 compared
to $0.425 per limited partner unit for the fourth quarter 2007 and
$0.35 per limited partner unit for the first quarter 2007.
"We are pleased with another solid performance by Exterran
Partners in the first quarter, which included a distribution 21%
higher than the prior year period's distribution. Exterran Partners
continues to work toward a possible acquisition of certain contract
operations assets and contracts from Exterran Holdings in a drop-down
transaction and recently obtained financing commitments to expand its
existing senior secured debt facility in contemplation of the proposed
drop-down transaction," commented Mr. Snider, Chairman, President and
CEO of Exterran Partners' general partner. "We believe the large pool
of U.S. contract compression assets that can be offered for sale by
Exterran Holdings to Exterran Partners over time and attractive
ongoing market opportunities continue to enhance our outlook."
Conference Call Details
Exterran Holdings, Inc. (NYSE:EXH) and Exterran Partners, L.P.
(NASDAQ:EXLP) announce the following schedule and teleconference
information for their first quarter 2008 earnings release:
-- Teleconference: Wednesday, May 7, 2008 at 11:00 a.m. Eastern
Time (10:00 a.m. Central Time). To access the call, United
States and Canadian participants should dial 888-727-7721.
International participants should dial 913-312-0381 at least
10 minutes before the scheduled start time. Please reference
Exterran conference call number 4019182.
-- Live Webcast: The webcast will be available in listen-only
mode via the Companies' website: www.exterran.com.
-- Webcast Replay: For those unable to participate, a replay will
be available from 2:00 p.m. Eastern Time on Wednesday, May 7,
until 2:00 p.m. Eastern Time Wednesday, May 14, 2008. To
listen to the replay, please dial 888-203-1112 in the United
States and Canada, or 719-457-0820 internationally, and enter
access code 4019182.
With respect to Exterran Holdings, EBITDA, as adjusted, a non-GAAP
measure, is defined as income from continuing operations plus income
taxes, interest expense (including debt extinguishment costs and gain
or loss on termination of interest rate swaps), depreciation and
amortization expense, impairment charges, merger and integration
expenses, minority interest, excluding non-recurring items, and
extraordinary gains or losses.
With respect to Exterran Partners, distributable cash flow, a
non-GAAP measure, is defined as net income plus depreciation expense,
non-cash selling, general and administrative expenses, interest
expense and any amounts by which cost of sales and selling, general
and administrative costs are reduced as a result of caps on these
costs contained in the omnibus agreement to which Exterran Holdings
and Exterran Partners are parties (the "Omnibus Agreement"), which
amounts are treated as capital contributions from Exterran Holdings
for accounting purposes, less cash interest expense and maintenance
capital expenditures, and excluding non-recurring items.
With respect to Exterran Partners, EBITDA, as further adjusted, a
non-GAAP measure, is defined as net income plus income taxes, interest
expense, depreciation expense, non-cash selling, general and
administrative expenses and any amounts by which cost of sales and
selling, general and administrative costs are reduced as a result of
caps on these costs contained in the Omnibus Agreement, which amounts
are treated as capital contributions from Exterran Holdings for
accounting purposes, and excluding non-recurring items.
With respect to Exterran Holdings, Gross Margin, a non-GAAP
measure, is defined as total revenue less cost of sales (excluding
depreciation and amortization expense).
With respect to Exterran Partners, Gross Margin, as adjusted, a
non-GAAP measure, is defined as total revenue less cost of sales
(excluding depreciation expense) plus any amounts by which cost of
sales are reduced as a result of caps on these costs contained in the
Omnibus Agreement, which amounts are treated as capital contributions
from Exterran Holdings for accounting purposes.
About Exterran
Exterran Holdings, Inc. is a global market leader in full service
natural gas compression and a premier provider of operations,
maintenance, service and equipment for oil and gas production,
processing and transportation applications. Exterran Holdings serves
customers across the energy spectrum -- from producers to transporters
to processors to storage owners. Headquartered in Houston, Texas,
Exterran and its over 10,000 employees have operations in more than 30
countries.
Exterran Partners, L.P. was formed by Exterran Holdings to provide
natural gas contract compression services to customers throughout the
United States. Exterran Holdings owns 51% of Exterran Partners.
For more information, visit www.exterran.com.
