Archrock Inc (AROC) 2012 Q1 法說會逐字稿

Good morning. Welcome to the Exterran Holdings Inc. and Exterran Partners LP First Quarter 2012 Earnings Conference Call. At this time, I would like to inform you this conference is being recorded and that all participants are in a listen-only mode. We will open the teleconference for questions after the presentation.

Earlier today, Exterran Holdings and Exterran Partners released their financial results for the first quarter ended March 31st, 2012. If you have not received a copy, you can find the information on the Company's website at Exterran.com.

During this call, the companies will discuss some non-GAAP measures in reviewing their performance, such as EBITDA is adjusted, EBITDA as further adjusted, gross margins, gross margin as adjust and distributable cash flow. You will find definitions and a reconciliation of these measures to GAAP measures in the summary pages of the earnings release and on the Company's web site, at Exterran.com.

During today's call, Exterran Holdings may be referred to as Exterran or EXH, and Exterran Partners as either Exterran Partners or EXLP. Because EXLP's financial results and position are consolidated into Exterran, the discussion of Exterran will include Exterran Partners, unless otherwise noted. Also the term International will be used to refer to Exterran's operations outside the US and Canada. And the combination of US and Canada will be referred to as North America.

I want to remind listeners that the news release issued this morning by Exterran Holdings and Exterran Partners, the companies' prepared remarks on this conference call, and the related question-and-answer session include forward-looking statements. These forward-looking statements include projections and expectations of the Company's performance and represent the Company's current beliefs. Various factors could cause results to differ materially from those projected in the forward-looking statements.

Information concerning the risk factors, challenges and uncertainties that could cause actual results to differ materially from those in the forward-looking statements can be found in the Company's press release, as well as in the Exterran Holdings annual report on Form 10-K for the year ended December 31st, 2011, Exterran Partners annual report on Form 10-K for the year ended December 31s, 2011, and those set forth from time to time in Exterran Holdings and Exterran Partners filings with the Securities and Exchange Commission, which are currently available at Exterran.com. Except as required by law, the companies expressly disclaim any intention or obligation to revise or update any forward-looking statements.

Your host for this morning's call is Brad Childers, President and CEO. I would now like to turn the call over to him. Mr. Childers, you may begin your conference.

Thank you. Good morning, everyone. With me today is Bill Austin, CFO of Exterran Holdings, and David Miller, CFO at the Exterran Partners level.

Overall, it was a good quarter for us, both operationally and financially. We generated better than expected operating results. We increased our backlog of new business significantly. And we reduced our debt levels. We generated these results by focusing on the three major items that I mentioned in our previous earnings call would be our areas of focus. First, enhancing our cash flow and profitability by taking cost out of our operations, by continuing to reduce and right size our SG&A, by increasing pricing where it makes sense. Second, consolidating and simplifying our businesses to make us faster and more efficient. Finally, by expanding in our active growth markets.

Although we're just getting started, I believe the actions we're taking are positively impacting our performance, as demonstrated by our results for the quarter. I want to spend a few minutes highlighting some of the initiatives that have contributed to this positive impact. Starting with our operating cost reduction initiatives; we focused on improving our contract operations and after-market services costs. We did this by more actively managing utilization of our employees in these operations,which led to improved labor efficiency and lower costs. Additionally, we enhanced the controls over our lube oil usage, which resulted in a reduction in the amount of lube oil we used and helped to offset the impact of high lube oil prices.

To further improve our cost structure, we continue to examine the infrastructure we use to manage our Business to find areas where we can further reduce costs. In the first quarter, we made an additional consolidation of regional management teams in North America and closed the three International locations we discussed last quarter. While these actions generated savings for us, we've reinvested those savings into ourselves, business development, project management and [spot change] functions.

