UCLP Universal Compression Partners, L.P. (MM)

HOUSTON, Aug. 7 /PRNewswire-FirstCall/ -- Universal Compression Holdings, Inc. (NYSE:UCO) and Universal Compression Partners, L.P. (NASDAQ:UCLP) today reported earnings for the second quarter of 2007. Universal Compression Holdings, Inc. Financial Results Universal Compression Holdings reported net income of $25.2 million, or $0.81 per diluted share, in the three months ended June 30, 2007, including a charge of $4.8 million on a pretax basis for merger-related expenses. Excluding this charge, earnings per diluted share would have been $0.91 in the second quarter. Net income was $14.3 million, or $0.46 per diluted share, in the three months ended March 31, 2007, including a charge of $1.4 million on a pretax basis for merger-related expenses. Excluding this charge, earnings per diluted share would have been $0.49 in the first quarter. Net income was $21.8 million, or $0.70 per diluted share, in the comparable period of the prior year. Revenue was $334.6 million in the three months ended June 30, 2007, compared to $239.4 million in the three months ended March 31, 2007 and $218.7 million in the prior year period. EBITDA, as adjusted (as defined below), was $93.3 million in the three months ended June 30, 2007, as compared to $72.3 million in the three months ended March 31, 2007 and $75.2 million in the comparable period of the prior year. "We are pleased with our second quarter results which included record levels of revenue, EBITDA, as adjusted, and earnings per share. With continuing robust worldwide demand for our products and services, each of our business segments recorded strong sequential growth in revenue and profitability," commented Stephen A. Snider, Universal Compression Holdings' Chairman, President and Chief Executive Officer. "Our business outlook remains optimistic due to favorable market conditions and company activity levels and the expected benefits from our proposed merger with Hanover Compressor Company." Merger Update Universal Compression Holdings and Hanover have scheduled annual stockholder meetings for August 16, 2007 for their respective stockholders to vote on, among other things, the proposed merger of the two companies. A joint proxy statement/prospectus was mailed to stockholders on or about July 13, 2007. Universal Compression Holdings and Hanover expect the merger to close on or about August 20, 2007, if both companies' shareholders have approved the merger and the other closing conditions are satisfied as of that date. Subject to and effective upon the closing of this merger, the combined new company will be named Exterran Holdings, Inc. (expected trading symbol NYSE: EXH) and Universal Compression Partners, L.P. will be renamed Exterran Partners, L.P. (expected trading symbol Nasdaq: EXLP). Universal Compression Partners, L.P. Financial Results Universal Compression Partners reported revenue of $18.8 million and net income of $2.3 million in the three months ended June 30, 2007, compared to revenue of $17.6 million and net income of $2.3 million in the three months ended March 31, 2007. EBITDA, as further adjusted (as defined below), totaled $10.4 million in the three months ended June 30, 2007 compared to $9.5 million in the three months ended March 31, 2007. Distributable cash flow (as defined below) totaled $6.9 million in the three months ended June 30, 2007 compared to $6.0 million in the three months ended March 31, 2007. Universal Compression Partners commenced operations in October 2006 upon the contribution of certain contract compression assets in the United States from Universal Compression Holdings in connection with the initial public offering of Universal Compression Partners. On July 30, 2007, Universal Compression Partners announced a cash distribution of $0.35 per unit, which reflected the partnership's minimum quarterly distribution. The distributable cash flow generated in the second quarter is approximately 1.2 times the amount of the cash distribution to unitholders, including distributions owed to new units issued in early July to finance the acquisition from Universal Compression Holdings described below. Excluding the distributions owed for these new units, distributable cash flow generated in the second quarter would have been approximately 1.5 times the amount of cash distribution to unitholders. "Universal Compression Partners experienced a strong second quarter and generated significant distributable cash flow as a result. Additionally, Universal Compression Partners completed its previously announced acquisition from Universal Compression Holdings of a fleet of compressor units totaling