UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(MARK ONE)
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED March 31, 2013
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO .
Commission File No. 001-33666
EXTERRAN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware |
|
74-3204509 |
(State or Other Jurisdiction of |
|
(I.R.S. Employer |
Incorporation or Organization) |
|
Identification No.) |
|
|
|
16666 Northchase Drive |
|
|
Houston, Texas |
|
77060 |
(Address of principal executive offices) |
|
(Zip Code) |
(281) 836-7000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o |
|
Accelerated filer x |
|
|
|
Non-accelerated filer o |
|
Smaller reporting company o |
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Number of shares of the common stock of the registrant outstanding as of April 25, 2013: 65,678,755 shares.
EXTERRAN HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share amounts)
(unaudited)
|
|
March 31, |
|
December 31, |
| ||
ASSETS |
|
|
|
|
| ||
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
33,198 |
|
$ |
34,601 |
|
Restricted cash |
|
1,283 |
|
1,283 |
| ||
Accounts receivable, net of allowance of $13,136 and $15,052, respectively |
|
457,363 |
|
451,547 |
| ||
Inventory, net |
|
430,862 |
|
387,710 |
| ||
Costs and estimated earnings in excess of billings on uncompleted contracts |
|
201,396 |
|
159,098 |
| ||
Current deferred income taxes |
|
82,459 |
|
88,508 |
| ||
Other current assets |
|
94,532 |
|
93,475 |
| ||
Current assets associated with discontinued operations |
|
20,994 |
|
21,746 |
| ||
Total current assets |
|
1,322,087 |
|
1,237,968 |
| ||
Property, plant and equipment, net |
|
2,859,422 |
|
2,842,031 |
| ||
Intangible and other assets, net |
|
181,246 |
|
174,848 |
| ||
Long-term assets associated with discontinued operations |
|
297 |
|
|
| ||
Total assets |
|
$ |
4,363,052 |
|
$ |
4,254,847 |
|
|
|
|
|
|
| ||
LIABILITIES AND EQUITY |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable, trade |
|
$ |
267,060 |
|
$ |
232,165 |
|
Accrued liabilities |
|
266,487 |
|
271,321 |
| ||
Deferred revenue |
|
96,953 |
|
95,230 |
| ||
Billings on uncompleted contracts in excess of costs and estimated earnings |
|
142,141 |
|
164,251 |
| ||
Current liabilities associated with discontinued operations |
|
9,782 |
|
11,572 |
| ||
Total current liabilities |
|
782,423 |
|
774,539 |
| ||
Long-term debt |
|
1,629,654 |
|
1,564,923 |
| ||
Deferred income taxes |
|
136,649 |
|
120,934 |
| ||
Other long-term liabilities |
|
83,438 |
|
91,148 |
| ||
Long-term liabilities associated with discontinued operations |
|
933 |
|
1,044 |
| ||
Total liabilities |
|
2,633,097 |
|
2,552,588 |
| ||
Commitments and contingencies (Note 12) |
|
|
|
|
| ||
Equity: |
|
|
|
|
| ||
Preferred stock, $0.01 par value per share; 50,000,000 shares authorized; zero issued |
|
|
|
|
| ||
Common stock, $0.01 par value per share; 250,000,000 shares authorized; 72,198,737 and 71,291,230 shares issued, respectively |
|
722 |
|
713 |
| ||
Additional paid-in capital |
|
3,751,992 |
|
3,710,758 |
| ||
Accumulated other comprehensive income |
|
18,466 |
|
23,909 |
| ||
Accumulated deficit |
|
(1,997,203 |
) |
(2,047,408 |
) | ||
Treasury stock 6,512,647 and 6,376,426 common shares, at cost, respectively |
|
(212,727 |
) |
(209,359 |
) | ||
Total Exterran stockholders equity |
|
1,561,250 |
|
1,478,613 |
| ||
Noncontrolling interest |
|
168,705 |
|
223,646 |
| ||
Total equity |
|
1,729,955 |
|
1,702,259 |
| ||
Total liabilities and equity |
|
$ |
4,363,052 |
|
$ |
4,254,847 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EXTERRAN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
|
|
Three Months Ended March 31, |
| ||||
|
|
2013 |
|
2012 |
| ||
Revenues: |
|
|
|
|
| ||
North America contract operations |
|
$ |
159,431 |
|
$ |
150,588 |
|
International contract operations |
|
109,558 |
|
112,786 |
| ||
Aftermarket services |
|
83,612 |
|
89,645 |
| ||
Fabrication |
|
458,776 |
|
262,222 |
| ||
|
|
811,377 |
|
615,241 |
| ||
Costs and expenses: |
|
|
|
|
| ||
Cost of sales (excluding depreciation and amortization expense): |
|
|
|
|
| ||
North America contract operations |
|
72,053 |
|
74,236 |
| ||
International contract operations |
|
46,199 |
|
43,889 |
| ||
Aftermarket services |
|
65,446 |
|
71,731 |
| ||
Fabrication |
|
402,399 |
|
235,602 |
| ||
Selling, general and administrative |
|
84,979 |
|
94,839 |
| ||
Depreciation and amortization |
|
82,646 |
|
85,111 |
| ||
Long-lived asset impairment |
|
3,563 |
|
4,122 |
| ||
Restructuring charges |
|
|
|
3,047 |
| ||
Interest expense |
|
27,874 |
|
37,991 |
| ||
Equity in income of non-consolidated affiliates |
|
(4,665 |
) |
(37,339 |
) | ||
Other (income) expense, net |
|
(9,809 |
) |
(6,094 |
) | ||
|
|
770,685 |
|
607,135 |
| ||
Income before income taxes |
|
40,692 |
|
8,106 |
| ||
Provision for (benefit from) income taxes |
|
15,151 |
|
(343 |
) | ||
Income from continuing operations |
|
25,541 |
|
8,449 |
| ||
Income (loss) from discontinued operations, net of tax |
|
33,250 |
|
(1,162 |
) | ||
Net income |
|
58,791 |
|
7,287 |
| ||
Less: Net income attributable to the noncontrolling interest |
|
(8,586 |
) |
(1,792 |
) | ||
Net income attributable to Exterran stockholders |
|
$ |
50,205 |
|
$ |
5,495 |
|
|
|
|
|
|
| ||
Basic income (loss) per common share: |
|
|
|
|
| ||
Income from continuing operations attributable to Exterran stockholders |
|
$ |
0.26 |
|
$ |
0.10 |
|
Income (loss) from discontinued operations attributable to Exterran stockholders |
|
0.51 |
|
(0.01 |
) | ||
Net Income attributable to Exterran stockholders |
|
$ |
0.77 |
|
$ |
0.09 |
|
|
|
|
|
|
| ||
Diluted income (loss) per common share: |
|
|
|
|
| ||
Income from continuing operations attributable to Exterran stockholders |
|
$ |
0.26 |
|
$ |
0.10 |
|
Income (loss) from discontinued operations attributable to Exterran stockholders |
|
0.50 |
|
(0.01 |
) | ||
Net income attributable to Exterran stockholders |
|
$ |
0.76 |
|
$ |
0.09 |
|
Weighted average common and equivalent shares outstanding: |
|
|
|
|
| ||
Basic |
|
65,291 |
|
64,515 |
| ||
Diluted |
|
65,810 |
|
64,596 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EXTERRAN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(unaudited)
|
|
Three Months Ended March 31, |
| ||||
|
|
2013 |
|
2012 |
| ||
Net income |
|
$ |
58,791 |
|
$ |
7,287 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
| ||
Derivative gain, net of reclassifications to earnings |
|
1,081 |
|
998 |
| ||
Adjustments from changes in ownership of Partnership |
|
(703 |
) |
360 |
| ||
Amortization of payments to terminate interest rate swaps |
|
325 |
|
3,888 |
| ||
Foreign currency translation adjustment |
|
(5,262 |
) |
751 |
| ||
Total other comprehensive income (loss) |
|
(4,559 |
) |
5,997 |
| ||
Comprehensive income |
|
54,232 |
|
13,284 |
| ||
Less: Comprehensive income attributable to the noncontrolling interest |
|
(9,470 |
) |
(1,261 |
) | ||
Comprehensive income attributable to Exterran stockholders |
|
$ |
44,762 |
|
$ |
12,023 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EXTERRAN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(unaudited)
|
|
Exterran Holdings, Inc. Stockholders |
|
|
|
|
| |||||||||||||||
|
|
Common |
|
Additional |
|
Accumulated |
|
Treasury |
|
Accumulated |
|
Noncontrolling |
|
Total |
| |||||||
Balance at December 31, 2011 |
|
$ |
704 |
|
$ |
3,645,332 |
|
$ |
6,059 |
|
$ |
(206,937 |
) |
$ |
(2,007,922 |
) |
$ |
242,806 |
|
$ |
1,680,042 |
|
Treasury stock purchased |
|
|
|
|
|
|
|
(1,757 |
) |
|
|
|
|
(1,757 |
) | |||||||
Shares issued in employee stock purchase plan |
|
|
|
405 |
|
|
|
|
|
|
|
|
|
405 |
| |||||||
Stock-based compensation, net of forfeitures |
|
7 |
|
4,431 |
|
|
|
|
|
|
|
180 |
|
4,618 |
| |||||||
Income tax benefit from stock-based compensation expense |
|
|
|
(1,580 |
) |
|
|
|
|
|
|
|
|
(1,580 |
) | |||||||
Net proceeds from sale of Partnership units, net of tax |
|
|
|
49,240 |
|
|
|
|
|
|
|
35,920 |
|
85,160 |