We're starting to see returns from those investments. One other operational aspect we focused on during the quarter was our pricing. As we discussed last quarter, we implemented a price increase effective in February in our North America contract operations business. And we're seeing the benefits of this increase currently. We implemented stronger, centralized management over pricing in our ENS business earlier this year, which helped to improve the margins we're realizing in that business, both in North America and internationally.

We also instituted more disciplined, centralized pricing in our fabrication business, which has resulted in higher margins associated with the large amount of bookings we achieved during the quarter. As we work through our backlog, we expect to realize these benefits by way of improved fabrication gross margin percentage in the second half of the year.

We've also taken some first steps toward consolidating and simplifying our Business. We halted plans to build a fabrication facility in Brazil for [FP and sill] related topside equipment, and we sold a contract operations facility in West Africa, which has allowed us to significantly reduce our infrastructure in the area. We will continue to look for opportunities in all of these areas to improve our operations and deliver value to our customers and our stockholders.

With respect to actions we're taking to expand in our growth markets; we've invested in ourselves and business development teams, which are doing an outstanding job of capturing new business. Driven by robust bookings in liquids rich and shale plays in the US, our fabrication backlog increased by $217 million or 33% from year-end levels. As I mentioned before, this backlog has been improved while increasing pricing, a testament to the job of our sales teams.

In addition to these operational achievements, we completed two major transactions in the first quarter. First, we completed a $183 million drop down transaction with Exterran Partners. We remain committed to sell the remainder of our US contract operations business to Exterran Partners over time.

Second, we sold our Venezuelan joint venture assets that were nationalized in 2009 to PDVSA for approximately $112 million, approximately $38 million of which was received in the first quarter, and the remaining amount of approximately $75 million is due to be received over the coming 16 quarters. Our subsidiary, Universal Compression International Holdings, has filed a separate arbitration proceeding against Venezuela related to its business assets and investments that were also nationalized in 2009. The sale of the joint venture assets has no effect on that separate arbitration claim, which is scheduled to go to arbitration in July of 2012.

Last year, we said -- last quarter we said that we were focused on reducing the debt leverage ratio at Exterran Holdings. And as a result of these actions, we were able to reduce Exterran Holdings covenant total debt to adjusted EBITDA from 4.3 times at the end of 2011 to 3.6 times at the end of the first quarter.

Now, I would like to turn to what we see the in our markets currently. In North America, we continue to see strong demand across our product lines in the liquids rich and shale plays. Bookings in our three major fabricated product lines; compression, processing and treating, and production equipment, have all been robust. Given the activity in these plays and the demand we expect to see for these products, we believe we'll continue to see robust activity for these product lines over the near term.

Current low natural gas prices will, however, pose a challenge to activity levels for our contract operations business in the near term, in particular, in primarily dry gas producing areas. This may largely offset horsepower gains we expect to see in the liquids rich areas, given our large presence in these dry gas areas. In the intermediate and long-term, we remain optimistic about growth opportunities in all of our product and service lines as a result of the role of natural gas as a readily available and cost-effective source of energy.

In international markets, although bookings have not increased substantially to date, we believe that the recent pick-up in exploration and development activity and spending in international markets will lead to more spending on the production side in the near term. As we continue to work on rebuilding our backlog, we are seeing more opportunities and believe our increasing opportunity set will turn into increased bookings.

Now, I would like to turn the call over to Bill for a review of our financial results.

Thanks, Brad. To summarize, we are encouraged with the progress we've made in the first quarter of 2012. We had better than expected operating results and an increased backlog of new business. Importantly, our financial position improved significantly as a result of positive developments during the quarter. While we did have certain one-time benefits and offsets in the first quarter, we're set up for relatively similar operating results in the second quarter, to be followed by an improving overall trend in the second half of the year, driven by the execution of our backlog of new business, as well as cost improvements. Overall, I believe that we're somewhat ahead of our plans, although there will be some lumpiness in our results, moving forward, based on the nature of our Business.