approximately 280,000 horsepower and associated customer contracts for approximately $233 million in early July. As a result of this acquisition, management expects to recommend to the board of directors that it raise cash distributions for the third quarter by approximately $0.0375 to $0.05 per unit, or approximately $0.15 to $0.20 per unit on an annualized basis," commented Mr. Snider, Chairman, President and Chief Executive Officer of Universal Compression Partners' general partner. "The proposed merger of Hanover and Universal Compression Holdings will result in a combined company with a larger pool of contract compression assets in the United States that can be offered for sale over time to the partnership, further enhancing our growth prospects. Hanover reported that it had approximately 2.4 million horsepower of compression in the United States at June 30, 2007." Conference Call Universal Compression Holdings and Universal Compression Partners will host a joint conference call today, August 7, 2007, at 10:00 a.m. Central Time, 11:00 a.m. Eastern Time, to discuss the quarter's results and certain other corporate matters. The conference call will be broadcast live over the Internet to provide interested persons the opportunity to listen. The call will also be archived for approximately 90 days to provide an opportunity to those unable to listen to the live broadcast. Both the live broadcast and replay of the archived version are free of charge to the user. Persons wishing to listen to the conference call live may do so by logging onto http://www.universalcompression.com/ (click UCO or UCLP "Investor Information" section) at least 15 minutes prior to the start of the call. The replay of the call will be available at the website http://www.universalcompression.com/. With respect to Universal Compression Holdings, EBITDA, as adjusted, a non-GAAP measure, is defined as net income plus income taxes, interest expense (including debt extinguishment costs and gain on termination of interest rate swaps), depreciation and amortization expense, foreign currency gains or losses, merger related expenses, minority interest, excluding non-recurring items (including facility consolidation costs), and extraordinary gains or losses. With respect to Universal Compression Partners, distributable cash flow, a non-GAAP measure, is defined as net income plus income taxes, 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 Universal Compression Holdings and Universal Compression Partners are parties (the "Omnibus Agreement"), which amounts are treated as capital contributions from Universal Compression Holdings for accounting purposes, less cash interest expense and maintenance capital expenditures. With respect to Universal Compression 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 Universal Compression Holdings for accounting purposes. With respect to Universal Compression Holdings, Gross Margin, a non-GAAP measure, is defined as total revenue less cost of sales (excluding depreciation and amortization expense). With respect to Universal Compression 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 Universal Compression Holdings for accounting purposes. 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 Universal Compression Holdings and Universal Compression Partners (the "Companies"), which could cause the Companies' actual results to differ materially from such statements. Forward-looking information includes, but is not limited to, statements regarding: the belief that the Companies will be able to continue to take advantage of strong market conditions; the Companies' optimism regarding business outlook; the existence of growth opportunities for Universal Compression Partners' and the basis for those opportunities; the expectation that Universal Compression Holdings or Exterran will contribute assets to Universal Compression Partners in the future; the ability of Universal Compression Holdings and Hanover to complete their proposed merger; the expected timing of the closing of the merger; and the expectation that Universal Compression Partners' management will recommend to its board of directors that cash distributions for the third quarter be raised by approximately $0.0375 to $0.05 per unit, or approximately $0.15 to $0.20 per unit on an annualized basis. 