| |||||||
Cash distribution to noncontrolling unitholders of the Partnership |
|
|
|
|
|
|
|
|
|
|
|
(12,207 |
) |
(12,207 |
) | |||||||
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net income |
|
|
|
|
|
|
|
|
|
5,495 |
|
1,792 |
|
7,287 |
| |||||||
Derivative gain (loss), net of reclassifications to earnings and tax |
|
|
|
|
|
1,529 |
|
|
|
|
|
(531 |
) |
998 |
| |||||||
Adjustments from changes in ownership of Partnership |
|
|
|
|
|
360 |
|
|
|
|
|
|
|
360 |
| |||||||
Amortization of payments to terminate interest rate swaps, net of tax |
|
|
|
|
|
3,888 |
|
|
|
|
|
|
|
3,888 |
| |||||||
Foreign currency translation adjustment |
|
|
|
|
|
751 |
|
|
|
|
|
|
|
751 |
| |||||||
Balance at March 31, 2012 |
|
$ |
711 |
|
$ |
3,697,828 |
|
$ |
12,587 |
|
$ |
(208,694 |
) |
$ |
(2,002,427 |
) |
$ |
267,960 |
|
$ |
1,767,965 |
|
Balance at December 31, 2012 |
|
$ |
713 |
|
$ |
3,710,758 |
|
$ |
23,909 |
|
$ |
(209,359 |
) |
$ |
(2,047,408 |
) |
$ |
223,646 |
|
$ |
1,702,259 |
|
Treasury stock purchased |
|
|
|
|
|
|
|
(3,368 |
) |
|
|
|
|
(3,368 |
) | |||||||
Options exercised |
|
2 |
|
4,074 |
|
|
|
|
|
|
|
|
|
4,076 |
| |||||||
Shares issued in employee stock purchase plan |
|
|
|
345 |
|
|
|
|
|
|
|
|
|
345 |
| |||||||
Stock-based compensation, net of forfeitures |
|
7 |
|
4,035 |
|
|
|
|
|
|
|
89 |
|
4,131 |
| |||||||
Income tax benefit from stock-based compensation expense |
|
|
|
1,207 |
|
|
|
|
|
|
|
|
|
1,207 |
| |||||||
Adjustments from changes in ownership of Partnership |
|
|
|
31,573 |
|
|
|
|
|
|
|
(49,238 |
) |
(17,665 |
) | |||||||
Cash distribution to noncontrolling unitholders of the Partnership |
|
|
|
|
|
|
|
|
|
|
|
(15,262 |
) |
(15,262 |
) | |||||||
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net income |
|
|
|
|
|
|
|
|
|
50,205 |
|
8,586 |
|
58,791 |
| |||||||
Derivative gain, net of reclassifications to earnings and tax |
|
|
|
|
|
197 |
|
|
|
|
|
884 |
|
1,081 |
| |||||||
Adjustments from changes in ownership of Partnership |
|
|
|
|
|
(703 |
) |
|
|
|
|
|
|
(703 |
) | |||||||
Amortization of payments to terminate interest rate swaps, net of tax |
|
|
|
|
|
325 |
|
|
|
|
|
|
|
325 |
| |||||||
Foreign currency translation adjustment |
|
|
|
|
|
(5,262 |
) |
|
|
|
|
|
|
(5,262 |
) | |||||||
Balance at March 31, 2013 |
|
$ |
722 |
|
$ |
3,751,992 |
|
$ |
18,466 |
|
$ |
(212,727 |
) |
$ |
(1,997,203 |
) |
$ |
168,705 |
|
$ |
1,729,955 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EXTERRAN HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
|
|
Three Months Ended |
| ||||
|
|
2013 |
|
2012 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net income |
|
$ |
58,791 |
|
$ |
7,287 |
|
Adjustments: |
|
|
|
|
| ||
Depreciation and amortization |
|
82,646 |
|
85,111 |
| ||
Long-lived asset impairment |
|
3,563 |
|
4,122 |
| ||
Amortization of deferred financing costs |
|
2,968 |
|
2,886 |
| ||
(Income) loss from discontinued operations, net of tax |
|
(33,250 |
) |
1,162 |
| ||
Amortization of debt discount |
|
5,567 |
|
4,960 |
| ||
Provision for (benefit from) doubtful accounts |
|
(449 |
) |
101 |
| ||
Gain on sale of property, plant and equipment |
|
(7,380 |
) |
(211 |
) | ||
Equity in income of non-consolidated affiliates |
|
(4,665 |
) |
(37,339 |
) | ||
Amortization of payments to terminate interest rate swaps |
|
500 |
|
3,888 |
| ||
Gain on remeasurement of intercompany balances |
|
(3,575 |
) |
(4,887 |
) | ||
Stock-based compensation expense |
|
4,131 |
|
4,438 |
| ||
Deferred income tax provision |
|
2,527 |
|
(9,729 |
) | ||
Changes in assets and liabilities: |
|
|
|
|
| ||
Accounts receivable and notes |
|
(5,554 |
) |
69,691 |
| ||
Inventory |
|
(43,207 |
) |
(24,289 |
) | ||
Costs and estimated earnings versus billings on uncompleted contracts |
|
(63,833 |
) |
(49,629 |
) | ||
Other current assets |
|
155 |
|
6,317 |
| ||
Accounts payable and other liabilities |
|
26,733 |
|
(8,735 |
) | ||
Deferred revenue |
|
(2,904 |
) |
(14,856 |
) | ||
Other |
|
(3,336 |
) |
(2,639 |
) | ||
Net cash provided by continuing operations |
|
19,428 |
|
37,649 |
| ||
Net cash provided by discontinued operations |
|
3,314 |
|
1,011 |
| ||
Net cash provided by operating activities |
|
22,742 |
|
38,660 |
| ||
|
|
|
|
|
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Capital expenditures |
|
(106,990 |
) |
(115,472 |
) | ||
Proceeds from sale of property, plant and equipment |
|
14,945 |
|
9,785 |
| ||
Return of investments in non-consolidated affiliates |
|
4,665 |
|
37,563 |
| ||
Increase in restricted cash |
|
|
|
(15 |
) | ||
Cash invested in non-consolidated affiliates |
|
|
|
(224 |
) | ||
Net cash used in continuing operations |
|
(87,380 |
) |
(68,363 |
) | ||
Net cash provided by (used in) discontinued operations |
|
30,674 |
|
(1,081 |
) | ||
Net cash used in investing activities |
|
(56,706 |
) |
(69,444 |
) | ||
|
|
|
|
|
| ||
Cash flows from financing activities: |
|
|
|
|
| ||
Proceeds from borrowings of long-term debt |
|
1,204,037 |
|
844,500 |
| ||
Repayments of long-term debt |
|
(1,145,251 |
) |
(913,048 |
) | ||
Payments for debt issuance costs |
|
(11,373 |
) |
(525 |
) | ||
Net proceeds from the sale of Partnership units |
|
|
|
114,568 |
| ||
Proceeds from stock options exercised |
|
2,576 |
|
|
| ||
Proceeds from stock issued pursuant to our employee stock purchase plan |
|
345 |
|
405 |
| ||
Purchases of treasury stock |
|
(3,368 |
) |
(1,757 |
) | ||
Stock-based compensation excess tax benefit |
|
1,311 |
|
194 |
| ||
Distributions to noncontrolling partners in the Partnership |
|
(15,262 |
) |
(12,207 |
) | ||
Net cash provided by financing activities |
|
33,015 |
|
32,130 |
| ||
|
|
|
|
|
| ||
Effect of exchange rate changes on cash and equivalents |
|
(454 |
) |
243 |
| ||
Net increase (decrease) in cash and cash equivalents |
|
(1,403 |
) |
1,589 |
| ||
Cash and cash equivalents at beginning of period |
|
34,601 |
|
21,903 |
| ||
Cash and cash equivalents at end of period |
|
$ |
33,198 |
|
$ |
23,492 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EXTERRAN HOLDINGS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements of Exterran Holdings, Inc. (we or Exterran) included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.)(GAAP) for interim financial information and the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are not required in these interim financial statements and have been condensed or omitted. Management believes that the information furnished includes all adjustments, consisting only of normal recurring adjustments, that are necessary to present fairly our consolidated financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements presented in our Annual Report on Form 10-K for the year ended December 31, 2012. That report contains a more comprehensive summary of our accounting policies. The interim results reported herein are not necessarily indicative of results for a full year.
Revenue Recognition
Revenue from contract operations is recorded when earned, which generally occurs monthly when service is provided under our customer contracts. Aftermarket services revenue is recorded as products are delivered and title is transferred or services are performed for the customer.
Fabrication revenue is recognized using the percentage-of-completion method when the applicable criteria are met. We estimate percentage-of-completion for compressor and accessory fabrication on a direct labor hour to total labor hour basis. Production and processing equipment fabrication percentage-of-completion is estimated using the direct labor hour to total labor hour and the cost to total cost basis. The duration of these projects is typically between three and 36 months. Fabrication revenue is recognized using the completed contract method when the applicable criteria of the percentage-of-completion method are not met. Fabrication revenue from a claim is recognized to the extent that costs related to the claim have been incurred, when collection is probable and can be reliably estimated.