Now I will provide a summary of these results. We generated EBITDA as adjusted of some $96 million for the first quarter, as compared to $119 million in the fourth quarter of 2011. EBITDA, as adjusted for the quarter, excluded the $37.6 million in cash proceeds from the sale of our joint venture assets in Venezuela.

Our North American contract operations revenues was $154 million in the first quarter, somewhat above our guidance range. And gross margin was 51% for the first quarter. That's up from 49%, both in the fourth quarter of last year and the full year 2011. As Brad mentioned earlier, our performance benefited from our February price increase, profit improvement initiatives, including what he described and what we have described as work force utilization and lube oil management.

North American operating horsepower declined by some 6,000 horsepower during the first quarter, as growth in the liquids rich and oil plays were somewhat offset by the declines in the conventional, more dry gas areas. North American operating and horsepower was approximately 2.9 million horsepower at March 31st.

Looking ahead at the second quarter, we expect North American contract operation revenues and margins to be modestly up as compared to the first quarter levels.

Maintenance capital was $16 million in North America during the first quarter, as compared to $18 million in the fourth quarter of 2011. Maintenance capital spending in the second quarter is expected to be somewhat higher than the first quarter levels, again similar to the trend we saw last year.

In the first quarter, our International contract operations revenue was $113 million and gross margin was 61%, both somewhat above our guidance. Our performance benefited from the accelerated revenue as a result of the sale of a facility in West Africa, as mentioned earlier by Brad. We also had an inflation recovery billings in Argentina and contributions from our profit improvement initiatives.

Looking at the second quarter, we expect International contract operation revenues will be slightly lower to the first quarter levels, and margins in the mid 50% range, somewhat down from the first quarter levels. We expect increased revenues in the second half of the year, driven primarily by the contribution of new projects, including a large compression project in the Middle East and a processing facility in Mexico.

Our current backlog for International contract operations work is in excess of $60 million of annualized revenue. Backlog in this area was up approximately $20 million over year-end results, as a result of the bookings of new business in Brazil, Mexico and Indonesia.

Moving to fabrication results in the first quarter; revenue came in at $262 million, above our guidance range, as we were able to accelerate some second quarter initiatives into the first quarter. Gross margins increased from 7% in the fourth quarter to some 10% in the first quarter.

Our fabrication backlog, as Brad indicated, increased significantly from $666 million at the end of 2011 to some $883 million at the end of the first quarter. Robust demand in liquids rich plays in North America has been the primary driver, although we're optimistic about a rebound in our International activity, based on the increasing number of opportunities. By the way, as an example of this increased demand and backlog, we're quoting delivery times in our process and treating equipment into the mid 2013 levels.

Fabrication revenue during the first quarter was comprised of about 35% compression, 50% production and processing,15% [below]. For both revenues and backlog, about 70% were from North America, and about 30% International. For the second quarter, we expect fabrication revenues again in that $240 million to $260 million, with margins in that 10% range. With our higher backlog levels, we expect to see increased fabrication revenue in the second half of the year and see the benefit of improved pricing, which is embedded in our backlog, which was -- a lot of which is recently priced.

In our after-market services business, in the first quarter, revenue came in at $97 million and gross margin was 18%, both better than expected and a significant improvement over the first quarter of 2011 levels. In North America, we benefited from increased field activities due to relatively warm weather. Our profitability also benefited from profit improvement initiatives, including more disciplined and centralized pricing and better utilization of the field work force. Looking at the second quarter, we expect after-market services revenues in the $90 million to $100 million range, and margins to be in the high teens.

Moving on to the SG&A expenses. They came in at $96 million in the first quarter, somewhat higher than expected, driven by $4.2 million increase in reserves for our sales and use tax receivables. This was based on our view as to their collectability. We expect SG&A expenses to be down in the low $90 million range in the second quarter.

Net capital expenditures were $96 million in the first quarter. Gross capital spending was about $66 million, including $34 million in North America, primarily for our previously announced fleet build. Proceeds from the first quarter PP&E sales were $10 million. Maintenance capital for the quarter was $22 million, including $16 million in North America.

