Hanover Compressor Reports Third Quarter 2002 Results; Conference Call Scheduled For 11:00 a.m. ET, Thursday, October 31st.Business EditorsHOUSTON--(BUSINESS WIRE)--Oct. 31, 2002 Hanover Hanover, city, Germany Hanover, Ger. Hannover, city (1994 pop. 524,820), capital of Lower Saxony, N Germany, on the Leine River and the Midland Canal. Compressor compressor, machine that decreases the volume of air or other gas by the application of pressure. Compressor types range from the simple hand pump and the piston-equipped compressor used to inflate tires to machines that use a rotating, bladed element to achieve Company (NYSE NYSE See: New York Stock Exchange : HC), the leading provider of outsourced natural gas compression services, today reported financial results for the third quarter ended September September: see month. 30, 2002. Quarterly Results -- Summary Third quarter total revenue was $255.3 million compared with $282.3 million a year earlier. Cash flow (net income before interest expense, leasing expense, distributions on mandatorily redeemable Redeemable Eligible for redemption under the terms of an indenture. convertible preferred securities, income taxes, and depreciation and amortization) was $81.0 million compared with $79.9 million for the same quarter a year earlier. Net income for the third quarter was $9.1 million or $0.11 per fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share compared to $19.8 million or $0.26 per fully diluted share for the same quarter a year earlier. Net income was lower primarily due to higher interest, leasing and depreciation expenses associated with the Company's 2001 acquisition of POI. "While international growth was strong in the third quarter, domestic market conditions continue to be difficult," said Chad Chad (chăd, chäd), Fr. Tchad, officially Republic of Chad, republic (2005 est. pop. 9,826,000), 495,752 sq mi (1,284,000 sq km), N central Africa. Deaton, chief executive officer. "Though we expect some improvement in business during 2003, we are in the process of positioning the Company to improve overall efficiency and promote capital discipline in order to improve the bottom line. Quarterly Results -- Revenue & Profit Third quarter revenue declined compared with third quarter 2001 as growth in the compression rental business was more than offset by declining compression parts and service, compressor fabrication fabrication (fab´rikā´sh  n),n the construction or making of a restoration. and production and processing equipment markets, as customers reduced capital investments and deferred maintenance on their assets. Total domestic compression rental revenues for the quarter grew 14% over the third quarter of 2001 to $81.9 million with gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. of 62%. The company experienced particularly strong growth in its international compression rental revenues, which increased 64% to $53.9 million for the quarter with gross profit margins of 74%. Excluding the impact of Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. contract renegotiations international revenue grew 40% compared to the third quarter of 2001 and gross profit margins for the quarter were 70%. Compression parts and service segment revenues were $52.6 million during the third quarter compared to $67.7 million for the same quarter a year earlier, as this segment delivered gross profit margins of 26% versus 29% in the third quarter 2001. Compressor fabrication revenue was $26.8 million compared to $55.6 million the same quarter a year earlier. Compressor fabrication gross profit margin for the quarter was 13% versus 18% in the third quarter 2001. Production and processing equipment revenue was $35.0 million compared with $50.4 million in the year earlier quarter, while the segment generated gross profit margins of 19% for the quarter compared with 21% in the third quarter 2001. Included in the third quarter results was a $7.9 million positive impact due to international rental compression revenue resulting from renegotiated 2002 Argentina contracts. This gain was offset by costs associated with the Company's investigation and restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of its past financial results, including legal, additional leasing expense related to the delay in filing registration statements and one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. separation costs, amounting to roughly $5.0 million. In addition the Company recorded impairments by Hanover Measurement Services in the quarter of approximately $1.5 million. The third quarter 2002 results reflect a reduction in amortization expense of $2.5 million resulting from the required adoption of FAS 142. The Company's third quarter 2002 results were also impacted by a change in the estimated useful life of certain types of the Company's compression equipment. This change in estimate was previously announced in the Company's third quarter 2001 earnings release. For the third quarter 2002, depreciation expense was reduced because of this change by approximately $3.6 million. Note: Historical financial figures reflect the announced restatement of prior results. Liquidity & Other The Company had capital expenditures during the quarter of approximately $37 million, within the Company's self-funded level for the quarter. Liquidity available under the Company's revolver revolver: see small arms. revolver Pistol with a revolving cylinder that provides multishot action. Some early versions, known as pepperboxes, had several barrels, but as early as the 17th century pistols were being made with a revolving chamber to increased from approximately $128 million as of June June: see month. 30, 2002 to about $136 million as of September 30, 2002, subject to covenant limitations. "We are achieving success in reducing our capital expenditures to our targeted 2002 level as reflected in our improved liquidity," said John Jackson John Jackson may refer to: Politics:
The Company's compression horsepower horsepower, unit of power in the English system of units. It is equal to 33,000 foot-pounds per minute or 550 foot-pounds per second or approximately 746 watts. utilization rate as of September 30, 2002, was down one percent compared to the second quarter 2002 at 88% and down from 94 % in the third quarter 2001. The Company has traditionally excluded from the rental utilization certain units from acquired companies requiring maintenance and upgrade to Hanover's standards. Total compression horsepower as of September 30, 2002 was 3,621,000 of which 360,000 was not available for use in the field. Conference Call Details The Company will host a conference call at 11:00 a.m. ET, Thursday Thursday: see week. , October October: see month. 31st, to discuss financial results for the third quarter ended September 30, 2002, and other matters. To access the call, participants should dial 913-981-4910 at least ten minutes before the scheduled start time. For those unable to participate, a replay will be available from 2:00 p.m. ET on Thursday, October 31st, until midnight on Wednesday Wednesday: see week. , November November: see month. 6th. To listen to the replay, please dial 719-457-0820, access code 441442. About Hanover Compressor Hanover Compressor Company (www.hanover-co.com) is the global market leader in full service natural gas compression and a leading provider of service, financing, fabrication and equipment for contract natural gas handling applications. Hanover provides this equipment on a rental, contract compression, maintenance and acquisition leaseback A transaction whereby land is sold and subsequently rented by the seller from the purchaser who is the new owner. basis to natural gas production, processing and transportation companies that are increasingly seeking outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. solutions. Founded in 1990 and a public company since 1997, Hanover's customers include premier independent and major producers and distributors throughout the Western Hemisphere Western Hemisphere Part of Earth comprising North and South America and the surrounding waters. Longitudes 20° W and 160° E are often considered its boundaries. . Certain matters discussed in this press release are "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " intended to qualify for the safe harbors Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. from liability established by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements can generally be identified as such because of the context of the statement and will include words such as "believes," "anticipates," "expects," "estimates," or words of similar import. Similarly, statements that describe Hanover's future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those anticipated as of the date of this press release. These risks and uncertainties include: the loss of market share through competition; the introduction of competing technologies by other companies; a prolonged pro·long tr.v. pro·longed, pro·long·ing, pro·longs 1. To lengthen in duration; protract. 2. To lengthen in extent. , substantial reduction in oil and gas prices which could cause a decline in the demand for Hanover's compression and oil and gas production equipment; new governmental safety, health and environmental regulations which could require Hanover to make significant capital expenditures; inability to successfully integrate acquired businesses; currency fluctuations; changes in economic or political conditions in the countries in which Hanover operates; adverse results of regulatory inquiries or shareholder litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; and legislative changes in the various countries in which Hanover does business. The forward-looking statements included in this press release are only made as of the date of this press release, and Hanover undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . A discussion of these factors is included in the Company's periodic reports filed with the Securities and Exchange Commission.
HANOVER COMPRESSOR COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
(in thousands of dollars, except per share amounts)(unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
2002 2001 2002 2001
-------- -------- --------- ---------
Revenues:
Rentals - Domestic $81,944 $72,033 $250,402 $185,627
Rental - International 53,915 32,832 143,612 88,973
Parts, service and used
equipment 52,567 67,658 188,013 168,017
Compressor fabrication 26,783 55,571 85,285 168,061
Production and processing
equipment fabrication 35,022 50,363 99,771 135,760
Equity in income of non-
consolidated affiliate 3,782 1,688 13,928 3,751
Other 1,258 2,149 2,375 7,478
-------- -------- --------- ---------
255,271 282,294 783,386 757,667
Expenses:
Rentals - Domestic 30,968 25,889 88,480 63,337
Rentals - International 13,866 9,501 39,855 29,326
Parts, service and used
equipment 38,889 47,835 159,583 112,594
Compressor fabrication 23,244 45,655 73,884 140,644
Production and processing
equipment fabrication 28,256 39,831 84,329 107,809
Selling, general and
administrative 39,130 24,212 113,867 68,593
Depreciation and amortization 31,478 25,498 83,241 62,482
Leasing expense 23,936 16,614 70,810 47,541
Interest expense 9,137 4,200 26,573 10,255
Distributions on mandatorily
redeemable convertible
preferred securities 1,593 1,593 4,780 4,780
Foreign currency translation 461 984 13,339 1,147
Change in fair value of
derivative financial
instruments (497) 5,716 (1,530) 8,723
Goodwill impairment -- -- 47,500 --
Other -- 2,750 14,837 2,750
-------- -------- --------- ---------
240,461 250,278 819,548 659,981
-------- -------- --------- ---------
Income (loss ) before income
taxes 14,810 32,016 (36,162) 97,686
Provision for income taxes 5,751 12,168 4,986 37,113
-------- -------- --------- ---------
Net income (loss) before
cumulative effect of accounting
change 9,059 19,848 (41,148) 60,573
Cumulative effect of
accounting change for
derivative instruments,
net of income tax -- -- -- (164)
-------- -------- --------- ---------
Net income (loss) $9,059 $19,848 $(41,148) $60,409
======== ======== ========= =========
Diluted net income (loss) per share:
Net income (loss) before
cumulative effect of
accounting change $9,059 $19,848 $(41,148) $60,409
Distributions on mandatorily
redeemable convertible
preferred securities, net
of income tax -- 1,036 -- 3,108
Cumulative effect of
accounting change, net of
income tax -- -- -- (164)
-------- -------- --------- ---------
Net income (loss) for purposes of
computing diluted net income
(loss) per share $9,059 $20,884 $(41,148) $63,353
======== ======== ========= =========
Earnings (loss) per common share:
Basic $0.11 $0.27 $( 0.52) $0.88
Diluted $0.11 $0.26 $(0.52) $0.82
Weighted average common and
common equivalent shares
outstanding:
Basic 79,438 73,194 79,338 68,555
Diluted 81,255 81,890 79,338 77,557
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