Earnings (Loss) Attributable to Exterran Stockholders Per Common Share
Basic income (loss) attributable to Exterran stockholders per common share is computed by dividing income (loss) attributable to Exterran common stockholders by the weighted average number of shares outstanding for the period. Unvested share-based awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and are included in the computation of earnings (loss) per share following the two-class method. Therefore, restricted share awards that contain nonforfeitable rights to receive dividends are included in the computation of basic and diluted earnings (loss) per share, unless their effect would be anti-dilutive.
Diluted income (loss) attributable to Exterran stockholders per common share is computed using the weighted average number of shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding options and warrants to purchase common stock, restricted stock, restricted stock units, stock to be issued pursuant to our employee stock purchase plan and convertible senior notes, unless their effect would be anti-dilutive.
The following table summarizes net income attributable to Exterran stockholders (in thousands):
|
|
Three Months Ended |
| ||||
|
|
2013 |
|
2012 |
| ||
Income from continuing operations attributable to Exterran stockholders |
|
$ |
16,955 |
|
$ |
6,657 |
|
Income (loss) from discontinued operations, net of tax |
|
33,250 |
|
(1,162 |
) | ||
Net income attributable to Exterran stockholders |
|
$ |
50,205 |
|
$ |
5,495 |
|
The following table shows the potential shares of common stock that were included in computing diluted income (loss) attributable to Exterran stockholders per common share (in thousands):
|
|
Three Months Ended |
| ||
|
|
2013 |
|
2012 |
|
Weighted average common shares outstanding used in basic income (loss) per common share |
|
65,291 |
|
64,515 |
|
Net dilutive potential common shares issuable: |
|
|
|
|
|
On exercise of options and vesting of restricted stock and restricted stock units |
|
517 |
|
54 |
|
On settlement of employee stock purchase plan shares |
|
2 |
|
27 |
|
On exercise of warrants |
|
** |
|
** |
|
On conversion of 4.25% convertible senior notes due 2014 |
|
** |
|
** |
|
On conversion of 4.75% convertible senior notes due 2014 |
|
** |
|
** |
|
Weighted average common shares outstanding used in diluted income (loss) per common share |
|
65,810 |
|
64,596 |
|
** Excluded from diluted income (loss) per common share as their inclusion would have been anti-dilutive.
There were no adjustments to net income (loss) attributable to Exterran stockholders for the diluted earnings (loss) per share calculation for the three months ended March 31, 2013 and 2012.
The table below indicates the potential shares of common stock issuable that were excluded from computing diluted income (loss) attributable to Exterran stockholders per common share as their inclusion would have been anti-dilutive (in thousands):
|
|
Three Months Ended |
| ||
|
|
2013 |
|
2012 |
|
|
|
|
|
|
|
Net dilutive potential common shares issuable: |
|
|
|
|
|
On exercise of options where exercise price is greater than average market value for the period |
|
926 |
|
2,510 |
|
On exercise of options and vesting of restricted stock and restricted stock units |
|
|
|
|
|
On settlement of employee stock purchase plan shares |
|
|
|
|
|
On exercise of warrants |
|
12,426 |
|
12,426 |
|
On conversion of 4.25% convertible senior notes due 2014 |
|
15,334 |
|
15,334 |
|
On conversion of 4.75% convertible senior notes due 2014 |
|
484 |
|
3,114 |
|
Net dilutive potential common shares issuable |
|
29,170 |
|
33,384 |
|
Comprehensive Income (Loss)
Components of comprehensive income (loss) are net income (loss) and all changes in equity during a period except those resulting from transactions with owners. Our accumulated other comprehensive income (loss) consists of foreign currency translation adjustments, changes in the fair value of derivative financial instruments, net of tax, that are designated as cash flow hedges and to the extent the hedge is effective, and adjustments related to changes in our ownership of the Partnership. The following table presents the changes in accumulated other comprehensive income by component, net of tax and excluding noncontrolling interest, for the three months ended March 31, 2013 and 2012:
|
|
Derivatives - |
|
Foreign Currency |
|
|
| |||
|
|
Cash Flow Hedges |
|
Translation Adjustment |
|
Total |
| |||
Accumulated other comprehensive income (loss), December 31, 2012 |
|
$ |
(2,984 |
) |
$ |
26,893 |
|
$ |
23,909 |
|
Loss recognized in other comprehensive income, net of tax |
|
(659 |
) |
(5,262 |
) |
(5,921 |
) | |||
Loss reclassified from accumulated other comprehensive income (loss), net of tax |
|
478 |
(1) |
|
|
478 |
| |||
Other comprehensive loss attributable to Exterran stockholders |
|
(181 |
) |
(5,262 |
) |
(5,443 |
) | |||
Accumulated other comprehensive income (loss), March 31, 2013 |
|
$ |
(3,165 |
) |
$ |
21,631 |
|
$ |
18,466 |
|
(1) Includes a $0.7 million loss, net of a tax benefit of $0.2 million, which are reflected in interest expense and provision for (benefit from) income taxes, respectively, in our condensed consolidated statements of operations.
|
|
Derivatives - |
|
Foreign Currency |
|
|
| |||
|
|
Cash Flow Hedges |
|
Translation Adjustment |
|
Total |
| |||
Accumulated other comprehensive income (loss), December 31, 2011 |
|
$ |
(17,072 |
) |
$ |
23,131 |
|
$ |
6,059 |
|
Gain (loss) recognized in other comprehensive income, net of tax |
|
(25 |
) |
751 |
|
726 |
| |||
Loss reclassified from accumulated other comprehensive income (loss), net of tax |
|
5,802 |
(1) |
|
|
5,802 |
| |||
Other comprehensive income attributable to Exterran stockholders |
|
5,777 |
|
751 |
|
6,528 |
| |||
Accumulated other comprehensive income (loss), March 31, 2012 |
|
$ |
(11,295 |
) |
$ |
23,882 |
|
$ |
12,587 |
|
(1) Includes an $8.9 million loss, net of a tax benefit of $3.1 million, which are reflected in interest expense and provision for (benefit from) income taxes, respectively, in our condensed consolidated statements of operations.
Financial Instruments
Our financial instruments consist of cash, restricted cash, receivables, payables, interest rate swaps and debt. At March 31, 2013 and December 31, 2012, the estimated fair values of these financial instruments approximated their carrying values as reflected in our condensed consolidated balance sheets. The fair value of our fixed rate debt has been estimated based on quoted market yields in inactive markets or model-derived calculations using market yields observed in active markets, which are Level 2 inputs. The fair value of our floating rate debt has been estimated using a discounted cash flow analysis based on interest rates offered on loans with similar terms to borrowers of similar credit quality, which are Level 3 inputs. See Note 8 for additional information regarding the fair value hierarchy. The following table summarizes the fair value and carrying value of our debt as of March 31, 2013 and December 31, 2012 (in thousands):
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||||||||
|
|
Carrying |
|
Fair Value |
|
Carrying |
|
Fair Value |
| ||||
Fixed rate debt |
|
$ |
1,021,154 |
|
$ |
1,078,000 |
|
$ |
814,423 |
|
$ |
857,000 |
|
Floating rate debt |
|
608,500 |
|
609,000 |
|
750,500 |
|
761,000 |
| ||||
Total debt |
|
$ |
1,629,654 |
|
$ |
1,687,000 |
|
$ |
1,564,923 |
|
$ |
1,618,000 |
|
GAAP requires that all derivative instruments (including certain derivative instruments embedded in other contracts) be recognized in the balance sheet at fair value and that changes in such fair values be recognized in earnings (loss) unless specific hedging criteria are
met. Changes in the values of derivatives that meet these hedging criteria will ultimately offset related earnings effects of the hedged item pending recognition in earnings.
2. Discontinued Operations
In May 2009, the Venezuelan government enacted a law that reserves to the State of Venezuela certain assets and services related to hydrocarbon activities, which included substantially all of our assets and services in Venezuela. The law provides that the reserved activities are to be performed by the State, by the State-owned oil company, Petroleos de Venezuela S.A. (PDVSA), or its affiliates, or through mixed companies under the control of PDVSA or its affiliates. The law authorizes PDVSA or its affiliates to take possession of the assets and take over control of those operations related to the reserved activities as a step prior to the commencement of an expropriation process, and permits the national executive of Venezuela to decree the total or partial expropriation of shares or assets of companies performing those services.
In June 2009, PDVSA commenced taking possession of our assets and operations in a number of our locations in Venezuela and by the end of the second quarter of 2009, PDVSA had assumed control over substantially all of our assets and operations in Venezuela. The expropriation of our business in Venezuela meets the criteria established for recognition as discontinued operations under accounting standards for presentation of financial statements. Therefore, our Venezuela contract operations business is reflected as discontinued operations in our condensed consolidated financial statements.
In March 2010, our Spanish subsidiary filed a request for the institution of an arbitration proceeding against Venezuela with the International Centre for Settlement of Investment Disputes (ICSID) related to the seized assets and investments under the Agreement between Spain and Venezuela for the Reciprocal Promotion and Protection of Investments and under Venezuelan law. The arbitration hearing occurred in July 2012.