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 or Exterran's business. Among the factors that could cause results to differ materially from those indicated by such forward-looking statements are: the failure to receive the approval of the merger by the shareholders of Universal Compression Holdings and Hanover and satisfaction of various other conditions to the closing of the merger contemplated by their merger agreement; the failure to realize anticipated synergies from the proposed merger; 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; employment workforce factors, including Universal Compression Holdings' ability to hire, train and retain key employees; Universal Compression 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 implement 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 Universal Compression Holdings' Annual Report on Form 10-K for the year ended December 31, 2006, as amended by Amendment No. 1 thereto, and Universal Compression Partners' Annual Report on Form 10-K for the year ended December 31, 2006 and those set forth from time to time in the Companies' filings with the Securities and Exchange Commission ("SEC"), which are available through http://www.universalcompression.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. Universal Compression Holdings, headquartered in Houston, Texas, is a leading natural gas compression services company, providing a full range of contract compression, sales, operations, maintenance and fabrication services to the domestic and international natural gas industry. Universal Compression Partners was formed by Universal Compression Holdings to provide natural gas contract compression services to customers throughout the United States. Universal Compression Holdings owns approximately 51% of Universal Compression Partners. UNIVERSAL COMPRESSION HOLDINGS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts) Three Months Ended June 30, March 31, June 30, 2007 2007 2006 Revenue: Domestic contract compression $103,596 $102,034 $101,460 International contract compression 40,014 38,534 35,010 Fabrication 134,988 54,616 38,528 Aftermarket services 55,989 44,179 43,718 Total revenue 334,587 239,363 218,716 Costs and expenses: Cost of sales (excluding depreciation and amortization expense): Domestic contract compression 40,543 41,056 35,792 International contract compression 10,637 10,315 8,430 Fabrication 112,602 47,237 33,797 Aftermarket services 41,262 34,436 36,359 Depreciation and amortization 35,792 34,863 30,013 Selling, general and administrative 36,802 35,741 29,461 Interest expense, net 14,063 14,039 14,605 Merger-related expenses 4,792 1,373 -- Foreign currency (gain) loss (962) (693) 299 Minority interest 1,642 1,324 -- Other (income) expense, net (518) (1,731) (360) Total costs and expenses 296,655 217,960 188,396 Income before income taxes 37,932 21,403 30,320 Income tax expense 12,765 7,079 8,504 Net income $25,167 $14,324 $21,816 Weighted average common and common equivalent shares outstanding: Basic 30,003 29,820 29,891 Diluted 31,182 30,881 31,040 Earnings per share: Basic $0.84 $0.48 $0.73 Diluted $0.81 $0.46 $0.70 UNIVERSAL COMPRESSION HOLDINGS, INC. UNAUDITED SUPPLEMENTAL INFORMATION (Dollars in thousands) Three Months Ended June 30, March 31, June 30, 2007 2007 2006 Revenue: Domestic contract compression $103,596 $102,034 $101,460 International contract compre 40,014 38,534 35,010 Fabrication 134,988 54,616 38,528 Aftermarket services 55,989 44,179 43,718 Total $334,587 $239,363 $218,716 Gross Margin: Domestic contract compression $63,053 $60,978 $65,668 International contract compress 29,377 28,219 26,580 Fabrication 22,386 7,379 4,731 Aftermarket services 14,727 9,743 7,359 Total (1) $129,543 $106,319 $104,338 Selling, General and Administrative $36,802 $35,741 $29,461 % of Revenue 11% 15% 13% EBITDA, as adjusted (1) $93,259 $72,309 $75,237 % of Revenue 28% 30% 34% Capital Expenditures $72,019 $59,560 $59,402 Proceeds from Sale of PP&E 3,814 3,690 4,070 Net Capital Expenditures $68,205 $55,870 $55,332 Gross Margin Percentage: Domestic contract compression 61% 60% 65% International contract compression 73% 73% 76% Fabrication 17% 14% 12% Aftermarket services 26% 22% 17% Total 39% 44% 48% Reconciliation of GAAP to Non-GAAP Financial Information: Net income $25,167 $14,324 $21,816 Income tax expense 12,765 7,079 8,504 Depreciation and amortization 35,792 34,863 30,013 Interest expense, net 14,063 14,039 14,605 Foreign currency (gain) loss (962) (693) 299 Merger-related expenses 4,792 1,373 -- Minority interest 1,642 1,324 -- EBITDA, as adjusted (1) 93,259 72,309 75,237 Selling, general and administrative 36,802 35,741 29,461 Other (income) expense, net (518) (1,731) (360) Gross Margin (1) $129,543 $106,319 $104,338 June 30, March 31, June 30, 2007 2007 2006 Debt and Capital Lease Obligations $872,997 $856,582 $898,855 Stockholders' Equity $986,075 $935,856 $904,308 Total Debt to Capitalization 47.0% 47.8% 49.8% (1) Management believes disclosure of