Hanover Comp (NYSE:HC)
Historical Stock Chart
From Sep 2019 to Sep 2024
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 treating applications, today reported financial results for the
quarter ended June 30, 2007.
Second quarter 2007 revenue increased to $515.7 million, a 27% increase
over second quarter 2006 revenue of $405.7 million. Net income for the
second quarter 2007 was $26.1 million, or $0.23 earnings per share,
compared with net income of $21.7 million, or $0.21 earnings per share,
in the second quarter 2006.
EBITDA(1) from continuing operations for the
second quarter 2007 was a record $121.8 million, a 17% increase over
second quarter 2006 EBITDA of $103.8 million. Second quarter 2007 EBITDA
includes $3.1 million in merger related expenses. Second quarter 2006
EBITDA included an $8.0 million pre-tax gain on the sale of fabrication
assets in Canada, or approximately $0.07 per share.
We are pleased with the strong results for
the second quarter, with record revenue, EBITDA, backlog and fabrication
margin, said John Jackson, President and CEO. I
want to congratulate the Hanover employees on these operational records
and job well done to position the Company for a successful merger with
Universal.
Summary of Business Line Results
U.S. Rentals
(in thousands)
Three months ended
June 30,
2007
2006
Increase
(Decrease)
Revenue
$
99,562
$
93,073
7
%
Operating expense
40,258
36,729
10
%
Gross profit
$
59,304
$
56,344
5
%
Gross margin
60
%
61
%
(1
)%
U.S. rental revenue and gross profit increased during the three months
ended June 30, 2007, compared to the three months ended June 30, 2006,
due primarily to an improvement in market conditions for higher
horsepower units that has led to an improvement in pricing. Gross margin
decreased slightly in the current quarter as compared to the same period
last year due to higher repair and maintenance expenses.
International Rentals
(in thousands)
Three months ended
June 30,
2007
2006
Increase
(Decrease)
Revenue
$
69,645
$
67,520
3
%
Operating expense
27,675
23,691
17
%
Gross profit
$
41,970
$
43,829
(4
)%
Gross margin
60
%
65
%
(5
)%
During the three months ended June 30, 2007, international rental
revenue increased, compared to the three months ended June 30, 2006,
primarily due to increased rental activity in Brazil and Mexico. Gross
margin and gross profit decreased primarily due to higher repair and
maintenance costs in Argentina and Venezuela as well as lower revenues
in Nigeria in the second quarter of 2007. Revenue related to our
Nigerian Cawthorne Channel Project was not recognized during the three
months ended June 30, 2007 since the project was not on-line, however,
we recorded expenses of $0.8 million related to maintaining the project.
The three months ended June 30, 2006 included $3.9 million in revenue
and $1.6 million in operating costs related to this project.
Parts, Service and Used Equipment
(in thousands)
Three months ended
June 30,
2007
2006
Increase
(Decrease)
Revenue
$
72,664
$
55,737
30
%
Operating expense
56,036
45,061
24
%
Gross profit
$
16,628
$
10,676
56
%
Gross margin
23
%
19
%
4
%
Parts, service and used equipment revenue, gross profit and gross margin
for the three months ended June 30, 2007 were higher than the three
months ended June 30, 2006 primarily due to an increase in parts and
service revenues in both the U.S. and internationally as well as higher
used rental equipment sales.
Parts, service and used equipment revenue includes two business
components: (1) parts and service and (2) used rental equipment sales
and installation revenues. For the three months ended June 30, 2007,
parts and service revenue was $49.8 million with a gross margin of 27%,
compared to $41.9 million and 21%, respectively, for the three months
ended June 30, 2006. Used rental equipment and installations sales for
the three months ended June 30, 2007 was $22.8 million with a gross
margin of 14%, compared to $13.8 million with a 14% gross margin for the
three months ended June 30, 2006. Our installation revenue and used
rental equipment sales and gross margins vary significantly from period
to period and are dependent on the exercise of purchase options on
rental equipment by customers and timing of the start-up of new projects
by customers.
Compressor and Accessory Fabrication
(in thousands)
Three months ended
June 30,
2007
2006
Increase
(Decrease)
Revenue
$
139,508
$
70,128
99
%
Operating expense
106,016
58,482
81
%
Gross profit
$
33,492
$
11,646
188
%
Gross margin
24
%
17
%
7
%
For the three months ended June 30, 2007, compression and accessory
fabrication revenue, gross profit and gross margin increased primarily
due to improved market conditions that led to higher sales levels,
better pricing and an improvement in operating efficiencies. As of June
30, 2007, we had compression fabrication backlog of $299.0 million,
compared to $193.0 million at June 30, 2006.