In August 2012, our Venezuelan subsidiary sold its previously nationalized assets to PDVSA Gas, S.A. (PDVSA Gas) for a purchase price of approximately $441.7 million. We received an initial payment of $176.7 million in cash at closing, of which we remitted $50.0 million to the insurance company from which we collected $50.0 million in January 2010 under the terms of an insurance policy we maintained for the risk of expropriation. We received an installment payment of $16.8 million in the year ended December 31, 2012. In March 2013, we received an installment payment of $34.3 million, which includes a prepayment of $17.2 million for the second quarter 2013 installment payment due to us. The remaining principal amount due to us of approximately $215 million is payable in quarterly cash installments through the third quarter of 2016. We have not recognized amounts payable to us by PDVSA Gas as a receivable and will therefore recognize quarterly payments received in the future as income from discontinued operations in the periods such payments are received. The proceeds from the sale of assets are not subject to Venezuelan national taxes due to an exemption allowed under the Venezuelan Reserve Law applicable to expropriation settlements. In addition, and in connection with the sale, we and the Venezuelan government agreed to waive rights to assert certain claims against each other.
In connection with the sale of these assets, we have agreed to suspend the arbitration proceeding previously filed by our Spanish subsidiary against Venezuela pending payment in full by PDVSA Gas of the purchase price for these nationalized assets.
In February 2013, the Venezuelan government announced a devaluation of the Venezuelan bolivar. This devaluation resulted in a translation gain of approximately $1.4 million on the remeasurement of our net liability position associated with our discontinued operations in Venezuela and is reflected in other (income) loss, net in the table below during the three months ended March 31, 2013. The functional currency of our Venezuela subsidiary is the U.S. dollar and we had more liabilities than assets denominated in bolivars in Venezuela at the time of the devaluation. The exchange rate used to remeasure our net liabilities changed from 4.3 bolivars per U.S. dollar at December 31, 2012 to 6.3 bolivars per U.S. dollar in February 2013.
In June 2012, we committed to a plan to sell our contract operations and aftermarket services businesses in Canada as part of our continued emphasis on simplification and focus on our core businesses. We expect this sale to be completed within the next twelve months. Our Canadian contract operations and aftermarket services businesses are reflected as discontinued operations in our condensed consolidated financial statements. These operations were previously included in our North American contract operations and aftermarket services business segments. In connection with the planned disposition, we recorded impairments of long-lived assets totaling $2.1 million during the three months ended March 31, 2013. The impairment charges are reflected in income (loss) from discontinued operations, net of tax.
The table below summarizes the operating results of the discontinued operations (in thousands):
|
|
Three Months Ended March 31, 2013 |
|
Three Months Ended March 31, 2012 |
| ||||||||||||||
|
|
Venezuela |
|
Canada |
|
Total |
|
Venezuela |
|
Canada |
|
Total |
| ||||||
Revenue |
|
$ |
|
|
$ |
10,828 |
|
$ |
10,828 |
|
$ |
|
|
$ |
11,274 |
|
$ |
11,274 |
|
Expenses and selling, general and administrative |
|
227 |
|
11,039 |
|
11,266 |
|
172 |
|
13,851 |
|
14,023 |
| ||||||
Loss (recovery) attributable to expropriation and impairments |
|
(33,199 |
) |
2,076 |
|
(31,123 |
) |
13 |
|
|
|
13 |
| ||||||
Other (income) loss, net |
|
(2,592 |
) |
34 |
|
(2,558 |
) |
|
|
(686 |
) |
(686 |
) | ||||||
Provision for (benefit from) income taxes |
|
|
|
(7 |
) |
(7 |
) |
440 |
|
(1,354 |
) |
(914 |
) | ||||||
Income (loss) from discontinued operations, net of tax |
|
$ |
35,564 |
|
$ |
(2,314 |
) |
$ |
33,250 |
|
$ |
(625 |
) |
$ |
(537 |
) |
$ |
(1,162 |
) |
The table below summarizes the balance sheet data for discontinued operations (in thousands):
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||||||||||||||
|
|
Venezuela |
|
Canada |
|
Total |
|
Venezuela |
|
Canada |
|
Total |
| ||||||
Cash |
|
$ |
134 |
|
$ |
194 |
|
$ |
328 |
|
$ |
113 |
|
$ |
791 |
|
$ |
904 |
|
Accounts receivable |
|
13 |
|
8,604 |
|
8,617 |
|
17 |
|
9,148 |
|
9,165 |
| ||||||
Inventory |
|
|
|
10,319 |
|
10,319 |
|
|
|
9,826 |
|
9,826 |
| ||||||
Other current assets |
|
14 |
|
1,716 |
|
1,730 |
|
41 |
|
1,810 |
|
1,851 |
| ||||||
Total current assets associated with discontinued operations |
|
161 |
|
20,833 |
|
20,994 |
|
171 |
|
21,575 |
|
21,746 |
| ||||||
Property, plant and equipment |
|
|
|
273 |
|
273 |
|
|
|
|
|
|
| ||||||
Intangible and other long-term assets |
|
|
|
24 |
|
24 |
|
|
|
|
|
|
| ||||||
Total assets associated with discontinued operations |
|
$ |
161 |
|
$ |
21,130 |
|
$ |
21,291 |
|
$ |
171 |
|
$ |
21,575 |
|
$ |
21,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Accounts payable |
|
$ |
367 |
|
$ |
2,911 |
|
$ |
3,278 |
|
$ |
499 |
|
$ |
3,345 |
|
$ |
3,844 |
|
Accrued liabilities |
|
2,558 |
|
3,265 |
|
5,823 |
|
4,335 |
|
2,724 |
|
7,059 |
| ||||||
Deferred revenue |
|
|
|
681 |
|
681 |
|
|
|
669 |
|
669 |
| ||||||
Total current liabilities associated with discontinued operations |
|
2,925 |
|
6,857 |
|
9,782 |
|
4,834 |
|
6,738 |
|
11,572 |
| ||||||
Other long-term liabilities |
|
340 |
|
593 |
|
933 |
|
455 |
|
589 |
|
1,044 |
| ||||||
Total liabilities associated with discontinued operations |
|
$ |
3,265 |
|
$ |
7,450 |
|
$ |
10,715 |
|
$ |
5,289 |
|
$ |
7,327 |
|
$ |
12,616 |
|
3. Inventory
Inventory, net of reserves, consisted of the following amounts (in thousands):
|
|
March 31, |
|
December 31, |
| ||
Parts and supplies |
|
$ |
238,644 |
|
$ |
232,737 |
|
Work in progress |
|
151,288 |
|
120,930 |
| ||
Finished goods |
|
40,930 |
|
34,043 |
| ||
Inventory, net of reserves |
|
$ |
430,862 |
|
$ |
387,710 |
|
As of March 31, 2013 and December 31, 2012, we had inventory reserves of $12.6 million and $11.7 million, respectively.
4. Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
|
|
March 31, |
|
December 31, |
| ||
Compression equipment, facilities and other fleet assets |
|
$ |
4,256,299 |
|
$ |
4,207,772 |
|
Land and buildings |
|
185,868 |
|
186,410 |
| ||
Transportation and shop equipment |
|
268,296 |
|
261,520 |
| ||
Other |
|
164,922 |
|
161,681 |
| ||
|
|
4,875,385 |
|
4,817,383 |
| ||
Accumulated depreciation |
|
(2,015,963 |
) |
(1,975,352 |
) | ||
Property, plant and equipment, net |
|
$ |
2,859,422 |
|
$ |
2,842,031 |
|
5. Investments in Non-Consolidated Affiliates
Investments in affiliates that are not controlled by Exterran but where we have the ability to exercise significant control over the operations are accounted for using the equity method.
We own a 30.0% interest in WilPro Energy Services (PIGAP II) Limited and 33.3% interest in WilPro Energy Services (El Furrial) Limited, joint ventures that provided natural gas compression and injection services in Venezuela. In May 2009, PDVSA assumed control over the assets of our Venezuelan joint ventures and transitioned the operations including the hiring of their employees, to PDVSA. In March 2011, our Venezuelan joint ventures, together with the Netherlands parent company of our joint venture partners, filed a request for the institution of an arbitration proceeding against Venezuela with ICSID related to the seized assets and investments.
In March 2012, our Venezuelan joint ventures sold their assets to PDVSA Gas. We received an initial payment of $37.6 million in March 2012, and received installment payments totaling $14.1 million in the year ended December 31, 2012. In March 2013, we received an installment payment of $4.7 million. The remaining principal amount due to us of approximately $52 million is payable in quarterly cash installments through the first quarter of 2016. We have not recognized amounts payable to us by PDVSA Gas as a receivable and will therefore recognize quarterly payments received in the future as equity in (income) loss of non-consolidated affiliates in our condensed consolidated statements of operations in the periods such payments are received. In connection with the sale of our Venezuelan joint ventures assets, the joint ventures and our joint venture partners have agreed to suspend their previously filed arbitration proceeding against Venezuela pending payment in full by PDVSA Gas of the purchase price for the assets.