On the balance sheet, total consolidated debt decreased by $64 million during the quarter, from $1.77 billion as of December 31st, to $1.71 billion at March 31st. Exterran Holdings, that was $1.04 billion, and Exterran Partners came in at $636 million. In the first quarter of 2012, Exterran Holdings debt, this is exclusive of the MLP, declined by $154 million. We are committing to generate cash flow and further reducing borrowings at that current level.

Available but undrawn debt capacity at March 31st was approximately $665 million, including $265 million at Partners. As of March 31st, Exterran Holdings had a total debt -- total leverage ratio, that is a covenant total debt to adjusted EBITDA of 3.6%, a significant improvement as compared to the 4.3% at December 31st, 2011. The partnership EXLP had total debt ratio of 3.6%, as opposed to 3.7% at the end of the fourth quarter. We have no significant debt maturities until January of 2014 at Exterran, and November 2015 at EXLP.

Let's take a quick look at the Exterran Partners. To summarize, Exterran Partners had another good quarter of performance, including solid operating results; the completion of an acquisition from Exterran, an increase in its borrowing capacity to help fund future growth, and an increase in its quarterly distribution. As Brad noted, earlier the MLP completed a purchase of compression and processing assets from Exterran in March, the Partnership now has a total of about 2.1 million horsepower or about 59% of the combined US contract operations business of Exterran Holdings and Exterran Partners.

In March 2012, we amended the partnership senior secured credit facility to increase its size by an additional $200 million, up to $900 million. This additional debt capacity will enable us to finance the organic growth of EXLP's compression service business and position the partnership for future acquisitions.

Late last month, the partnership announced a quarterly distribution increase for the first quarter of 2012, and this distribution now equals $1.99 on an annualized basis. This distribution is $0.005 higher than the fourth quarter of 2011 distribution and $0.02 higher than the first quarter of 2011.

The partnership generated EBITDA as further adjusted of $40 million and distributable cash flow of $26.9 million in the first quarter. Distributable cash flow covered the first quarter of distribution by some 1.2 times. Exterran Partners benefited from a partial quarter benefit from the assets purchased from Exterran in March.

Taking into account for the acquisition completed in March, we expect Partners' maintenance capital will be in the $40 million to $45 million range in 2012.

Now, finally, we are working at completing our 10-Qs, and we're specifically working on a couple of items related to the Exterran Holdings 10-Q. The first item is a misclassification in our consolidated statements of cash flow that will cause us to reclassify two financing activities, cash flows from the sale of Exterran Partners Equity, previously classified as an investing activity in 2011 and 2010. The second item we're working on is a classification issue in our guarantor information footnote schedules.

These items had no impact on our consolidated balance sheets, consolidated statements of operations, or our cash flows from operating activities in our consolidated statements of cash flows. In addition, there is no impact to the consolidated financial statements or footnotes of Exterran Partners. We are working through the impact of these items on our evaluation of internal controls over financial reporting.

The outcome of this review will range from correcting this area prospectively in future filings, to amending or restating the above-described items through the filings of a 2011 Form 1-K A. If we determine that an amendment or restatement of our 2011 10-K is required, we would reflect the proceeds from sales of Exterran Partners Equity in financing activities, and we would reflect the necessary reclassification in the schedules contained within the guarantor information footnote.

We plan to file the EXLP 10-Q in the next few days and we plan to file Exterran Holdings 10-Q shortly after completing the work on the items just discussed.

I'll turn it back to Brad for some concluding remarks. Brad?

Thanks, Bill. My summary for this call -- we had a good quarter. We addressed some of the challenging issues during the quarter. And we've begun to see contributions from our various performance improvement initiatives. Throughout the year, we're going to continue to focus on improving our margins across all of our product lines, growing our operating horsepower in North America contract operations, although we're concerned about the impact of the natural gas prices in the near term, building our International backlog, reducing our debt to EBITDA ratio at the Exterran Holdings level, and simplifying our Company, in terms of our business processes, product and service lines and support infrastructure.

