SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 9, 2001
HANOVER COMPRESSOR COMPANY
(Exact Name of Registrant as Specified in Charter)
Delaware 1-13071 75-2344249
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
12001 North Houston Rosslyn 77086
Houston, Texas 77086 (Zip Code)
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (281) 447-8787
Item 5. Other Events
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See the following press release regarding the Company's results for the
second quarter 2001.
Hanover Compressor Reports Record Revenues, EBITDA and Net Income for Second
Quarter 2001
Year-Over-Year Quarterly Cash Flow Increases 72%
Company Expects to Complete Acquisition of Schlumberger Assets in Q3
HOUSTON--(BUSINESS WIRE)--Aug. 9, 2001-- Hanover Compressor (NYSE: HC) a leading
provider of outsourced natural gas compression and treating services, today
reported revenues increased 124.7 percent and cash flow increased 71.6 percent
for the second quarter ended June 30, 2001, compared with the same quarter a
year earlier. Net income for the quarter increased 83.2 percent over the prior
year period.
The company also reported that its planned acquisition of Schlumberger's
Production Operators Corporation natural gas compression business and other
related interests for $761 million is proceeding on schedule and is expected to
close by the end of the month.
"This second quarter of 2001 marked a milestone in the 11-year history of
Hanover Compressor," said Michael J. McGhan, President and Chief Operating
Officer. "Each of our business segments achieved outstanding performance as we
significantly increased our global presence and overall market position through
internally generated growth and Hanover's continued significant improvement of
recently acquired operations. This level of accomplishment has Hanover very well
prepared for the addition of Schlumberger's Production Operators (POI) gas
compression unit, South American joint ventures, and related assets. This
transaction, which is accretive from the onset and is scheduled to close at the
end of the month, will also launch a worldwide alliance between Schlumberger and
Hanover and will result in Schlumberger becoming a major shareholder in Hanover
for at least three years. POI's organization and customer base is first rate and
we are very excited about this outstanding group becoming part of the Hanover
family."
Second quarter revenues were $263.1 million compared with $117.1 million for the
second quarter of 2000. Cash flow (income before income taxes, interest expense,
leasing expense, distributions on mandatorily redeemable convertible preferred
securities and depreciation and amortization) increased to $77.3 million from
$45.0 million in the second quarter a year earlier. Net income increased 83.2
percent to $23.4 million or $0.31 per fully diluted share, compared with $12.8
million or $0.20 per fully diluted share a year ago.
"Our accelerating progress in recent years is proof of the resounding strength
and added value of our outsourcing model. Demand for both primary and outsourced
gas compression and related gas handling services continues to grow, especially
overseas," McGhan said. "Our business is very much about providing our customers
here and abroad a total solution of products and services - bundling
compression, parts and service, gas processing, treating and measurement, power
generation and pump systems - to help them improve their business results. We
are very excited about our growth opportunities over the next five years and
beyond."
Overall growth among Hanover's core business segments was strong compared with
the second quarter a year ago, reflecting the impact of the Company's growth
strategy as well as the successful integration of several recent corporate
acquisitions. Compression rental revenues for the quarter grew 55.8 percent over
the comparable quarter to $90.1 million. Related compression
parts and service segment revenues increased 172.9 percent over the second
quarter a year ago to $66.1 million, reflecting Hanover's continued emphasis on
building that high return on capital business. Compressor fabrication revenue
rose 286.0 percent over the same quarter a year earlier to $57.8 million.
Production and processing equipment fabrication revenue was $45.3 million, an
increase of 198.6 percent compared with the year earlier quarter.
Rental fleet compression at June 30, 2001 totaled 2,533,000 horsepower, 490,000
of which was operating in international markets. Fleet utilization at the end of
the second quarter exceeded 93 percent. In the past twelve months, Hanover has
grown its rental fleet compression by approximately 948,000 horsepower, while
keeping its fleet utilization over 93 percent, reflecting the Company's success
in promptly improving the operating performance of recently acquired major
compression services companies, including PAMCO Services International and the
Compression Services Division of Dresser Rand. This performance also reflects
continued strong organic growth in customer demand for outsourcing compression
and the Company's focus on delivering the highest mechanical run-time to aid its
customers during this critical time for the industry.