6. Long-Term Debt
Long-term debt consisted of the following (in thousands):
|
|
March 31, |
|
December 31, |
| ||
Revolving credit facility due July 2016 |
|
$ |
220,500 |
|
$ |
70,000 |
|
Partnerships revolving credit facility due November 2015 |
|
|
|
530,500 |
| ||
Partnerships term loan facility due November 2015 |
|
|
|
150,000 |
| ||
Partnerships revolving credit facility due May 2018 |
|
238,000 |
|
|
| ||
Partnerships term loan facility due May 2018 |
|
150,000 |
|
|
| ||
Partnerships 6% senior notes due April 2021 (presented net of the unamortized discount of $5.5 million as of March 31, 2013) |
|
344,548 |
|
|
| ||
4.25% convertible senior notes due June 2014 (presented net of the unamortized discount of $28.8 million and $34.3 million, respectively) |
|
326,228 |
|
320,673 |
| ||
4.75% convertible senior notes due January 2014 |
|
|
|
143,750 |
| ||
7.25% senior notes due December 2018 |
|
350,000 |
|
350,000 |
| ||
Other, interest at various rates, collateralized by equipment and other assets |
|
378 |
|
|
| ||
Long-term debt |
|
$ |
1,629,654 |
|
$ |
1,564,923 |
|
In January 2013, we redeemed for cash all $143.8 million principal amount outstanding of our 4.75% Convertible Senior Notes (the 4.75% Notes) at a redemption price of 100% of the principal amount thereof plus accrued but unpaid interest to, but excluding, the redemption date. Upon redemption, the 4.75% Notes were no longer deemed outstanding, interest ceased to accrue thereon and all rights of the holders of the 4.75% Notes ceased to exist. The redemption of the 4.75% Notes was financed by borrowings under our
revolving credit facility. As a result of the redemption, we expensed $0.9 million of unamortized deferred financing costs in the first quarter of 2013, which is reflected in interest expense in our condensed consolidated statements of operations.
In March 2012, we amended our senior secured credit facility (the 2011 Credit Facility) to decrease the borrowing capacity under our revolving credit facility by $200.0 million to $900.0 million. As a result of the decrease in borrowing capacity under our revolving credit facility, we expensed $1.3 million of unamortized deferred financing costs associated with our revolving credit facility in the first quarter of 2012, which is reflected in interest expense in our condensed consolidated statements of operations.
As of March 31, 2013, we had $220.5 million in outstanding borrowings and $173.8 million in outstanding letters of credit under the 2011 Credit Facility. At March 31, 2013, taking into account guarantees through letters of credit, we had undrawn and available capacity of $505.7 million under the 2011 Credit Facility.
In June 2009, we issued $355.0 million aggregate principal amount of 4.25% convertible senior notes due June 2014 (the 4.25% Notes). The 4.25% Notes are convertible upon the occurrence of certain conditions into shares of our common stock at an initial conversion rate of 43.1951 shares of our common stock per $1,000 principal amount of the convertible notes, equivalent to an initial conversion price of approximately $23.15 per share of common stock. The conversion rate will be subject to adjustment following certain dilutive events and certain corporate transactions. The value of the shares into which the 4.25% Notes can be converted exceeds their principal amount by $59.0 million as of March 31, 2013. We may not redeem the 4.25% Notes prior to their maturity date.
In March 2012, the Partnership, as guarantor, and EXLP Operating LLC, a wholly-owned subsidiary of the Partnership, as borrower, amended its senior secured credit agreement (the Partnership Credit Agreement) to increase the borrowing capacity under its revolving credit facility by $200.0 million to $750.0 million. In March 2013, the Partnership amended its Credit Agreement to reduce the borrowing capacity under its revolving credit facility by $100.0 million to $650.0 million and extend the maturity date of the term loan and revolving credit facilities provided for under the Partnership Credit Agreement to May 2018. The amendment decreased the applicable margins for the Partnerships revolving credit and term loan facilities by 25 basis points and 50 basis points, respectively. Additionally, following the effectiveness of the amendment and upon the issuance of the Partnerships 6% senior notes discussed below, the maximum allowed ratio of Total Debt (as defined in the Partnership Credit Agreement) to EBITDA (as defined in the Partnership Credit Agreement) increased to 5.25 to 1.0 (subject to a temporary increase to 5.5 to 1.0 for any quarter during which an acquisition meeting certain thresholds is completed and for the following two quarters after the acquisition closes) and the maximum allowed ratio of Senior Secured Debt (as defined in the Credit Agreement) to EBITDA is 4.0 to 1.0. As a result of the amendment to the Partnership Credit Agreement in March 2013, we expensed $0.7 million of unamortized deferred financing costs, which is reflected in interest expense in our condensed consolidated statements of operations. During the three months ended March 31, 2013 and 2012, the Partnership incurred transaction costs of approximately $4.3 million and $0.5 million, respectively, related to the amendments to the Partnership Credit Agreement. These costs were included in intangible and other assets, net and are being amortized over the terms of the facilities. As of March 31, 2013, the Partnership had undrawn and available capacity of $412.0 million under its revolving credit facility.
In March 2013, the Partnership issued $350.0 million aggregate principal amount of 6% Senior Notes due April 2021 (the Partnership 6% Notes). The Partnership used the net proceeds of $336.9 million, after original issuance discount and issuance costs, to repay borrowings outstanding under its revolving credit facility. The Partnership 6% Notes were issued at an original issuance discount of $5.5 million, which will be amortized using the effective interest method at an interest rate of 6.25% over the term. During the three months ended March 31, 2013, the Partnership incurred transaction costs related to the issuance of the Partnership 6% Notes of approximately $7.6 million. These costs were included in intangible and other assets, net, and are being amortized to interest expense over the term of the Partnership 6% Notes. The Partnership 6% Notes have not been registered under the Securities Act of 1933, as amended (the Securities Act), or any state securities laws, and unless so registered, may not be offered or sold in the U.S. except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Partnership offered and issued the Partnership 6% Notes only to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to persons outside the U.S. pursuant to Regulation S. Pursuant to a registration rights agreement, the Partnership is required to register the Partnership 6% Notes no later than 365 days after March 27, 2013.
The Partnership 6% Notes are guaranteed on a senior unsecured basis by all of the Partnerships existing subsidiaries (other than EXLP Finance Corp., which is a co-issuer of the Partnership 6% Notes) and certain of the Partnerships future subsidiaries. The Partnership 6% Notes and the guarantees are the Partnerships and the guarantors general unsecured senior obligations, respectively, rank equally in right of payment with all of the Partnerships and the guarantors other senior obligations, and are effectively subordinated to all of the Partnerships and the guarantors existing and future secured debt to the extent of the value of the collateral securing such indebtedness. In addition, the Partnership 6% Notes and guarantees are effectively subordinated to all existing and future indebtedness and other liabilities of any future non-guarantor subsidiaries.
Prior to April 1, 2017, the Partnership may redeem all or a part of the Partnership 6% Notes at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) a make-whole premium at the redemption date, plus accrued and unpaid interest, if any, to the redemption date. In addition, the Partnership may redeem up to 35% of the aggregate principal amount of the Partnership 6% Notes prior to April 1, 2016 with the net proceeds of one or more equity offerings at a redemption price of 106.000% of the principal amount of the Partnership 6% Notes, plus any accrued and unpaid interest to the date of redemption, if at least 65% of the aggregate principal amount of the Partnership 6% Notes issued under the indenture remains outstanding after such redemption and the redemption occurs within 180 days of the date of the closing of such equity offering. On or after April 1, 2017, the Partnership may redeem all or a part of the Partnership 6% Notes at redemption prices (expressed as percentages of principal amount) equal to 103.000% for the twelve-month period beginning on April 1, 2017, 101.500% for the twelve-month period beginning on April 1, 2018 and 100.000% for the twelve-month period beginning on April 1, 2019 and at any time thereafter, plus accrued and unpaid interest, if any, to the applicable redemption date on the Partnership 6% Notes.
7. Accounting for Derivatives
We are exposed to market risks primarily associated with changes in interest rates. We use derivative financial instruments to minimize the risks and/or costs associated with financial activities by managing our exposure to interest rate fluctuations on a portion of our debt obligations. We do not use derivative financial instruments for trading or other speculative purposes.
Interest Rate Risk
At March 31, 2013, we were a party to interest rate swaps pursuant to which we make fixed payments and receive floating payments on a notional value of $250.0 million. We entered into these swaps to offset changes in expected cash flows due to fluctuations in the associated variable interest rates. Our interest rate swaps expire in November 2015. As of March 31, 2013, the weighted average effective fixed interest rate on our interest rate swaps was 1.8%. We have designated these interest rate swaps as cash flow hedging instruments so that any change in their fair values is recognized as a component of comprehensive income (loss) and is included in accumulated other comprehensive income (loss) to the extent the hedge is effective. The swap terms substantially coincide with the hedged item and are expected to offset changes in expected cash flows due to fluctuations in the variable rate, and therefore we currently do not expect a significant amount of ineffectiveness on these hedges. We perform quarterly calculations to determine whether the swap agreements are still effective and to calculate any ineffectiveness. During the three months ended March 31, 2013 and 2012, there was no ineffectiveness related to interest rate swaps. We estimate that $3.5 million of deferred pre-tax losses attributable to existing interest rate swaps and included in our accumulated other comprehensive income (loss) at March 31, 2013, will be reclassified into earnings as interest expense at then-current values during the next twelve months as the underlying hedged transactions occur. Cash flows from derivatives designated as hedges are classified in our condensed consolidated statements of cash flows under the same category as the cash flows from the underlying assets, liabilities or anticipated transactions.
In the fourth quarter of 2010, we paid $43.0 million to terminate interest rate swap agreements with a total notional value of $585.0 million and a weighted average effective fixed interest rate of 4.6%. These swaps qualified for hedge accounting and were previously included on our balance sheet as a liability and in accumulated other comprehensive income (loss). The liability was paid in connection with the termination, and the associated amount in accumulated other comprehensive income (loss) is being amortized into interest expense over the original terms of the swaps. We estimate that $1.4 million of deferred pre-tax losses from these terminated interest rate swaps will be amortized into interest expense during the next twelve months.