Production and Processing Equipment Fabrication
(in thousands)
Three months ended
June 31,
2007
2006
Increase
(Decrease)
Revenue
$
122,595
$
103,653
18
%
Operating expense
104,336
89,203
17
%
Gross profit
$
18,259
$
14,450
26
%
Gross margin
15
%
14
%
1
%
Production and processing equipment fabrication revenue, gross profit
and gross margin for the three months ended June 30, 2007 increased over
the three months ended June 30, 2006, primarily due to an improvement in
market conditions that led to an increase in awarded sales, improved
pricing and an improvement in operating efficiencies. During the quarter
ended June 30, 2007, Bellelis revenue
increased $24.4 million to $81.0 million and gross profit increased
$0.4 million to $6.3 million compared to the quarter ended June 30,
2006. Bellelis gross profit was negatively
impacted during the three months ended June 30, 2007 by approximately
$6.7 million of re-work costs on one of its projects.
As of June 30, 2007, we had a production and processing equipment
fabrication backlog of $731.6 million compared to $521.5 million at
June 30, 2006, including Bellelis
backlog of $569.4 million and $454.2 million at June 30, 2007 and 2006,
respectively.
Capital and Other
Hanover had capital expenditures of approximately $69 million in the
second quarter of 2007, compared to approximately $62 million in the
second quarter of 2006. At June 30, 2007, the Company had approximately
$1.35 billion in debt and compression equipment lease obligations,
compared to $1.44 billion at June 30, 2006. At June 30 2007, the Company
had approximately $53.8 million in cash on its balance sheet.
Total compression horsepower at June 30, 2007 was approximately
3,343,000, consisting of approximately 2,419,000 horsepower in the
United States and approximately 924,000 horsepower internationally.
Backlog (in millions)
Date
Compression &
Accessory
Production &
Processing*
Total
Fabrication
June 30, 2007
$
299.0
$
731.6
$
1030.6
December 31, 2006
325.1
482.5
807.6
June 30, 2006
193.0
521.5
714.5
*Includes Belleli backlog
of $569.4 million, $414.0 million and $454.2 million at June 30,
2007, December 31, 2006 and June 30, 2006, respectively.
Compression HP Utilization Rate
Date
U.S.
International
Total
June 30, 2007
81%
96%
85%
December 31, 2006
84%
97%
87%
June 30, 2006
84%
98%
88%
Conference Call Details
Hanover Compressor Company (NYSE: HC) announces the following schedule
and teleconference information for its second quarter 2007 earnings
release:
Earnings Release: Tuesday, July 31, 2007 before market open by
public distribution through Business Wire and the Hanover website at www.hanover-co.com.
Teleconference: Tuesday, July 31, 2007 at 11 a.m. EDT hosted by
Stephen York, Vice President, Investor Relations and Technology.
Speakers will be John E. Jackson, President and CEO, and Lee E.
Beckelman, Senior Vice President and CFO. To access the call, United
States and Canadian participants should dial (800) 811-8824.
International participants should dial (913) 981-4903 at least
10 minutes before the scheduled start time. Please reference Hanover
conference call number 4801055.
Live Webcast: The webcast will be available in listen-only mode
via the Companys website: www.hanover-co.com
Webcast Replay: For those unable to participate, a replay will
be available from 1:30 p.m. EDT on Tuesday, July 31, until 1:30 p.m.
EDT Tuesday, August 7, 2007. To listen to the replay, please dial 888-203-1112
in the U.S. and Canada, or 719-457-0820 internationally and
enter access code 4801055.
About Hanover Compressor Company
Hanover Compressor Company (NYSE:HC) 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 production, 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.
More information can be found at www.hanover-co.com.