Forward Looking Statements
All statements in this release (and oral statements made regarding
the subjects of this release) other than historical facts are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements rely on a number of assumptions concerning future events
and are subject to a number of uncertainties and factors that could
cause actual results to differ materially from such statements, many
of which are outside the control of Exterran Holdings, Inc. and
Exterran Partners, L.P. (the "Companies"). Forward-looking information
includes, but is not limited to: Exterran Holdings' expectation to
deliver improvements in revenue and margins in the North American
business by the last half of 2008; the Companies' operational and
financial strategies, and the Companies' ability to successfully
effect those strategies; the Companies' financial and operational
outlook and ability to fulfill that outlook; demand for the Companies'
products and services and growth opportunities for those products and
services; the ability of Exterran Holdings and Exterran Partners to
complete a possible transaction and the expected timing of the closing
of such a transaction; the expected benefits of such a transaction;
and Exterran Holdings' intention to offer and sell other assets to
Exterran Partners over time.
While the Companies believe that the assumptions concerning future
events are reasonable, they caution that there are inherent
difficulties in predicting certain important factors that could impact
the accuracy of the forward-looking information. Among the factors
that could cause results to differ materially from those indicated by
such forward-looking statements are: changes in Exterran Holdings'
credit rating and the factors that impact its credit rating; the
failure to realize anticipated synergies from the merger; changes in
master limited partnership equity markets and overall financial
markets that impact the effect of the drop-down of additional assets
from Exterran Holdings to Exterran Partners; changes in tax laws that
impact master limited partnerships, including drop-downs of additional
assets into Exterran Partners; conditions in the oil and gas industry,
including a sustained decrease in the level of supply or demand for
natural gas and the impact on the price of natural gas; Exterran
Holdings' ability to timely and cost-effectively obtain components
necessary to conduct the Companies' business; changes in political or
economic conditions in key operating markets, including international
markets; the Companies' ability to timely and cost-effectively
integrate their enterprise resource planning systems; changes in
safety and environmental regulations pertaining to the production and
transportation of natural gas; and, as to each of the Companies, the
performance of the other entity.
These forward-looking statements are also affected by the risk
factors, forward-looking statements and challenges and uncertainties
described in the Companies' Annual Reports on Form 10-K for the year
ended December 31, 2007, and those set forth from time to time in the
Companies' filings with the Securities and Exchange Commission, which
are currently available at www.exterran.com. Except as required by
law, the Companies expressly disclaim any intention or obligation to
revise or update any forward-looking statements whether as a result of
new information, future events or otherwise.
EXTERRAN HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended
--------------------------------
March 31, December 31, March 31,
2008 2007 2007
--------- ------------ ---------
Revenues:
North America contract operations $199,076 $ 202,956 $ 99,635
International contract operations 119,892 111,414 67,291
Aftermarket services 84,172 102,307 47,301
Fabrication 336,949 436,698 233,751
--------- ------------ ---------
740,089 853,375 447,978
--------- ------------ ---------
Costs and expenses:
Cost of sales (excluding
depreciation and amortization
expense):
North America contract operations 88,288 86,300 39,982
International contract operations 39,385 40,441 23,305
Aftermarket services 66,927 82,633 36,631
Fabrication 263,743 362,425 193,503
Selling, general and administrative 89,687 89,659 49,906
Merger and integration expenses 4,439 9,326 324
Depreciation and amortization 90,449 85,822 49,488
Fleet impairment 1,450 - -
Interest expense 33,220 34,959 28,272
Equity in (income) loss of non-
consolidated affiliates (6,093) (5,541) (5,683)
Other (income) expense, net (12,999) (15,002) (7,597)
--------- ------------ ---------
658,496 771,022 408,131
--------- ------------ ---------
Income from continuing operations
before income taxes and minority
interest 81,593 82,353 39,847
Provision for income taxes 29,977 19,979 14,445
Minority interest, net of taxes 2,643 3,880 -
--------- ------------ ---------
Income from continuing operations 48,973 58,494 25,402
Income from discontinued operations,
net of tax 398 - -
--------- ------------ ---------
Net income $ 49,371 $ 58,494 $ 25,402
========= ============ =========
Earnings per share - Basic(1):
Income from continuing operations $ 0.75 $ 0.90 $ 0.76
Income from discontinued
operations, net of tax 0.01 - -
--------- ------------ ---------
Net income (loss) $ 0.76 $ 0.90 $ 0.76
========= ============ =========
Earnings per share - Diluted(1):
Income from continuing operations
(2) $ 0.73 $ 0.87 $ 0.71
Income from discontinued
operations, net of tax - - -
--------- ------------ ---------
Net income $ 0.73 $ 0.87 $ 0.71
========= ============ =========
Weighted average common and
equivalent shares outstanding (1):
Basic 65,065 65,276 33,607
--------- ------------ ---------
Diluted 68,831 68,715 38,226
--------- ------------ ---------
(1) Adjusted for the Hanover common share conversion ratio in the
merger of Hanover and Universal for the period ended March 31, 2007.