The following tables present the effect of derivative instruments on our consolidated financial position and results of operations (in thousands):
|
|
March 31, 2013 |
| |||
|
|
Balance Sheet Location |
|
Fair Value |
| |
Derivatives designated as hedging instruments: |
|
|
|
|
| |
Interest rate hedges |
|
Accrued liabilities |
|
$ |
(3,497 |
) |
Interest rate hedges |
|
Other long-term liabilities |
|
(5,230 |
) | |
Total derivatives |
|
|
|
$ |
(8,727 |
) |
|
|
December 31, 2012 |
| |||
|
|
Balance Sheet Location |
|
Fair Value |
| |
Derivatives designated as hedging instruments: |
|
|
|
|
| |
Interest rate hedges |
|
Accrued liabilities |
|
$ |
(3,873 |
) |
Interest rate hedges |
|
Other long-term liabilities |
|
(6,043 |
) | |
Total derivatives |
|
|
|
$ |
(9,916 |
) |
|
|
Three Months Ended March 31, 2013 |
| ||||||
|
|
Pre-tax Gain (Loss) |
|
Location of Gain |
|
Pre-tax Gain (Loss) |
| ||
Derivatives designated as cash flow hedges: |
|
|
|
|
|
|
| ||
Interest rate hedges |
|
$ |
216 |
|
Interest expense |
|
$ |
(1,472 |
) |
|
|
Three Months Ended March 31, 2012 |
| ||||||
|
|
Pre-tax Gain (Loss) |
|
Location of Gain |
|
Pre-tax Gain (Loss) |
| ||
Derivatives designated as cash flow hedges: |
|
|
|
|
|
|
| ||
Interest rate hedges |
|
$ |
(1,944 |
) |
Interest expense |
|
$ |
(9,747 |
) |
The counterparties to our derivative agreements are major international financial institutions. We monitor the credit quality of these financial institutions and do not expect non-performance by any counterparty, although such non-performance could have a material adverse effect on us. We have no specific collateral posted for our derivative instruments. The counterparties to our interest rate swaps are also lenders under our credit facilities and, in that capacity, share proportionally in the collateral pledged under the related facility.
8. Fair Value Measurements
The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories:
· Level 1 Quoted unadjusted prices for identical instruments in active markets to which we have access at the date of measurement.
· Level 2 Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered market makers.
· Level 3 Model-derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information.
The following table presents our assets and liabilities measured at fair value on a recurring basis as of March 31, 2013 and December 31, 2012, with pricing levels as of the date of valuation (in thousands):
|
|
March 31, 2013 |
|
December 31, 2012 |
| ||||||||||||||
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
| ||||||
Interest rate swaps liability |
|
$ |
|
|
$ |
(8,727 |
) |
$ |
|
|
$ |
|
|
$ |
(9,916 |
) |
$ |
|
|
On a quarterly basis, our interest rate swaps are recorded at fair value utilizing a combination of the market approach and income approach to estimate fair value based on forward LIBOR curves.
The following table presents our assets and liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2013 and 2012, with pricing levels as of the date of valuation (in thousands):
|
|
Three Months Ended March 31, 2013 |
|
Three Months Ended March 31, 2012 |
| ||||||||||||||
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
| ||||||
Impaired long-lived assets |
|
$ |
|
|
$ |
|
|
$ |
1,216 |
|
$ |
|
|
$ |
|
|
$ |
1,800 |
|
Impaired long-lived assetsDiscontinued operations |
|
|
|
|
|
273 |
|
|
|
|
|
|
| ||||||
Our estimate of the impaired long-lived assets fair value was primarily based on the expected net sale proceeds compared to other fleet units we recently sold, as well as our review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. Our estimate of the fair value of the impaired assets that are classified as discontinued operations was based on our expected proceeds, net of selling costs.
9. Long-Lived Asset Impairment
During the three months ended March 31, 2013, we evaluated the future deployment of our idle fleet and determined to retire and either sell or re-utilize the key components of approximately 85 idle compressor units, representing approximately 19,000 horsepower, that we previously used to provide services in our North America contract operations segment. As a result, we performed an impairment review and recorded a $3.6 million asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit was estimated based on the expected net sale proceeds compared to other fleet units we recently sold, as well as our review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use.
During the three months ended March 31, 2012, we evaluated the future deployment of our idle fleet and determined to retire and either sell or re-utilize the key components of approximately 50 idle compressor units, representing approximately 16,000 horsepower, that we previously used to provide services in our North America contract operations segment. As a result, we performed an impairment review and recorded a $4.1 million asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit was estimated based on the expected net sale proceeds compared to other fleet units we recently sold, as well as our review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use.
10. Restructuring Charges
In November 2011, we announced a workforce cost reduction program across all of our business segments as a first step in a broader overall profit improvement initiative. These actions were the result of a review of our cost structure aimed at identifying ways to reduce our on-going operating costs and to adjust the size of our workforce to be consistent with then current and expected activity levels. A significant portion of the workforce cost reduction program was completed in 2011, with the remainder completed in 2012.
During the three months ended March 31, 2012, we incurred $3.0 million of restructuring charges primarily related to termination benefits and consulting services. These charges are reflected as Restructuring charges in our condensed consolidated statements of operations.
11. Stock-Based Compensation
Stock Incentive Plan
In August 2007, we adopted the Exterran Holdings, Inc. 2007 Amended and Restated Stock Incentive Plan (the 2007 Plan) that provides for the granting of stock-based awards in the form of stock options, restricted stock, restricted stock units, stock appreciation rights and performance awards to our employees and directors. In May 2011, our stockholders approved an amendment to the 2007 Plan increasing the maximum number of shares of common stock available under the 2007 Plan to 12,500,000. Each stock option and stock appreciation right granted counts as one share against the aggregate share limit, and each share of restricted stock and stock settled restricted stock unit granted counts as two shares against the aggregate share limit. Awards granted under the 2007 Plan that are subsequently cancelled, terminated or forfeited are available for future grant, and cash settled awards are not counted against the aggregate share limit.
In February 2013, our board of directors approved the Exterran Holdings, Inc. 2013 Stock Incentive Plan (the 2013 Plan), subject to stockholder approval at the 2013 annual meeting of stockholders. The 2013 Plan provides for the granting of stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, other stock-based awards and dividend equivalent rights. Under the 2013 Plan, the maximum number of shares of common stock available for issuance pursuant to awards is 6,500,000. Each option and stock appreciation right granted will count as one share against the aggregate share limit, and any share subject to a stock
settled award other than a stock option, stock appreciation right or other award for which the recipient pays intrinsic value will count as 1.75 shares against the aggregate share limit. Awards granted under the 2013 Plan that are subsequently cancelled, terminated or forfeited are available for future grant, and cash settled awards are not counted against the aggregate share limit. The 2013 Plan became effective upon receipt of stockholder approval on April 30, 2013, and no further awards may be made under the 2007 Plan after that date.
Stock Options
Under the 2007 Plan, stock options are granted at fair market value at the date of grant, are exercisable in accordance with the vesting schedule established by the compensation committee of our board of directors in its sole discretion and expire no later than seven years after the date of grant. Stock options generally vest 33 1/3% on each of the first three anniversaries of the grant date.
The weighted average grant date fair value for stock options granted during the three months ended March 31, 2013 was $10.19, and was estimated using the Black-Scholes option valuation model with the following weighted average assumptions:
|
|
Three Months |
|
Expected life in years |
|
4.5 |
|
Risk-free interest rate |
|
0.66 |
% |
Volatility |
|
49.19 |
% |
Dividend yield |
|
0.0 |
% |
The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the grant date for a period commensurate with the estimated expected life of the stock options. Expected volatility is based on the historical volatility of our stock over the period commensurate with the expected life of the stock options and other factors. We have not historically paid a dividend and do not expect to pay a dividend during the expected life of the stock options.
The following table presents stock option activity during the three months ended March 31, 2013:
|
|
Stock |
|
Weighted |
|
Weighted |
|
Aggregate |
| ||
Options outstanding, December 31, 2012 |
|
2,584 |
|
$ |
27.02 |
|
|
|
|
| |
Granted |
|
177 |
|
25.04 |
|
|
|
|
| ||
Exercised |
|
(236 |
) |
16.72 |
|
|
|
|
| ||
Cancelled |
|
(3 |
) |
46.92 |
|
|
|
|
| ||
Options outstanding, March 31, 2013 |
|
2,522 |
|
27.82 |
|
4.1 |
|
$ |
17,623 |
| |
Options exercisable, March 31, 2013 |
|
1,812 |
|
32.58 |
|
3.3 |
|
9,573 |
| ||
Intrinsic value is the difference between the market value of our stock and the exercise price of each stock option multiplied by the number of stock options outstanding for those stock options where the market value exceeds their exercise price. The total intrinsic value of stock options exercised during the three months ended March 31, 2013 was $2.2 million. As of March 31, 2013, we expect $3.8 million of unrecognized compensation cost related to unvested stock options to be recognized over the weighted-average period of 2.0 years.
Restricted Stock, Restricted Stock Units, Cash Settled Restricted Stock Units and Cash Settled Performance Awards
For grants of restricted stock and restricted stock units, we recognize compensation expense over the vesting period equal to the fair value of our common stock at the date of grant. We remeasure the fair value of cash settled restricted stock units and cash settled performance awards and record a cumulative adjustment of the expense previously recognized. Our obligation related to the cash settled restricted stock units and cash settled performance awards is reflected as a liability in our condensed consolidated balance sheets. Our grants of restricted stock, restricted stock units, cash settled restricted stock units and cash settled performance awards generally vest 33 1/3% on each of the first three anniversaries of the grant date.
