Exterran Holdings and Exterran Partners Report Third Quarter 2008 Results
HOUSTON--(BUSINESS WIRE)--Exterran Holdings, Inc. (NYSE:EXH) and Exterran Partners, L.P. (NASDAQ:EXLP) today reported financial results for the third quarter 2008.
Exterran Holdings, Inc. Financial Results
Exterran Holdings reported net income for the third quarter 2008 of $37.0 million, or $0.56 per share, compared to net income for the second quarter 2008 of $21.7 million, or $0.33 per share, and a net loss for the third quarter 2007 of $75.4 million, or a $1.55 loss per share.
Revenue was $796.0 million for the third quarter 2008 compared to $812.2 million for the second quarter 2008 and $744.6 million for the third quarter 2007. EBITDA, as adjusted (as defined below), was $192.8 million for the third quarter 2008 compared to $166.1 million for the second quarter 2008 and $165.9 million for the third quarter 2007.
The merger of Hanover Compressor Company and Universal Compression Holdings, Inc. was completed on August 20, 2007, and periods prior to the merger reflect only Hanover’s results. Third quarter 2008 results included pretax charges that totaled $4.7 million, or $0.04 per share, including $3.7 million for merger and integration related expenses and $1.0 million for asset impairment charges related to units lost or damaged in Hurricane Ike. Second quarter 2008 results included pretax charges of $33.3 million, or $0.30 per share, including $31.8 million for estimated cost overruns in the fabrication segment and $1.5 million for merger and integration expenses. Third quarter 2007 results included pretax charges related to merger, integration and refinancing activities and asset impairment charges that totaled $179.9 million, or $2.37 per share. 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’ Chief Executive Officer said, “Our overall operating performance in the third quarter improved despite challenges in our markets, as demonstrated by sequential increases in gross margin contribution in each of our North America contract operations, international contract operations and fabrication segments. We continue to experience good demand for our products and services and an ongoing backlog of new business for our contract operations and sale activities.
“While we are optimistic about the long-term prospects for our business, many of our North American customers have announced or are currently considering reductions in their 2009 capital spending, which may have a negative impact on the demand for our products and services. Nevertheless, we continue to believe there is potential for increased demand for outsourced compression and other services, and our service infrastructure and fleet position us well to capture that demand. Further, we continue to see positive developments in the international sector and we again added new business to our contract operations backlog in the third quarter, which now stands at more than $135 million of annualized revenues.”
J. Michael Anderson, Senior Vice President and Chief Financial Officer, added, "With our healthy financial position, we are well positioned to fund existing capital projects and take advantage of growth opportunities. We expect cash generated by our operations to sustain our maintenance and growth capital expenditures for the foreseeable future. In addition, we have significant unused availability under our credit facilities to fund short-term needs and other activities.”
Exterran Holdings repurchased 1,087,038 shares of its common stock during the third quarter at an average price of $45.94 per share for a total of approximately $50 million. Including the repurchases made in late 2007, Exterran Holdings has now repurchased approximately $150 million of its common stock under its $200 million share repurchase program.
Exterran Partners, L.P. Financial Results
Exterran Partners reported revenue of $44.4 million for the third quarter 2008 compared to $35.0 million for the second quarter 2008 and $34.7 million for the third quarter 2007. Net income was $9.4 million for the third quarter 2008 compared to $6.1 million for the second quarter 2008 and $7.5 million for the third quarter 2007. EBITDA, as further adjusted (as defined below), totaled $22.7 million for the third quarter 2008 compared to $20.3 million for the second quarter 2008 and $19.1 million for the third quarter 2007. Distributable cash flow (as defined below) totaled $14.8 million for the third quarter 2008 compared to $14.0 million for the second quarter 2008 and $13.5 million for the third quarter 2007.
“Third quarter highlights for Exterran Partners included strong cash flow generation as well as the completion of the acquisition of an additional 254,000 horsepower from Exterran Holdings on July 30,” commented Mr. Snider, Chairman and Chief Executive Officer of Exterran Partners’ general partner. “Exterran Partners’ outlook remains positive due to its financial position and continuing relationship with Exterran Holdings.”
On October 28, 2008, Exterran Partners announced a cash distribution of $0.4625 per limited partner unit for the third quarter 2008, compared to $0.425 per limited partner unit for the second quarter 2008 and $0.40 per limited partner unit for the third quarter 2007. The third quarter 2008 per unit distribution is 15.6 percent higher than that for the third quarter of 2007 and reflects the contribution of the additional contract operations assets Exterran Partners purchased from Exterran Holdings.