We're really encouraged by the initial progress we've made in the implementation of our initiatives. And we'll continue our efforts to improve our overall performance. We look forward to providing further updates in upcoming earnings calls.

Operator, at this point, we would like to open the call up for questions.

(Operator Instructions). Our first question is from Mike Urban from Deutsche Bank. Please go ahead.

Thanks, good morning, guys.

Good morning, Mike.

Quick housekeeping item on the 10-Q filing and some of the items you went through. Just to understand, is this just a categorization issue? Is there any impact on cash flow covenants? Anything that I'm missing here?

Hey, Mike, good question. Maybe we can put this to bed. It is fairly narrow. I tried to get into the fact that one is a misclassification from investing to financing. And that moves some numbers down. It doesn't change any of the cash flows, none of the consolidated. Nothing that's on the big picture of what EXH or EXLP looks at.

The other is in the guarantor note. The reason you have to put a guarantor note is because we have debt instruments that are out there that have guarantees from various of our subsidiaries, you have to have a statement in the note of cash flows and balance sheets and some other financials in some of those subsidiaries, both at the parent and in some of the operating subsidiaries. As we looked at that in our review, we looked at it and we realized that some of those things have to change. And we're looking at the controls and we're looking at making those changes. But all in all, the numbers on the consolidated basis don't change.

So basically, the numbers should have been in one line and it was another and it nets to zero? More or less?

Yes.

Okay. And shifting over to the business. Certainly makes sense to note some caution with respect to gas prices and where they are and the potential impact. Is that something more perspective? In other words, given the low gas price, we should expect to see some impact? Or is it something that you've already seen in the way of shut-ins or reduced activity in some of the dry gas basins and that's been -- we saw some impact of that in Q1?

Sure. We truly haven't seen much impact of shut-in activity in Q1. The point is and as you said, Mike, we just have to raise the caution that there's uncertainty right now looking out as to how long this low gas price is going to last, and what the reaction will be by our customers in the back half of the year, especially. But with that caution flag raised, we're not withstanding, working to deliver horsepower growth. And my expectation is that we're flat to growing in 2012, based on the activity levels we're seeing, currently.

Okay. Even if you do see some level of shut-ins or reduced dry gas activity?

Yes. But the extent is to be determined. That's the point about the uncertainty in the market.

Okay. And on the cost and margin front in North America, you see only a partial quarter of the price increase. At this point, as we're in the second quarter here now, do you have -- can you give us a sense of how much the book has rolled to the higher pricing? And how much of an impact did that have in the first quarter?

Sure. So the price increase is fully in. It was effectively implemented, we got no real resistance or pushback. So the price increase has stuck. And on an annualized basis, it is going to increase our revenue on a per horsepower basis by about 2%. We saw a little more than half of that in the first quarter.

Okay. Very helpful. And then it was great to see some recovery on the Venezuela JV assets. What was -- apples-to-apples, what was the book value of those assets, net to Exterran? I'm trying to get a sense for what you got in relative to the book value of the assets on an apples-to-apples basis.

We wrote off about $91 million in 2009, when those assets were nationalized, Mike.

That's right.

Okay. And the wholly-owned assets, what does the book value of those -- what did you write off when those were nationalized?

Yes, we wrote off about $380 million when those assets were nationalized, at a total dollar level. But we also had a $50 million recovery for an insurance policy that we had in place applicable to the expropriation. So the net hit to us was $330 million.

Okay. I will let some others go and I can requeue. Thank you.

Great, thanks.

Our next question comes from Joe Gibney from Capital One. Please go ahead.