The following table presents restricted stock, restricted stock unit, cash settled restricted stock unit and cash settled performance award activity during the three months ended March 31, 2013:
|
|
Shares |
|
Weighted |
| |
Non-vested awards, December 31, 2012 |
|
1,992 |
|
$ |
16.12 |
|
Granted |
|
693 |
|
25.06 |
| |
Vested |
|
(720 |
) |
18.79 |
| |
Cancelled |
|
(5 |
) |
20.13 |
| |
Non-vested awards, March 31, 2013(1) |
|
1,960 |
|
18.29 |
| |
(1) Non-vested awards as of March 31, 2013 are comprised of 480 thousand cash settled restricted stock units and cash settled performance awards and 1,480 thousand restricted stock shares and stock settled restricted stock units.
As of March 31, 2013, we expect $36.7 million of unrecognized compensation cost related to unvested restricted stock, restricted stock units, cash settled restricted stock units and cash settled performance awards to be recognized over the weighted-average period of 2.1 years.
Employee Stock Purchase Plan
In August 2007, we adopted the Exterran Holdings, Inc. Employee Stock Purchase Plan (ESPP), which is intended to provide employees with an opportunity to participate in our long-term performance and success through the purchase of shares of common stock at a price that may be less than fair market value. The ESPP is designed to comply with Section 423 of the Internal Revenue Code of 1986, as amended. Each quarter, an eligible employee may elect to withhold a portion of his or her salary up to the lesser of $25,000 per year or 10% of his or her eligible pay to purchase shares of our common stock at a price equal to 85% to 100% of the fair market value of the stock as of the first trading day of the quarter, the last trading day of the quarter or the lower of the first trading day of the quarter and the last trading day of the quarter, as the compensation committee of our board of directors may determine. The ESPP will terminate on the date that all shares of common stock authorized for sale under the ESPP have been purchased, unless it is extended. In May 2011, our stockholders approved an amendment to the ESPP that increased the maximum number of shares of common stock available for purchase under the ESPP to 1,000,000. At March 31, 2013, 288,318 shares remained available for purchase under the ESPP. Our ESPP is compensatory and, as a result, we record an expense in our condensed consolidated statements of operations related to the ESPP. The purchase discount under the ESPP is 5% of the fair market value of our common stock on the first trading day of the quarter or the last trading day of the quarter, whichever is lower.
Partnership Long-Term Incentive Plan
The Partnership has a Long-Term Incentive Plan (the Plan) that was adopted by Exterran GP LLC, the general partner of the Partnerships general partner, in October 2006 for employees, directors and consultants of the Partnership, us and our respective affiliates. A maximum of 1,035,378 common units, common unit options, restricted units and phantom units are available under the Plan. The Plan is administered by the board of directors of Exterran GP LLC or a committee thereof (the Plan Administrator).
Phantom units are notional units that entitle the grantee to receive a common unit upon the vesting of the phantom unit or, at the discretion of the Plan Administrator, cash equal to the fair market value of a common unit.
Partnership Phantom Units
The following table presents phantom unit activity during the three months ended March 31, 2013:
|
|
Phantom |
|
Weighted |
| |
Phantom units outstanding, December 31, 2012 |
|
63,884 |
|
$ |
23.62 |
|
Granted |
|
55,334 |
|
23.76 |
| |
Vested |
|
(18,135 |
) |
24.46 |
| |
Phantom units outstanding, March 31, 2013 |
|
101,083 |
|
23.55 |
| |
As of March 31, 2013, we expect $2.2 million of unrecognized compensation cost related to unvested phantom units to be recognized over the weighted-average period of 2.4 years.
12. Commitments and Contingencies
We have issued the following guarantees that are not recorded on our accompanying balance sheet (dollars in thousands):
|
|
Term |
|
Maximum Potential |
| |
Performance guarantees through letters of credit(1) |
|
2013-2017 |
|
$ |
235,957 |
|
Standby letters of credit |
|
2013-2014 |
|
13,435 |
| |
Commercial letters of credit |
|
2013 |
|
1,113 |
| |
Bid bonds and performance bonds(1) |
|
2013-2018 |
|
86,643 |
| |
Maximum potential undiscounted payments |
|
|
|
$ |
337,148 |
|
(1) We have issued guarantees to third parties to ensure performance of our obligations, some of which may be fulfilled by third parties.
As part of an acquisition in 2001, we may be required to make contingent payments of up to $46 million to the seller, depending on our realization of certain U.S. federal tax benefits through the year 2015. To date, we have not realized any such benefits that would require a payment and we do not anticipate realizing any such benefits that would require a payment before the year 2016.
See Note 2 and Note 5 for a discussion of our gain contingencies related to assets that were expropriated in Venezuela.
The Texas Legislature enacted changes related to the appraisal of natural gas compressors for ad valorem taxes by expanding the definitions of Heavy Equipment Dealer and Heavy Equipment. Under the revised statute, we believe we are a Heavy Equipment Dealer and that our natural gas compressors are Heavy Equipment and were, therefore, required to file the 2012 property tax renditions under this new methodology. As a result of filing as a Heavy Equipment Dealer in Texas counties, a large number of Appraisal Review Boards have denied our position and petitions for review were filed in the appropriate district courts. The first of these cases is presently scheduled to take place in September 2013.
As a result of the new methodology, our ad valorem tax expense (which is reflected on our condensed consolidated statements of operations as a component of Cost of sales (excluding depreciation and amortization expense)) includes a benefit of $2.0 million during the three months ended March 31, 2013. Since the change in methodology was enacted in 2012, we have recorded an aggregate benefit of $8.8 million as of March 31, 2013, of which approximately $1.5 million has been agreed to by a number of Appraisal Review Boards. If we are unsuccessful in any of the cases with the appraisal districts, we may also be subject to penalties and interest.
In addition to federal and state income taxes, we are subject to a number of state and local taxes that are not income-based. Many of these taxes are subject to audit by the taxing authorities, and therefore, it is possible that an audit could result in our making additional tax payments. We accrue for such additional tax payments resulting from an audit when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. We do not believe that such payments would be material to our consolidated financial position but cannot provide assurance that the resolution of an audit would not be material to our results of operations or cash flows for the period in which the resolution occurs.
Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions. As is customary in our industry, we review our safety equipment and procedures and carry insurance against some, but not all, risks of our business. Our insurance coverage includes property damage, general liability and commercial automobile liability and other coverage we believe is appropriate. In addition, we have a minimal amount of insurance on our offshore assets. We believe that our insurance coverage is customary for the industry and adequate for our business; however, losses and liabilities not covered by insurance would increase our costs.
Additionally, we are substantially self-insured for workers compensation and employee group health claims in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks. Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages.
In the ordinary course of business, we are involved in various pending or threatened legal actions. While management is unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from these actions will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. Because of the inherent uncertainty of litigation, however, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our consolidated financial position, results of operations or cash flows for the period in which the resolution occurs.
13. Recent Accounting Developments
In February 2013, the Financial Accounting Standards Board issued an update to the authoritative guidance related to the reporting of amounts reclassified out of accumulated other comprehensive income (loss). Under this update, entities are required to present changes in accumulated other comprehensive income (loss) by component including the amount of the change that is due to reclassification, and the amount that is due to current period other comprehensive income (loss). Entities are also required to present on the face of the financials where net income is reported or in the footnotes, significant amounts reclassified out of accumulated other comprehensive income (loss) by the respective line items of net income. The disclosure amendments in this update require a prescribed presentation, but do not require any additional disclosures and are effective for reporting periods beginning after December 15, 2012. The new presentation requirements did not have a material impact on our condensed consolidated financial statements.
14. Reportable Segments
We manage our business segments primarily based upon the type of product or service provided. We have four reportable segments: North America contract operations, international contract operations, aftermarket services and fabrication. The North America and international contract operations segments primarily provide natural gas compression services, production and processing equipment services and maintenance services to meet specific customer requirements on Exterran-owned assets. The aftermarket services segment provides a full range of services to support the surface production, compression and processing needs of customers, from parts sales and normal maintenance services to full operation of a customers owned assets. The fabrication segment provides (i) design, engineering, fabrication, installation and sale of natural gas compression units and accessories and equipment used in the production, treating and processing of crude oil and natural gas and (ii) engineering, procurement and fabrication services primarily related to the manufacturing of critical process equipment for refinery and petrochemical facilities, the fabrication of tank farms and evaporators and brine heaters for desalination plants.
We evaluate the performance of our segments based on gross margin for each segment. Revenue includes only sales to external customers. We do not include intersegment sales when we evaluate our segments performance.
The following table presents sales and other financial information by reportable segment (in thousands):
Three months ended |
|
North |
|
International |
|
Aftermarket |
|
Fabrication |
|
Reportable |
| |||||
March 31, 2013 |
|
|
|
|
|
|
|
|
|
|
| |||||
Revenue from external customers |
|
$ |
159,431 |
|
$ |
109,558 |
|
$ |
83,612 |
|
$ |
458,776 |
|
$ |
811,377 |
|
Gross margin(1) |
|
87,378 |
|
63,359 |
|
18,166 |
|
56,377 |
|
225,280 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
March 31, 2012: |
|
|
|
|
|
|
|
|
|
|
| |||||
Revenue from external customers |
|
$ |
150,588 |
|
$ |
112,786 |
|
$ |
89,645 |
|
$ |
262,222 |
|
$ |
615,241 |
|
Gross margin(1) |
|
76,352 |
|
68,897 |
|
17,914 |
|
26,620 |
|
189,783 |
|
(1) Gross margin, a non-GAAP financial measure, is reconciled to net income (loss) below.