Conference Call Details
Exterran Holdings, Inc. (NYSE: EXH) and Exterran Partners, L.P. (NASDAQ: EXLP) announce the following schedule and teleconference information for their third quarter 2008 earnings release:
- Teleconference: Thursday, November 6, 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 3429588.
- 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 1:30 p.m. Eastern Time on Thursday, November 6, until 1:00 p.m. Eastern Time on Thursday, November 13, 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 3429588.
With respect to Exterran Holdings, EBITDA, as adjusted, a non-GAAP measure, is defined as net income 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, EBITDA, as further adjusted, a non-GAAP measure, is defined as net income plus income taxes, interest expense, depreciation and amortization 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 Partners, distributable cash flow, a non-GAAP measure, is defined as net income plus depreciation and amortization 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 gains/losses on asset sales and 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 and amortization 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 Holdings and Exterran Partners
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 operations services to customers throughout the United States. Exterran Holdings indirectly owns a majority interest in 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, many of which are outside the control of Exterran Holdings and Exterran Partners (the “Companies”), which could cause actual results to differ materially from such statements. Forward-looking information includes, but is not limited to: Exterran Holdings’ expectation of continuing healthy market conditions for the remainder of 2008; the ability of Exterran Holdings to experience attractive returns from its North America and international contract operations backlog; 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, including demand arising from an increased interest in outsourcing services; the expected benefits to Exterran Partners from its relationship with Exterran Holdings; and the Companies’ expected ability to fund operations, capital expenditures and growth opportunities.
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 future performance or results of their business. Among the factors that could cause results to differ materially from those indicated by such forward-looking statements are: local, regional, national and international economic conditions and the impact they may have on the Companies and their customers; changes in master limited partnership equity markets and overall financial markets that impact the effect of the drop-down of additional assets to Exterran Partners; changes in tax laws that impact master limited partnerships, including drop-downs of additional assets to Exterran Partners; conditions in the oil and gas industry, including a sustained decrease in the level of supply or demand for oil and natural gas and the impact on the price of oil and 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; changes in safety and environmental regulations pertaining to the production and transportation of oil and 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 Exterran Holdings’ Annual Report on Form 10-K for the year ended December 31, 2007, as amended by Amendment No. 1 thereto, Exterran Partners’ Annual Report 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.
(Tables Follow)
| EXTERRAN HOLDINGS, INC. | ||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||
| (in thousands, except per share amounts) | ||||||||||||
| Three Months Ended | ||||||||||||
| September 30, | June 30, | September 30, | ||||||||||
| 2008 | 2008 | 2007 | ||||||||||
| Revenues: | ||||||||||||
| North America contract operations | $ | 197,926 | $ | 194,607 | $ | 148,986 | ||||||
| International contract operations | 135,153 | 125,854 | 88,457 | |||||||||
| Aftermarket services | 98,275 | 97,706 | 75,045 | |||||||||
| Fabrication | 364,608 | 394,044 | 432,114 | |||||||||
| 795,962 | 812,211 | 744,602 | ||||||||||
| Costs and expenses: | ||||||||||||
| Cost of sales (excluding depreciation and amortization expense): | ||||||||||||
| North America contract operations | 84,440 | 86,303 | 64,581 | |||||||||
| International contract operations | 53,884 | 48,128 | 35,439 | |||||||||
| Aftermarket services | 78,306 | 76,681 | 58,049 | |||||||||