(2) Net income for the diluted earnings per share calculation for the
three-month periods ending March 31, 2008, December 31, 2007 and
March 31, 2007 is adjusted to add back interest expense and
amortization of financing costs, net of tax, relating to the
Company's convertible senior notes totaling $1.2 million, $1.2
million and $1.6 million, respectively.
EXTERRAN HOLDINGS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION
(Dollars in thousands)
Three Months Ended
------------------------------------
March 31, December 31, March 31,
2008 2007 2007
----------- ------------ -----------
Revenues:
North America contract
operations $ 199,076 $ 202,956 $ 99,635
International contract
operations 119,892 111,414 67,291
Aftermarket services 84,172 102,307 47,301
Fabrication 336,949 436,698 233,751
----------- ------------ -----------
Total $ 740,089 $ 853,375 $ 447,978
=========== ============ ===========
Gross Margin (1):
North America contract
operations $ 110,788 $ 116,656 $ 59,653
International contract
operations 80,507 70,973 43,986
Aftermarket services 17,245 19,674 10,670
Fabrication 73,206 74,273 40,248
----------- ------------ -----------
Total $ 281,746 $ 281,576 $ 154,557
=========== ============ ===========
Selling, General and
Administrative $ 89,687 $ 89,659 $ 49,906
% of Revenues 12% 11% 11%
EBITDA, as adjusted (1) $ 211,151 $ 212,460 $ 117,931
% of Revenues 29% 25% 26%
Capital Expenditures $ 102,575 $ 119,279 $ 72,746
Less: Proceeds from Sale of PP&E (2,527) (6,463) (11,798)
----------- ------------ -----------
Net Capital Expenditures $ 100,048 $ 112,816 $ 60,948
=========== ============ ===========
Gross Margin Percentage:
North America contract
operations 56% 57% 60%
International contract
operations 67% 64% 65%
Aftermarket services 20% 19% 23%
Fabrication 22% 17% 17%
Total 38% 33% 35%
Reconciliation of GAAP to Non-
GAAP Financial Information:
Income from continuing
operations $ 48,973 $ 58,494 $ 25,402
Depreciation and amortization 90,449 85,822 49,488
Fleet impairment 1,450 - -
Interest expense 33,220 34,959 28,272
Merger and integration expenses 4,439 9,326 324
Minority interest 2,643 3,880 -
Provision (benefit) for income
taxes 29,977 19,979 14,445
----------- ------------ -----------
EBITDA, as adjusted (1) 211,151 212,460 117,931
Selling, general and
administrative 89,687 89,659 49,906
Equity in (income) loss of non-
consolidated affiliates (6,093) (5,541) (5,683)
Other (income) expense (12,999) (15,002) (7,597)
----------- ------------ -----------
Gross Margin (1) $ 281,746 $ 281,576 $ 154,557
=========== ============ ===========
March 31, December 31, March 31,
2008 2007 2007
----------- ------------ -----------
Debt $2,326,104 $ 2,333,924 $1,365,669
Stockholders' Equity $3,186,342 $ 3,162,260 $1,088,695
Total Debt to Capitalization 42.2% 42.5% 55.6%
(1) Management believes disclosure of EBITDA, as adjusted, and Gross
Margin, both non-GAAP measures, provides useful information to
investors because, when viewed with our GAAP results and accompanying
reconciliations, they provide a more complete understanding of our
performance than GAAP results alone. Management uses EBITDA, as
adjusted, and Gross Margin as supplemental measures to review current
period operating performance, comparability measures and performance
measures for period to period comparisons. In addition, EBITDA, as
adjusted, is used by management as a valuation measure.
EXTERRAN HOLDINGS, INC.