Thanks, good morning. Just a couple of quick ones for me. Just, Bill, on the G&A side, you referenced moving down to the low $90 million range in Q2, in line with previous expectations. Does it head lower in the back half of the year? Just trying to calibrate on your expectations for tightening up costs on the G&A side.

I like to (inaudible). We expect progress throughout the year. How's that?

Fair enough. Brad, one for you, broader perspective on the FPSO space and how Exterran fits in and you want to compete. You reference you are halting plans to build in Brazil, that's understandable. Trying to understand your perspective on where Exterran fits into the FPSO side of the equation from a fabrications standpoint.

Sure. On that particular decision, we just determined with what we have going on in our portfolio, potentially not a bad investment, but not the right investment for us right now. So that was the decision on that particular investment. But in the FPSO market overall, we continue to service that market out of our Singapore facility. And because of local content requirements in Brazil, we'll be targeting other markets where we still see growth in that market, including West Africa. So the decision is limited to pulling back on the investment that we were -- that we had put in place to make in Brazil.

Okay, fair enough. And just on the North America contract side, I just wanted to follow up and question -- you referenced despite some dry gas cautionary flags, you still expect flat to growth in horsepower. If you could, what is your horsepower mix on a dry gas versus liquids basis percentage of the fleet? It would be helpful to understand your mix, currently.

Sure. This is an estimate. But we think we are about 70% dry gas and 30% more liquids-based applications, currently.

Okay. Helpful. I appreciate it. Thank you, gentlemen. I'll turn it back.

Our next question is from Sharon Lui from Wells Fargo. Please go ahead.

Hi, good morning.

Hi, Sharon.

A couple of housekeeping questions for EXLP. In terms of growth Cap Ex, what is the budget for 2012 for the partnership?

With the drop-down, it is around $40 million to $45 million.

Is that just maintenance?

Did you say growth Cap Ex?

Yes.

That was maintenance Cap Ex.

Let's see. Sharon, can I get back to you with that number?

Sure, no problem. Do you have the debt balance for the partnership?

I think we quoted it at the end of -- it was $635.5 million.

Okay. In terms of your exposure to specific producers, would you be able to quantify how much does Chesapeake account for your contract compression business, given that they're planning to significantly reduce rig count activity?

We do not have a significant amount of business with Chesapeake.

Okay, great. Thank you.

Sharon, our growth Cap Ex is in the $75 million to $80 million range for 2012.

That's for the partnership?

Yes.

Okay. And do you know what was the expenditures during the first quarter?

Just above $25 million -- about $26 million.

Okay, great. Thank you so much.

Our next question comes from Daniel Burke from Johnson Rice. Please go ahead.

Good morning, guys.

Good morning.

Hey, Daniel.

Quick one, before I forget about it. Bill, I think you referenced a couple of items in the International contract result in Q1. Any sense of the magnitude of those?

Yes, we had a sale. It was in West Africa to a good customer that had a right to buy it. And that sale from a cash basis will come in in the low tens of millions of dollars. From a benefit from us, from an EBITDA standpoint, it was probably in the $4 million to $5 million range.

To be clear, I see that in -- I'll see those two figures in the revenue and gross margin at the segment level in International contract?

You will.

Okay.

The sale of the property, Daniel, would not be in the segment.

That's right. That's in PP&E, I'm sorry. You'll see the EBITDA, though, in the gross margin.

Okay.

The net gain or loss from the sale would be included in other income.

Okay. All right. Thanks. And then on the International contract backlog side, in terms of timing of having that -- those dollars hit the P&L, what's the horizon? By Q1 of 2013, should that $60 million figure be fully rolled in? Or is the horizon stretching out a little bit farther?

Almost all of that $60 million is going to be implemented this year. So we should have the full run rate of that in the -- certainly, by the fourth quarter.

Okay, great. And then last one for me, actually refers back to the last question, so it has been covered a bit here. But given the context that the expectation in NACCO is to maintain or see a slight gain in operating horsepower, so maybe just a hair softer than last quarter's expectation -- any change to your build plans internally for this year?