EBITDA, as adjusted, and Gross Margin, non-GAAP measures, provide 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. UNIVERSAL COMPRESSION HOLDINGS, INC. UNAUDITED SUPPLEMENTAL INFORMATION (Horsepower in thousands) Three Months Ended June 30, March 31, June 30, 2007 2007 2006 Total Available Horsepower (at period end): Domestic contract compression 2,147 2,098 1,989 International contract compression 614 608 595 Total 2,761 2,706 2,584 Average Operating Horsepower: Domestic contract compression 1,825 1,822 1,794 International contract compression 556 552 549 Total 2,381 2,374 2,343 Horsepower Utilization: Spot (at period end) 87.1% 87.7% 90.2% Average 87.3% 88.3% 91.1% Fabrication Backlog (in millions) $223 $280 $275 UNIVERSAL COMPRESSION PARTNERS, L.P. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands) Three Months Ended June 30, March 31, 2007 2007 Revenue $18,804 $17,585 Costs and expenses: Cost of sales (excluding depreciation and amortization expense) 7,573 7,018 Depreciation 2,968 2,782 Selling, general and administrative 3,915 3,259 Interest expense, net 2,093 2,133 Other (income) expense, net (3) (6) Total costs and expenses 16,546 15,186 Income before income taxes 2,258 2,399 Income tax (benefit) expense (6) 56 Net income $2,264 $2,343 General partner interest in net income $45 $47 Limited partner interest in net income $2,219 $2,296 Weighted average limited partners' units outstanding: Basic 12,650 12,650 Diluted 12,709 12,671 Earnings per limited partner unit: Basic $0.18 $0.18 Diluted $0.17 $0.18 UNIVERSAL COMPRESSION PARTNERS, L.P. UNAUDITED SUPPLEMENTAL INFORMATION (Dollars in thousands, except per unit amounts) Three Months Ended June 30, March 31, 2007 2007 Revenue $18,804 $17,585 Gross Margin, as adjusted (1) $12,908 $11,974 EBITDA, as further adjusted (1) $10,411 $9,480 % of Revenue 55% 54% Capital Expenditures $10,071 $6,079 Proceeds from Sale of PP&E -- -- Net Capital Expenditures $10,071 $6,079 Gross Margin percentage, as adjusted 69% 68% Reconciliation of GAAP to Non-GAAP Financial Information: Net income $2,264 $2,343 Income tax (benefit) expense (6) 56 Depreciation 2,968 2,782 Cap on operating and selling, general and administrative costs provided by Universal Compression Holdings ("UCO") 1,789 1,578 Non-cash selling, general and administrative costs 1,303 588 Interest expense, net 2,093 2,133 EBITDA, as further adjusted (1) 10,411 9,480 Cash selling, general and administrative costs 2,612 2,671 Less: cap on selling, general and administrative costs provided by UCO (1) (112) (171) Other income, net (3) (6) Gross Margin, as adjusted for operating cost caps provided by UCO (1) $12,908 $11,974 Less: Cash interest expense (2,085 (2,077) Less: Cash selling, general and administrative, as adjusted for cost caps provided by UCO (1) (2,500) (2,500) Less: Maintenance capital expenditures (1,438) (1,373) Distributable cash flow (2) $6,885 $6,024 Distributions per Unit $0.35 $0.35 Distribution to All Unitholders $5,957 $4,518 Distributable Cash Flow Coverage 1.16x 1.33x June 30, March 31, 2007 2007 Debt $121,000 $125,000 Total Partners' Capital $74,861 $71,064 Total Debt to Capitalization 61.8% 63.8% Total Debt to Annualized EBITDA, as further adjusted UCO (1) 2.9x 3.3x EBITDA, as further adjusted (1) to Interest Expense 5.0x 4.4x (1) Management believes disclosure of EBITDA, as further adjusted, and Gross Margin, as adjusted, non-GAAP measures, provide 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. UNIVERSAL COMPRESSION PARTNERS, L.P. UNAUDITED SUPPLEMENTAL INFORMATION (Horsepower in thousands) Three Months Ended June 30, March 31, 2007 2007 Total Available Horsepower (at period end) 387 358 Average Operating Horsepower 348 331 Horsepower Utilization: Spot (at period end) 92.7% 93.4% Average 93.1% 94.8% Combined Domestic Contract Compression Horsepower of Universal Compression Holdings and Universal Compression Partners covered by contracts converted to service agreements 1,194 1,154 Total Available Domestic Contract Compression Horsepower of Universal Compression Holdings and Universal Compression Partners (at period end): 2,147 2,098 % of Domestic Contract Compression Horsepower of Universal Compression Holdings and Universal Compression Partners under Converted Contract Form 55.6% 55.0% http://www.newscom.com/cgi-bin/prnh/20061130/DATH005LOGO http://www.newscom.com/cgi-bin/prnh/20011008/UCOLOGO http://photoarchive.ap.org/ DATASOURCE: Universal Compression Holdings, Inc. CONTACT: David Oatman, Vice President, Investor Relations of Universal Compression, +1-713-335-7460 Web site: http://www.universalcompression.com/

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