| Fabrication | 292,978 | 355,284 | 364,749 | |||||||||
| Selling, general and administrative | 94,533 | 95,339 | 71,191 | |||||||||
| Merger and integration expenses | 3,728 | 1,543 | 34,008 | |||||||||
| Early extinguishment of debt | - | - | 70,150 | |||||||||
| Depreciation and amortization | 94,286 | 92,415 | 66,040 | |||||||||
| Fleet impairment | 1,000 | - | 61,945 | |||||||||
| Interest expense | 33,364 | 30,105 | 38,680 | |||||||||
| Equity in (income) loss of non-consolidated affiliates | (6,657 | ) | (6,962 | ) | 5,005 | |||||||
| Other (income) expense, net | 5,689 | (8,612 | ) | (13,578 | ) | |||||||
| 735,551 | 770,224 | 856,259 | ||||||||||
| Income (loss) before income taxes and minority interest | 60,411 | 41,987 | (111,657 | ) | ||||||||
| Provision (benefit) for income taxes | 20,350 | 17,084 | (38,692 | ) | ||||||||
| Minority interest, net of taxes | 3,028 | 3,243 | 2,426 | |||||||||
| Net income (loss) | $ | 37,033 | $ | 21,660 | $ | (75,391 | ) | |||||
| Earnings (loss) per share - (1): | ||||||||||||
| Basic | $ | 0.57 | $ | 0.33 | $ | (1.55 | ) | |||||
| Diluted (2) | $ | 0.56 | $ | 0.33 | $ | (1.55 | ) | |||||
| Weighted average common and equivalent shares outstanding (1): | ||||||||||||
| Basic | 64,940 | 65,217 | 48,771 | |||||||||
| Diluted | 68,537 | 65,904 | 48,771 | |||||||||
| (1) Adjusted for the Hanover common share conversion ratio in the merger of Hanover and Universal for the period ended September 30, 2007. |
| (2) Net income for the diluted earnings per share calculation for the three-month periods ending September 30, 2008, June 30, 2008 and September 30, 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, zero and zero, respectively. |
| EXTERRAN HOLDINGS, INC. | ||||||||||||
| UNAUDITED SUPPLEMENTAL INFORMATION | ||||||||||||
| (Dollars in thousands) | ||||||||||||
| Three Months Ended | ||||||||||||
| September 30, | June 30, | September 30, | ||||||||||
| 2008 | 2008 | 2007 | ||||||||||
| Revenues: | ||||||||||||
| North America contract operations | $ | 197,926 | $ | 194,607 | $ | 148,986 | ||||||
| International contract operations | 135,153 | 125,854 | 88,457 | |||||||||
| Aftermarket services | 98,275 | 97,706 | 75,045 | |||||||||
| Fabrication | 364,608 | 394,044 | 432,114 | |||||||||
| Total | $ | 795,962 | $ | 812,211 | $ | 744,602 | ||||||
| Gross Margin (1): | ||||||||||||
| North America contract operations | $ | 113,486 | $ | 108,304 | $ | 84,405 | ||||||
| International contract operations | 81,269 | 77,726 | 53,018 | |||||||||
| Aftermarket services | 19,969 | 21,025 | 16,996 | |||||||||
| Fabrication | 71,630 | 38,760 | 67,365 | |||||||||
| Total | $ | 286,354 | $ | 245,815 | $ | 221,784 | ||||||
| Selling, General and Administrative | $ | 94,533 | $ | 95,339 | $ | 71,191 | ||||||
| % of Revenues | 12 | % | 12 | % | 10 | % | ||||||
| EBITDA, as adjusted (1) | $ | 192,789 | $ | 166,050 | $ | 165,909 | ||||||
| % of Revenues | 24 | % | 20 | % | 22 | % | ||||||
| Capital Expenditures (2) | $ | 119,831 | $ | 153,664 | $ | 90,714 | ||||||
| Less: Proceeds from Sale of PP&E | (18,418 | ) | (23,724 | ) | (8,591 | ) | ||||||
| Net Capital Expenditures | $ | 101,413 | $ | 129,940 | $ | 82,123 | ||||||
| Gross Margin Percentage: | ||||||||||||
| North America contract operations | 57 | % | 56 | % | 57 | % | ||||||
| International contract operations | 60 | % | 62 | % | 60 | % | ||||||
| Aftermarket services | 20 | % | 22 | % | 23 | % | ||||||
| Fabrication | 20 | % | 10 | % | 16 | % | ||||||
| Total | 36 | % | 30 | % | 30 | % | ||||||
| Reconciliation of GAAP to Non-GAAP Financial Information: | ||||||||||||
| Net income (loss) | $ | 37,033 | $ | 21,660 | $ | (75,391 | ) | |||||
| Depreciation and amortization | 94,286 | 92,415 | 66,040 | |||||||||
| Fleet impairment | 1,000 | - | 61,945 | |||||||||
| Impairment of investment in non-consolidated affiliates | - | - | 6,743 | |||||||||
| Early extinguishment of debt | - | - | 70,150 | |||||||||
| Interest expense | 33,364 | 30,105 | 38,680 | |||||||||
| Merger and integration expenses | 3,728 | 1,543 | 34,008 | |||||||||
| Minority interest | 3,028 | 3,243 | 2,426 | |||||||||
| Provision (benefit) for income taxes | 20,350 | 17,084 | (38,692 | ) | ||||||||
| EBITDA, as adjusted (1) | 192,789 | 166,050 | 165,909 | |||||||||
| Selling, general and administrative | 94,533 | 95,339 | 71,191 | |||||||||
| Equity in (income) loss of non-consolidated affiliates | (6,657 | |||||||||||