UNAUDITED SUPPLEMENTAL INFORMATION
(Horsepower in thousands; dollars in millions)
March 31, December 31,
2008 2007
--------- ------------
Total Available Horsepower:
North America contract operations 4,476 4,514
International contract operations 1,461 1,447
--------- ------------
Total 5,937 5,961
========= ============
Total Operating Horsepower:
North America contract operations 3,535 3,632
International contract operations 1,350 1,306
--------- ------------
Total 4,885 4,938
========= ============
Horsepower Utilization:
North America contract operations 79% 80%
International contract operations 92% 90%
Total 82% 83%
March 31, December 31, March 31,
2008 2007 2007
--------- ------------ ---------
Fabrication Backlog:
Compression & accessory $354 $322 $354
Production & processing 919 788 419
--------- ------------ ---------
Total $1,273 $1,110 $773
========= ============ =========
EXTERRAN PARTNERS, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
Three Months Ended
--------------------------------
March 31, December 31, March 31,
2008 2007 2007
--------- ------------ ---------
Revenue $ 35,267 $ 36,575 $ 17,585
Costs and expenses:
Cost of sales (excluding
depreciation) 16,143 15,511 7,507
Depreciation 5,674 5,660 2,782
Selling, general and administrative 3,001 4,134 2,770
Interest expense 3,801 3,872 2,133
Other (income) expense, net (10) (4) (6)
--------- ------------ ---------
Total costs and expenses 28,609 29,173 15,186
--------- ------------ ---------
Income before income taxes 6,658 7,402 2,399
Income tax (benefit) expense 111 90 56
--------- ------------ ---------
Net income $ 6,547 $ 7,312 $ 2,343
========= ============ =========
General partner interest in net
income $ 187 $ 205 $ 47
--------- ------------ ---------
Limited partner interest in net
income $ 6,360 $ 7,107 $ 2,296
========= ============ =========
Weighted average limited partners'
units outstanding:
Basic 16,679 16,679 12,650
--------- ------------ ---------
Diluted 16,791 16,753 12,671
--------- ------------ ---------
Earnings per limited partner unit:
Basic $ 0.38 $ 0.43 $ 0.18
========= ============ =========
Diluted $ 0.38 $ 0.42 $ 0.18
========= ============ =========
EXTERRAN PARTNERS, L.P.
UNAUDITED SUPPLEMENTAL INFORMATION
(Dollars in thousands, except per unit amounts)
Three Months Ended
--------------------------------
March 31, December 31, March 31,
2008 2007 2007
--------- ------------ ---------
Revenue $ 35,267 $ 36,575 $ 17,585
Gross Margin, as adjusted (1) $ 22,698 $ 23,755 $ 11,980
EBITDA, as further adjusted (1) $ 19,161 $ 20,122 $ 9,480
% of Revenue 54% 55% 54%
Capital Expenditures $ 4,469 $ 8,585 $ 6,079
Proceeds from Sale of PP&E - - -
--------- ------------ ---------
Net Capital Expenditures $ 4,469 $ 8,585 $ 6,079
========= ============ =========
Gross Margin percentage, as adjusted 64% 65% 68%
Distributable cash flow (2) $ 14,020 $ 14,108 $ 5,974
Distributions per Limited Partner
Unit $ 0.425 $ 0.425 $ 0.278
Distribution to All Unitholders,
including Incentive Distributions $ 7,290 $ 7,292 $ 3,585
Distributable Cash Flow Coverage 1.92x 1.93x 1.67x
March 31, December 31, March 31,
2008 2007 2007
--------- ------------ ---------
Debt $217,000 $ 217,000 $125,000
Total Partners' Capital $139,926 $ 145,159 $ 71,064
Total Debt to Capitalization 61% 60% 64%
Total Debt to Annualized EBITDA, as 2.8x 2.7x 3.3x
further adjusted (1)
EBITDA, as further adjusted (1) to 5.0x 5.2x 4.4x
Interest Expense
(1) Management believes disclosure of EBITDA, as further adjusted, and
Gross Margin, as adjusted, both non-GAAP measures, provides useful
information to investors because, when viewed with our GAAP results
and accompanying reconciliations, they provide a more complete
understanding of our performance than GAAP results alone. Management
uses EBITDA, as further adjusted, and Gross Margin, as adjusted, as
supplemental measures to review current period operating performance,
comparability measures and performance measures for period to period
comparisons. In addition, EBITDA, as further adjusted, is used by
management as a valuation measure.
(2) Distributable cash flow, a non-GAAP measure, is a significant
liquidity metric used by management to compare basic cash flows
generated by us to the cash distributions we expect to pay our
partners. Using this metric, management can quickly compute the
coverage ratio of estimated cash flows to planned cash distributions.
