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

HOUSTON, Nov. 7 /PRNewswire-FirstCall/ -- Universal Compression Holdings, Inc. (NYSE:UCO) today reported record net income of $25.0 million, or $0.80 per diluted share, in the three months ended September 30, 2006, including approximately $0.07 per diluted share of benefit related to employee benefit programs. Without this benefit, earnings per diluted share would have been $0.73. Universal reported net income of $21.8 million, or $0.70 per diluted share, in the three months ended June 30, 2006 and $17.7 million, or $0.54 per diluted share, in the prior year period. Revenue was $246.9 million in the three months ended September 30, 2006, compared to $218.7 million in the three months ended June 30, 2006 and $181.1 million in the prior year period. EBITDA, as adjusted (as defined below), was a record $84.0 million in the three months ended September 30, 2006 as compared to $75.2 million in the three months ended June 30, 2006 and $66.2 million in the comparable period of the prior year. Stock Repurchase Program Universal's Board of Directors has authorized the repurchase of up to $200 million of Universal's common stock. This authorization extends until November 2008. Universal intends to make purchases from time to time as market conditions warrant and hold the repurchased shares in treasury for general corporate purposes. Comments "Our overall strong financial results in the third quarter reflect continued favorable business conditions in each of our contract compression, fabrication and aftermarket services segments. Due to the high activity levels in our fabrication facilities during the most recently completed quarter, we experienced some unexpected delays in the production of new units for third-party sales and for our contract compression fleet, delaying revenue recognition in both the contract compression and fabrication segments. We are incurring continuing expenses related to our new enterprise resource planning system and incremental costs associated with our newly formed public entity, Universal Compression Partners, L.P. (NASDAQ:UCLP). We believe both of these initiatives are important steps in driving our long term growth strategy," commented Stephen A. Snider, Universal's Chairman, President and Chief Executive Officer. "The outlook for domestic and international markets continues to be positive as reflected by a strong level of customer inquiries and orders for compression services and products well into 2007." "We are very excited that the initial public offering of Universal's subsidiary, UCLP, was successfully completed last month and that UCLP has been well-received by investors. We believe that UCLP will create significant value to Universal's stockholders, as Universal intends to utilize UCLP's lower cost of capital to purchase the remainder of Universal's domestic contract compression fleet and for UCLP to be the primary growth vehicle for the domestic contract compression business," added Snider. Guidance The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. Factors affecting these forward-looking statements are detailed below under the section titled "Forward-Looking Statements." These statements do not include the potential impact of any acquisition, disposition, merger, joint venture or other material transactions that could occur in the future, including any additional future contributions of contract compression contracts and equipment from Universal to UCLP. For the three months ending December 31, 2006, we expect revenue of $240 million to $250 million and earnings per diluted share of $0.70 to $0.74. For the twelve months ending December 31, 2006, we now expect revenue of $935 million to $945 million, earnings per diluted share of $2.88 to $2.92 and capital expenditures, net of sale proceeds, of approximately $210 million; this compares to previously reported guidance of revenue of $950 million to $970 million, earnings per diluted share of $2.85 to $2.95 and capital expenditures, net of sale proceeds, of $210 million to $240 million. Guidance for earnings per diluted share does not include any special charges associated with our recent refinancing activities in the fourth quarter. Conference Call Universal will host a conference call today, November 7, 2006, 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 "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/. EBITDA, as adjusted, 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, foreign currency gains or losses, excluding non-recurring items (including facility consolidation costs), and extraordinary gains or losses. Forward-Looking Statements Statements about Universal's outlook and all other statements in this release (and oral statements made regarding the subjects of this release, including on the conference call announced herein) 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 Universal's control, which could cause actual results to differ materially from such statements. Forward looking information includes, but is not limited to, statements regarding: the belief that UCLP will create significant value to Universal's stockholders; the intention of Universal for UCLP to be the primary growth vehicle for the domestic contract compression business; Universal's optimistic expectation regarding the positive