Filing scope and business context
The supplied filing is Exterran Holdings, Inc.’s Form 10-K for the fiscal year ended December 31, 2013, filed February 25, 2014. This does not match the request metadata naming Archrock, Inc. or “2013 Q4”; the filing is an annual report, not a standalone quarterly filing. Exterran provided natural-gas compression services, aftermarket services, and fabrication of compression and production/processing equipment. It consolidated Exterran Partners, L.P. (the Partnership).
Financial performance and position
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Revenue | $3.160 billion | $2.794 billion |
| Gross margin (non-GAAP) | $963.0 million; 30.5% of revenue | $829.4 million; 29.7% of revenue |
| Net income (loss) attributable to Exterran stockholders | $123.2 million; $1.88 basic EPS | $(39.5) million; $(0.62) basic EPS |
| Income (loss) from continuing operations attributable to stockholders | $59.2 million | $(75.5) million |
| Adjusted EBITDA (non-GAAP) | $633.6 million | $460.7 million |
| Cash from operating activities | $355.7 million | $389.9 million |
| Capital expenditures | $391.7 million | $428.7 million |
| Cash and cash equivalents at year-end | $35.7 million | $34.6 million |
| Working capital at year-end | $580.4 million | $463.4 million |
| Long-term debt at year-end | $1.502 billion | $1.565 billion |
Annual revenue increased about 13%, with fabrication revenue rising 23% to $1.661 billion and fabrication gross margin rising to $252.4 million. North America contract operations gross margin increased 11% to $345.4 million; international contract operations gross margin was essentially flat at $279.1 million. The company reported $28.6 million of long-lived asset impairments in 2013, down from $136.6 million in 2012. Its 2013 income tax provision was $84.7 million (48% effective tax rate).
Fourth-quarter 2013 revenue was $739.0 million, versus $837.1 million in Q4 2012; quarterly net income attributable to stockholders was $22.6 million versus a $5.7 million loss. Quarterly “gross profit” was $159.1 million versus $155.6 million; the filing defines this quarterly measure differently from annual gross margin.
Changes, outlook, and material items
- Fabrication backlog fell to $679.9 million at year-end from $1.066 billion a year earlier, including installation backlog declining to $46.4 million from $245.6 million. Management said backlog had stabilized by year-end; over 30% of the fabrication backlog decline related to a customer installation project completed in 2013.
- Horsepower utilization was 83% at year-end, versus 84% in 2012; North America utilization declined to 84% from 86%. Management cited ongoing weakness in mature, predominantly dry-gas markets despite activity in shale and liquids-rich areas.
- Management expected 2014 net capital expenditures of approximately $400–$450 million, including $100–$110 million of contract-operations maintenance capital, and anticipated investing more in contract operations than in 2013. It expected operating cash flow and available credit to fund operating costs, capital spending, interest, and scheduled debt repayments through year-end 2014, but said additional financing might be needed.
- A $355 million face amount of 4.25% convertible notes matured in June 2014. The company stated it intended and was able to refinance them through its credit facility and/or conversion into shares. It had $744.9 million of available capacity under its own revolver and the Partnership had $387.0 million available under its revolver at year-end.
- Approximately $221 million of principal remained due from PDVSA Gas for Venezuelan asset sales, payable in installments through 2016; the company had not recorded the amounts due as receivables and recognized future payments when received. Management highlighted Venezuelan instability and PDVSA payment arrears as collection risks. The company also reported roughly $39 million due from the sale of its Venezuelan joint-venture assets.
- Other notable items included the July 2013 sale of Canadian operations, abandonment of the contract water-treatment business, and sale of the entity owning the U.K. fabrication facility. Texas ad valorem tax benefits of $11.5 million remained disputed in litigation; an unfavorable outcome could require repayment, potentially with interest and penalties.
- The company declared its first common-stock dividend, $0.15 per share quarterly ($0.60 annualized), in February 2014. Management reported compliance with debt covenants at year-end. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting.
Key investor verification points
- Confirm the issuer: the supplied filing is for Exterran Holdings, Inc. (ticker EXH), not Archrock, Inc.; verify whether this is the intended company and reporting period.
- Assess the June 2014 convertible-note refinancing or conversion, related dilution, and post-year-end debt developments.
- Evaluate collectability and timing of the approximately $221 million remaining Venezuelan asset-sale installments, including the separate joint-venture balance.
- Review fabrication project execution, cost overruns on three large turnkey projects, and the sharp year-over-year backlog reduction.
- Check the outcome of the Texas compressor tax litigation and potential environmental, currency, customer-credit, and international operating exposures.