Forward Looking Statements
Certain matters discussed in this presentation are "forward-looking
statements" intended to qualify for the safe harbors from liabilities
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 certain 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 and processing 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, kidnappings, 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 natural
disasters; ability to obtain components used to fabricate our products;
our inability to implement certain business objectives, such as
international expansion, ability to timely and cost-effectively execute
integrated projects, integrating acquired businesses, generating
sufficient cash, accessing the capital markets, and refinancing existing
or incurring additional indebtedness to fund our business; our inability
to consummate the proposed merger with Universal Compression Holdings,
Inc.; changes in governmental safety, health, environmental and other
regulations, which could require us to make significant expenditures;
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)
Three Months Ended
Six Months Ended
June 30,
June 30,
2007
2006
2007
2006
Revenues and other income:
U.S. rentals
$
99,562
$
93,073
$
199,198
$
184,716
International rentals
69,645
67,520
136,936
130,026
Parts, service and used equipment
72,664
55,737
154,004
105,008
Compressor and accessory fabrication
139,508
70,128
218,216
124,819
Production and processing equipment fabrication
122,595
103,653
255,833
182,272
Equity in income of non-consolidated affiliates
6,279
5,230
11,962
11,078
Gain on sale of business and other income
5,465
10,330
12,797
40,549
515,718
405,671
988,946
778,468
Expenses:
U.S. rentals
40,258
36,729
79,135
74,820
International rentals
27,675
23,691
50,980
45,023
Parts, service and used equipment
56,036
45,061
122,881
86,123
Compressor and accessory fabrication
106,016
58,482
169,261
105,175
Production and processing equipment fabrication
104,336
89,203
215,874
158,166
Selling, general and administrative
56,240
49,783
108,034
97,838
Foreign currency translation
319
(2,236
)
11
(3,733
)
Debt extinguishment costs
5,902
Merger expenses
3,065
3,389
Other
1,204
1,204
393,945
301,917
749,565
570,518
EBITDA from continuing operations (1)
121,773
103,754
239,381
207,950
Depreciation and amortization
52,772
43,077
103,668
85,045
Interest expense
26,775
29,287
53,640
60,927
79,547
72,364
157,308
145,972
Income from continuing operations before income taxes and minority
interest
42,226
31,390
82,073
61,978
Provision for income taxes
16,162
9,546
30,607
17,993
Income from continuing operations before minority interest
26,064
21,844
51,466
43,985
Minority interest, net of taxes
(93
)
(93
)
Income from continuing operations
26,064
21,751
51,466
43,892
Loss from discontinued operations, net of tax
(47
)
(139
)
Cumulative effect of accounting change, net of tax
370
Net income
$
26,064
$
21,704
$
51,466
$
44,123
Basic income per common share:
Income from continuing operations
$
0.25
$
0.21
$
0.49
$
0.44
Loss from discontinued operations, net of tax
Cumulative effect of accounting change, net of tax
Net income
$
0.25
$
0.21
$
0.49
$
0.44
Diluted income per common share:
Income from continuing operations(2)
$
0.23
$
0.21
$
0.46
$
0.43
Loss from discontinued operations, net of tax
Cumulative effect of accounting change, net of tax
Net income
$
0.23
$
0.21
$
0.46
$
0.43
Weighted average common and common equivalent shares outstanding:
Basic
105,889
101,017
104,631
100,888
Diluted
118,054
112,052
117,828
111,740
Gross profit percentage:
U.S. rentals
60
%
61%
60
%
59
%
International rentals
60
%
65%
63
%
65
%
Parts, service and used equipment
23
%
19%
20
%
18
%
Compressor and accessory fabrication
24
%
17%
22
%
16
%
Production and processing equipment fabrication
15
%
14%
16
%
13
%
(1)
EBITDA from continuing operations consists of consolidated income
from continuing operations before interest expense, provision for
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.
Three Months Ended
Six Months Ended
June 30,
June 30,
2007
2006
2007
2006
EBITDA Reconciliation
Income from continuing operations
$26,064
$21,751
$51,466
$43,892
Add:
Depreciation and amortization
52,772
43,077
103,668
85,045
Interest expense
26,775
29,287
53,640
60,927
Minority interest
93
93
Provision for income taxes
16,162
9,546
30,607
17,993
EBITDA from continuing operations
$121,773
$103,754
$239,381
$207,950
(2)
Net income for the diluted earnings per share calculation for the
three and six-month periods ended June 2007 is adjusted to add back
interest expense and amortization of financing costs, net of tax,
relating to the Company's convertible senior notes due 2014 and
convertible subordinated notes due 2029 totaling $1.2 million and
$2.7 million, respectively.
Net income for the diluted earnings per share calculation for the
three and six-month periods ended June 2006 is adjusted to add back
interest expense and amortization of financing costs, net of tax,
relating to the Company's convertible senior notes due 2014 totaling
$1.8 million and $3.6 million, respectively.