outlook for domestic and international markets; Universal's expected revenue and earnings per diluted share for the fourth quarter of 2006; Universal's intentions with respect to acquiring its shares as part of the stock repurchase program; and Universal's expected revenue, earnings per diluted share and capital expenditures, net of sales proceeds, for the full year 2006. While Universal believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. Among the factors that could cause results to differ materially from those indicated by such forward-looking statements are the 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 our ability to hire, train and retain key employees; our ability to timely and cost-effectively obtain components necessary to conduct our business; changes in political or economic conditions in key operating markets, including international markets; our ability to timely and cost- effectively implement our enterprise resource planning system; changes in safety and environmental regulations pertaining to the production and transportation of natural gas; and the performance of UCLP. These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in Universal's Transition Report on Form 10-K for the nine months ended December 31, 2005 and those set forth from time to time in Universal's filings with the Securities and Exchange Commission, which are available through our website http://www.universalcompression.com/. Universal expressly disclaims any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events, or otherwise. Universal, 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 HOLDINGS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Three Months Ended September 30, June 30, September 30, 2006 2006 2005 Revenue: Domestic contract compression $101,058 $101,460 $81,964 International contract compression 36,251 35,010 31,076 Fabrication 57,642 38,528 28,193 Aftermarket services 51,981 43,718 39,895 Total revenue 246,932 218,716 181,128 Costs and expenses: Cost of sales (excluding depreciation and amortization expense): Domestic contract compression 34,866 35,792 29,849 International contract compression 8,968 8,430 8,087 Fabrication 47,594 33,797 24,769 Aftermarket services 41,304 36,359 31,782 Depreciation and amortization 31,154 30,013 26,439 Selling, general and administrative 30,149 29,461 21,012 Interest expense, net 15,152 14,605 13,034 Foreign currency (gain) loss (45) 299 (610) Other (income) loss, net 3 (360) (524) Total costs and expenses 209,145 188,396 153,838 Income before income taxes 37,787 30,320 27,290 Income tax expense 12,827 8,504 9,611 Net income $24,960 $21,816 $17,679 Weighted average common and common equivalent shares outstanding: Basic 30,037 29,891 31,902 Diluted 31,163 31,040 32,836 Earnings per share: Basic $0.83 $0.73 $0.55 Diluted $0.80 $0.70 $0.54 UNIVERSAL COMPRESSION HOLDINGS, INC. UNAUDITED SUPPLEMENTAL INFORMATION (Dollars in thousands) Three Months Ended September 30, June 30, September 30, 2006 2006 2005 Revenue: Domestic contract compression $101,058 $101,460 $81,964 International contract compression 36,251 35,010 31,076 Fabrication 57,642 38,528 28,193 Aftermarket services 51,981 43,718 39,895 Total $246,932 $218,716 $181,128 Gross Margin: Domestic contract compression $66,192 $65,668 $52,115 International contract compression 27,283 26,580 22,989 Fabrication 10,048 4,731 3,424 Aftermarket services 10,677 7,359 8,113 Total $114,200 $104,338 $86,641 Selling, General and Administrative $30,149 $29,461 $21,012 % of Revenue 12% 13% 12% EBITDA, as adjusted $84,048 $75,237 $66,153 % of Revenue 34% 34% 37% Capital Expenditures $58,552 $59,402 $38,642 Proceeds from Sale of PP&E 5,175 4,070 3,876 Net Capital Expenditures $53,377 $55,332 $34,766 Gross Margin Percentage: Domestic contract compression 65% 65% 64% International contract compression 75% 76% 74% Fabrication 17% 12% 12% Aftermarket services 21% 17% 20% Total 46% 48% 48% Reconciliation of GAAP to Non-GAAP Financial Information: Net income $24,960 $21,816 $17,679 Income tax expense 12,827 8,504 9,611 Depreciation and amortization 31,154 30,013 26,439 Interest expense, net 15,152 14,605 13,034 Foreign currency (gain) loss (45) 299 (610) EBITDA, as adjusted(1) 84,048 75,237 66,153 Selling, general and administrative 30,149 29,461 21,012 Other (income) loss, net 3 (360) (524) Gross Margin(1) $114,200 $104,338 $86,641 September 30, June 30, September 30, 2006 2006 2005 Debt and Capital Lease Obligations $914,116 $898,855 $818,646 Stockholders' Equity $927,662 $904,308 $908,605 Total Debt to Capitalization 49.6% 49.8% 47.4% (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 September 30, June 30, September 30, 2006 2006 2005 Total Available Horsepower (at period end): Domestic contract compression 2,017 1,989 1,948 International contract compression 599 595 565 Total 2,616 2,584 2,513 Average Operating Horsepower: Domestic contract compression 1,792 1,794 1,751 International contract compression 547 549 524 Total 2,339 2,343 2,275 Horsepower Utilization: Spot (at period end) 89.8% 90.2% 91.0% Average 90.0% 91.1% 91.0% Fabrication Backlog (in millions) $268 $275 $114 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 Holdings, Inc., +1-713-335-7460 Web site: http://www.universalcompression.com/

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