“As was the case last year, the first quarter of 2012 is expected to be the low point of the year with revenues expected to be somewhat lower than first-quarter 2011 levels. We are implementing several initiatives to improve our profitability and cash flow and to reduce Exterran parent debt levels over the remainder of 2012 and beyond. We are committed to improving our overall performance and creating value for our stockholders.”
Profit Improvement Program
To enhance its competitive position, in 2011 Exterran embarked on a multi-year plan to improve the profitability of its operations. Exterran’s profitability initiatives are expected to benefit all of its business segments and geographies. As the largest provider of compression services in the world, Exterran intends to use its scale to achieve meaningful cost savings in its operations which it believes will provide better value to its customers. Exterran is also focused on increasing productivity and optimizing its processes in its core lines of business. By making its systems and processes more efficient, Exterran expects to lower its internal costs of doing business and improve its profitability.
As an initial step in implementing a profit improvement plan, in the fourth quarter of 2011 Exterran implemented a workforce cost reduction program across all of its business segments. A vast majority of the identified workforce reductions were completed in the fourth quarter 2011. Exterran is expected to generate annual savings from the workforce cost reduction program of approximately $20 million to $25 million, with approximately $10 million to $15 million of those savings within selling, general and administrative expense. Restructuring charges incurred during the fourth quarter 2011 and full year 2011 totaled $8.7 million and $11.6 million, respectively, related to consulting services and termination benefits. Exterran Holdings is currently expected to incur additional charges with respect to the profit improvement initiative of approximately $3.1 million in 2012.