We define gross margin as total revenue less cost of sales (excluding depreciation and amortization expense). Gross margin is included as a supplemental disclosure because it is a primary measure used by our management to evaluate the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key components of our operations. As an indicator of our operating performance, gross margin should not be considered an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP. Our gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate gross margin in the same manner.
The following table reconciles net income to gross margin (in thousands):
|
|
Three Months Ended |
| ||||
|
|
2013 |
|
2012 |
| ||
Net income |
|
$ |
58,791 |
|
$ |
7,287 |
|
Selling, general and administrative |
|
84,979 |
|
94,839 |
| ||
Depreciation and amortization |
|
82,646 |
|
85,111 |
| ||
Long-lived asset impairment |
|
3,563 |
|
4,122 |
| ||
Restructuring charges |
|
|
|
3,047 |
| ||
Interest expense |
|
27,874 |
|
37,991 |
| ||
Equity in income of non-consolidated affiliates |
|
(4,665 |
) |
(37,339 |
) | ||
Other (income) expense, net |
|
(9,809 |
) |
(6,094 |
) | ||
Provision for (benefit from) income taxes |
|
15,151 |
|
(343 |
) | ||
(Income) loss from discontinued operations, net of tax |
|
(33,250 |
) |
1,162 |
| ||
Gross margin |
|
$ |
225,280 |
|
$ |
189,783 |
|
15. Transactions Related to the Partnership
In March 2013, we sold to the Partnership contract operations customer service agreements with 50 customers and a fleet of 363 compressor units used to provide compression services under those agreements, comprising approximately 256,000 horsepower, or 8% (by then available horsepower) of our and the Partnerships combined U.S. contract operations business. The assets sold also included 204 compressor units, comprising approximately 99,000 horsepower, that we previously leased to the Partnership and contracts relating to approximately 6,000 horsepower of compressor units the Partnership already owned and previously leased to us. Total consideration for the transaction was approximately $174.0 million, excluding transaction costs, and consisted of the Partnerships issuance to us of approximately 7.1 million common units and approximately 145,000 general partner units. As a result, adjustments were made to noncontrolling interest, accumulated other comprehensive income, deferred income taxes and additional paid-in capital to reflect our new ownership percentage in the Partnership.
In March 2012, we sold to the Partnership contract operations customer service agreements with 39 customers and a fleet of 406 compressor units used to provide compression services under those agreements, comprising approximately 188,000 horsepower, or 5% (by then available horsepower) of our and the Partnerships combined U.S. contract operations business. The assets sold also included 139 compressor units, comprising approximately 75,000 horsepower, that we previously leased to the Partnership, and a natural gas processing plant with a capacity of 10 million cubic feet per day used to provide processing services. Total consideration for the transaction was approximately $182.8 million, excluding transaction costs, and consisted of the Partnerships payment of $77.4 million in cash and assumption of $105.4 million of our long-term debt.
In March 2012, the Partnership sold, pursuant to a public underwritten offering, 4,965,000 common units representing limited partner interests in the Partnership, including 465,000 common units sold pursuant to an over-allotment option. The Partnership used the $114.6 million of net proceeds from this offering to repay borrowings outstanding under its revolving credit facility. In connection with this sale and as permitted under the Partnerships partnership agreement, the Partnership issued and sold to Exterran General Partner, L.P. (GP), our wholly-owned subsidiary and the Partnerships general partner, approximately 101,000 general partner units in consideration of the continuation of GPs approximate 2.0% general partner interest in the Partnership. As a result, adjustments were made to noncontrolling interest, accumulated other comprehensive income, deferred income taxes and additional paid-in capital to reflect our new ownership percentage in the Partnership.
The table below presents the effects of changes from net income attributable to Exterran stockholders and changes in our equity interest of the Partnership on our equity attributable to Exterrans stockholders (in thousands):
|
|
Three Months Ended March 31, |
| ||||
|
|
2013 |
|
2012 |
| ||
Net income attributable to Exterran stockholders |
|
$ |
50,205 |
|
$ |
5,495 |
|
Increase in Exterran stockholders additional paid in capital for change in ownership of Partnership units |
|
31,573 |
|
49,240 |
| ||
Change from net income attributable to Exterran stockholders and transfers to/from the noncontrolling interest |
|
$ |
81,778 |
|
$ |
54,735 |
|
16. Supplemental Guarantor Financial Information
Exterran Holdings, Inc. (Parent) is the issuer of the 7.25% Notes. Exterran Energy Solutions, L.P., EES Leasing LLC, EXH GP LP LLC and EXH MLP LP LLC (each a 100% owned subsidiary; together, the Guarantor Subsidiaries), have agreed to fully and unconditionally guarantee Parents obligations relating to the 7.25% Notes. As a result of these guarantees, we are presenting the following condensed consolidating financial information pursuant to Rule 3-10 of Regulation S-X. These schedules are presented using the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for our share in the subsidiaries cumulative results of operations, capital contributions and distributions and other changes in equity. Elimination entries relate primarily to the elimination of investments in subsidiaries and associated intercompany balances and transactions. The Other Subsidiaries column includes financial information for those subsidiaries that do not guarantee the 7.25% Notes.
Condensed Consolidating Balance Sheet
March 31, 2013
(In thousands)
|
|
Parent |
|
Guarantor |
|
Other |
|
Eliminations |
|
Consolidation |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets |
|
$ |
1,598 |
|
$ |
781,103 |
|
$ |
518,392 |
|
$ |
|
|
$ |
1,301,093 |
|
Current assets associated with discontinued operations |
|
|
|
|
|
20,994 |
|
|
|
20,994 |
| |||||
Total current assets |
|
1,598 |
|
781,103 |
|
539,386 |
|
|
|
1,322,087 |
| |||||
Property, plant and equipment, net |
|
|
|
1,163,519 |
|
1,695,903 |
|
|
|
2,859,422 |
| |||||
Investments in affiliates |
|
1,722,665 |
|
1,529,139 |
|
|
|
(3,251,804 |
) |
|
| |||||
Intangible and other assets, net |
|
30,976 |
|
33,175 |
|
136,363 |
|
(19,268 |
) |
181,246 |
| |||||
Intercompany receivables |
|
715,860 |
|
83,499 |
|
551,744 |
|
(1,351,103 |
) |
|
| |||||
Long-term assets associated with discontinued operations |
|
|
|
|
|
297 |
|
|
|
297 |
| |||||
Total long-term assets |
|
2,469,501 |
|
2,809,332 |
|
2,384,307 |
|
(4,622,175 |
) |
3,040,965 |
| |||||
Total assets |
|
$ |
2,471,099 |
|
$ |
3,590,435 |
|
$ |
2,923,693 |
|
$ |
(4,622,175 |
) |
$ |
4,363,052 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current liabilities |
|
$ |
13,121 |
|
$ |
497,311 |
|
$ |
262,209 |
|
$ |
|
|
$ |
772,641 |
|
Current liabilities associated with discontinued operations |
|
|
|
|
|
9,782 |
|
|
|
9,782 |
| |||||
Total current liabilities |
|
13,121 |
|
497,311 |
|
271,991 |
|
|
|
782,423 |
| |||||
Long-term debt |
|
896,728 |
|
378 |
|
732,548 |
|
|
|
1,629,654 |
| |||||
Intercompany payables |
|
|
|
1,267,604 |
|
83,499 |
|
(1,351,103 |
) |
|
| |||||
Other long-term liabilities |
|
|
|
102,477 |
|
136,878 |
|
(19,268 |
) |
220,087 |
| |||||
Long-term liabilities associated with discontinued operations |
|
|
|
|
|
933 |
|
|
|
933 |
| |||||
Total liabilities |
|
909,849 |
|
1,867,770 |
|
1,225,849 |
|
(1,370,371 |
) |
2,633,097 |
| |||||
Total equity |
|
1,561,250 |
|
1,722,665 |
|
1,697,844 |
|
(3,251,804 |
) |
1,729,955 |
| |||||
Total liabilities and equity |
|
$ |
2,471,099 |
|
$ |
3,590,435 |
|
$ |
2,923,693 |
|
$ |
(4,622,175 |
) |
$ |
4,363,052 |
|
Condensed Consolidating Balance Sheet
December 31, 2012
(In thousands)
|
|
Parent |
|
Guarantor |
|
Other |
|
Eliminations |
|
Consolidation |
| |||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Current assets |
|
$ |
142 |
|
$ |
754,303 |
|
$ |
461,810 |
|
$ |
(33 |
) |
$ |
1,216,222 |
|
Current assets associated with discontinued operations |
|
|
|
|
|
21,746 |
|
|
|
21,746 |
| |||||
Total current assets |
|
142 |
|
754,303 |
|
483,556 |
|
(33 |
) |
1,237,968 |
| |||||
Property, plant and equipment, net |
|
|
|
1,299,797 |
|
1,542,234 |
|
|
|
2,842,031 |
| |||||
Investments in affiliates |
|
1,631,185 |
|
1,145,551 |
|
|
|
(2,776,736 |
) |
|
| |||||
Intangible and other assets, net |
|
33,234 |
|
37,748 |
|
123,681 |
|
(19,815 |
) |
174,848 |
| |||||
Intercompany receivables |
|
704,319 |
|
83,362 |
|
419,108 |
|
(1,206,789 |
) |
|
| |||||
Total long-term assets |
|
2,368,738 |
|