"Hanover's pending acquisition of POI and related assets and the alliance with
Schlumberger immediately enhances our Company's business strategy and financial
results and creates significant value for our shareholders," McGhan said. "This
transaction will add significantly to Hanover's industry-leading organization
and increase our worldwide rental fleet compression by 833,000 horsepower, not
including the roughly 800,000 horsepower owned by the South American compression
and gas handling joint venture, interests in which Hanover will acquire in this
transaction. The alliance will establish Hanover as Schlumberger's most favored
supplier with respect to its requirements worldwide for natural gas compression
and related services. This transaction also adds directly and immediately to
Hanover's growing gas treating business and fills out the total solutions
package that Hanover offers its customers."
Hanover Compressor Company is a 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 basis to natural gas production, processing and transportation
companies that are increasingly seeking outsourcing solutions. Founded in 1990
and a public company since 1997, its customers include premier independent and
major producers and distributors throughout the Western Hemisphere.
Certain matters discussed in this press release are "forward-looking statements"
intended to qualify for the safe harbors from liability established by the
Private Securities Litigation Reform Act 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 regarding the
benefits to be realized through the acquisition or the alliance or 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. The risks and uncertainties include:
inability of both parties to complete the acquisition of Production Operators
and the related transactions, difficulty in integrating Production Operators
into Hanover,
adverse regulatory decisions, the loss of market share through competition; the
introduction of competing technologies by other companies; a prolonged,
substantial reduction in oil and gas prices which would 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; and changes in economic or political conditions
in the countries in which Hanover operates. 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. A discussion
of these factors is included in the Company's periodic reports filed with the
Securities and Exchange Commission.
Hanover Compressor Company
Consolidated Statement of Income
(unaudited)
(in thousands of dollars, except per share amounts)
Three months Six months
ended June 30, ended June 30,
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2001 2000 2001 2000
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Revenues and Other:
Rentals $ 90,068 $ 57,797 170,125 $113,901
Parts, service and
used equipment 66,125 24,234 104,455 35,550
Compressor fabrication 57,839 14,986 112,490 29,171
Production and
processing equipment
fabrication 45,342 15,186 88,933 21,111
Equity in income of
non-consolidated
affiliates 1,313 476 2,063 1,498
Other 2,391 4,405 4,776 6,410
263,078 117,084 482,842 207,641
Expenses:
Rentals 30,561 20,690 57,273 38,841
Parts, service and
used equipment 48,524 16,045 70,410 24,251
Compressor fabrication 48,734 12,483 95,018 23,874
Production and
processing equipment
fabrication 35,297 11,935 70,446 16,418
Selling, general and
administrative 22,658 10,899 42,635 20,014
Depreciation and
amortization 19,061 12,292 35,928 22,651
Lease expense 15,639 10,060 30,927 18,136
Interest expense 3,259 1,005 5,963 2,635
Distributions on
mandatorily redeemable
convertible preferred
securities 1,594 1,592 3,187 3,183
Other 15 0 3,007
225,342 97,001 414,794 170,003
Income before income
taxes 37,736 20,083 68,048 37,638
Provision for income
taxes 14,332 7,310 25,851 13,700
Net income before
cumulative effect of
accounting change 23,404 12,773 42,197 23,938
Cumulative effect of
accounting change
for derivative
instruments, net of
income tax 0 0 (164) 0
Net income $ 23,404 $ 12,773 $ 42,033 $ 23,938
Diluted net income
per share:
Net income before
cumulative effect of
accounting change $ 23,404 $ 12,773 $ 42,197 $ 23,938
Distributions on
mandatorily redeemable
convertible preferred
securities, net of
income tax 1,036 0 2,072 0
Cumulative effect of
accounting change, net
of income tax 0 0 (164) 0
Net income for purposes
of computing diluted
net income per share $ 24,440 $ 12,773 $ 44,105 $ 23,938
Weighted average common
equivalent shares
outstanding:
Basic 70,243 59,594 68,555 58,504
Diluted 79,205 64,396 77,557 63,689
Earnings per common
share
Basic $ 0.33 $ 0.21 $ 0.61 $ 0.41
Diluted $ 0.31 $ 0.20 $ 0.57 $ 0.38
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HANOVER COMPRESSOR COMPANY
Date: August 9, 2001 By: /s/ Michael J. McGhan
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Name: Michael J. McGhan
Title: President and Chief Executive Officer