EXTERRAN PARTNERS, L.P.
UNAUDITED SUPPLEMENTAL INFORMATION
(Dollars in thousands)
Three Months Ended
--------------------------------
March 31, December 31, March 31,
2008 2007 2007
--------- ------------ ---------
Reconciliation of GAAP to Non-GAAP
Financial Information:
Net income $ 6,547 $ 7,312 $ 2,343
Income tax (benefit) expense 111 90 56
Depreciation 5,674 5,660 2,782
Cap on operating and selling,
general and administrative costs
provided by Exterran Holdings
("EXH") 3,574 2,687 1,578
Non-cash selling, general and
administrative costs (546) 501 588
Interest expense, net of interest
income 3,801 3,872 2,133
--------- ------------ ---------
EBITDA, as further adjusted (1) 19,161 20,122 9,480
Cash selling, general and
administrative costs (see note 1
below) 3,547 3,633 2,671
Less: cap on selling, general and
administrative costs provided by
EXH - - (171)
Less: other income, expense, net (10) - -
--------- ------------ ---------
Gross Margin, as adjusted for
operating cost caps provided by
EXH (1) $ 22,698 $ 23,755 $ 11,980
Other income, expense, net 10 - -
Less: Cash interest expense (3,696) (3,643) (2,077)
Less: Cash selling, general and
administrative, as adjusted for
cost caps provided by EXH (3,547) (3,633) (2,500)
Less: Income tax (expense) benefit (111) (90) (56)
Less: Maintenance capital
expenditures (1,334) (2,281) (1,373)
--------- ------------ ---------
Distributable cash flow (2) $ 14,020 $ 14,108 $ 5,974
========= ============ =========
Cash flows from operating
activities $ 3,991 $ 9,635 $ 7,921
Amortization of debt issuance cost (64) (67) (56)
Amortization of fair value of
acquired interest rate swaps (41) (162) -
Cap on operating and selling,
general and administrative costs
provided by EXH 3,574 2,687 1,578
Interest expense, net of interest
income 3,801 3,872 2,133
Cash interest expense (3,696) (3,643) (2,077)
Maintenance capital expenditures (1,334) (2,281) (1,373)
Change in current
assets/liabilities 7,789 4,067 (2,152)
--------- ------------ ---------
Distributable cash flow (2) $ 14,020 $ 14,108 $ 5,974
========= ============ =========
(1) Management believes disclosure of EBITDA, as further adjusted, and
Gross Margin, as adjusted, both non-GAAP measures, provides useful
information to investors because, when viewed with our GAAP results
and accompanying reconciliations, they provide a more complete
understanding of our performance than GAAP results alone. Management
uses EBITDA, as further adjusted, and Gross Margin, as adjusted, as
supplemental measures to review current period operating performance,
comparability measures and performance measures for period to period
comparisons. In addition, EBITDA, as further adjusted, is used by
management as a valuation measure.
(2) Distributable cash flow, a non-GAAP measure, is a significant
liquidity metric used by management to compare basic cash flows
generated by us to the cash distributions we expect to pay our
partners. Using this metric, management can quickly compute the
coverage ratio of estimated cash flows to planned cash distributions.
EXTERRAN PARTNERS, L.P.
UNAUDITED SUPPLEMENTAL INFORMATION
(Horsepower in thousands)
Three Months Ended
--------------------------------
March 31, December 31, March 31,
2008 2007 2007
--------- ------------ ---------
Total Available Horsepower (at period
end) 720 723 358
========= ============ =========
Average Operating Horsepower 659 667 331
========= ============ =========
Horsepower Utilization:
Spot (at period end) 91% 93% 93%
Average 91% 94% 95%
Combined U.S. Contract Operations
Horsepower of Exterran Holdings and
Exterran Partners covered by
contracts converted to service
agreements (at period end) 1,274 1,294 1,154
Total Available U.S. Contract
Operations Horsepower of Exterran
Holdings and Exterran Partners (at
period end) 4,365 4,403 2,098
% of U.S. Contract Operations
Horsepower of Exterran Holdings and
Exterran Partners under Converted
Contract Form (at period end) 29.2% 29.4% 55.0%
SOURCE:
Exterran Holdings, Inc. and Exterran Partners, L.P.
Exterran
David Oatman, 281-836-7035 (Investors)
Pat (Patricia) Wente, 713-335-7011 (Media)
Rick Goins, 832-554-4918 (Media)