Not yet. And the basic reason is where we're building are for parts of the fleet that are primarily going into the growth areas, which are driven by the rich plays and liquids infrastructure build-out that we're really seeing. In those categories for that equipment, we remain very highly utilized. It hasn't yet impacted our build program.

Great. Thank you, guys.

Our next question comes from Blake Hutchinson from Howard Weil. Please go ahead.

Morning, guys.

Good morning.

Hey, Blake.

Just talking about fabrication first, it's such -- taking over in terms of prominence, at least with that sort of backlog build. What type of embedded pricing improvement do you have -- or pricing push have you put into North American based operations on the processing and treatment side thus far?

Well, we're not going to talk about pricing, specifically. But given the tightness in the market and the capacity in the market, we found room. We're pushing pricing up. You should continue to look as we get that -- the recently contracted projects working through our backlog throughout the year, you'll see steadily improving margins in that segment as well as the others.

Okay, so that was going to be really my next question -- is despite the fact that we've shifted -- the backlog has shifted more toward North America, whatever pricing you put through, you feel like you take most, if not all of that home, so maybe we have a couple hundred basis points of opportunity to push, even though -- that North America margins have been, up to this point, inferior to International margins.

Sure. The point is valid. In the mix of the backlog, the North America portion, in compression in particular, has certainly increased compared to International. But for North America compression, as well as the processing treatment production equipment, we continue to see ability to move margin forward. That's despite some of that headwind that we get in the mix coming off of International.

We're not missing anything on the cost side that would hurt that possibility here in North America?

No.

And then -- Bill, with regard to the International compression margin guidance, understanding there were some one-timers in Q1, is a retreat to the mid-50s kind of more symptomatic of a lower revenue run rate, and then the International revenue that you add over the second half of the year is accretive to the mid-50s margin guidance? And we maybe can consider something a little higher than natural margin in that business, going forward?

Boy, that's a big question, Blake. We did try to take out the effect of the sale in the first quarter. In giving that guidance, I wanted to get into that mid-50s. But we have lots of initiatives to work that one hard, let's put it that way. The backlog that we're getting is good, high-quality backlog in the initial contract side.

Okay. Fair enough. I think that's it for me. I'll turn it back.

(Operator Instructions). Our next question is a follow-up from Mike Urban from Deutsche Bank. Please go ahead.

Thanks for letting me back in. Mostly housekeeping items; what is your depreciation D&A guidance for the year?

Mike, you may get me to relook at some papers. I don't think we gave any depreciation guidance. But let me -- I may have to get -- typically, we have some increases based on the CapEx number. But I'll have to give you a little more -- it is a little bit above where we were. We're showing it increasing a little bit over last year.

Okay.

I'll try to get a little more specific on that in the next day or two.

Okay. And the only other thing I had was -- you talked about how much of the price increase you saw in the quarter. The other part of the margin equation is some of the cost and efficiency initiatives you talked about, better employee utilization, cost management and things that you've implemented in terms of lube oil and other costs. Did you get a full benefit from that in the first quarter? Or is there still a little bit more benefit to come from those initiatives, as well?

We did get some benefit from that in the quarter. We saw some nice moves on -- and reductions in our labor and materials costs. But yes, we do believe we have more to come from some of those improvement initiatives that we have in place. We got some. We're actually really encouraged by seeing that some of the work we're doing is coming through in the numbers. And yes, we have more to go.

Okay. That's all for me. Thank you.

Yes.

We have no further questions. At this time, I would like to turn the call back over to Brad Childers for closing remarks.

Thank you, everyone for participating in our first quarter earnings call. And we look forward to talking to you again next quarter. Thanks very much.

Thank you. Ladies and gentlemen, this concludes Exterran Holdings and Exterran Partners First Quarter 2012 Earnings Conference Call. Thank you for participating. You may now disconnect.