SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FOR THE TRANSITION PERIOD FROM TO

Securities registered pursuant to Section 12(b) of the Exchange Act:

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

x☐

Accelerated filer

o☒

Non-accelerated filer

o☐

Smaller reporting company

o☐

Emerging growth company

o☐

Number of shares of the common stock of the registrant outstanding as of ~~April 25, 2019: 36,327,036~~May 4, 2020: 33,150,524 shares.

Table of Contents

TABLE OF CONTENTS



			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)			3
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Operations			4
Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss			5
Condensed Consolidated Statements of Stockholders’ Equity			6
Condensed Consolidated Statements of Cash Flows			7
Notes to Unaudited Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2921
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3933
Item 4. Controls and Procedures			3934
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			4135
Item 1A. Risk Factors			4135
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4136
Item 3. Defaults Upon Senior Securities			4136
Item 4. Mine Safety Disclosures			4136
Item 5. Other Information			4136
Item 6. Exhibits			4237
SIGNATURES			4338

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXTERRAN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

(unaudited)


	March 31, 2019			December 31, 2018				March 31, 2020		December 31, 2019
ASSETS							ASSETS

Current assets:							Current assets:
Cash and cash equivalents	$	18,576		$	19,300		Cash and cash equivalents	$	18,138	$	16,683
Restricted cash	178			178			Restricted cash	14		19
Accounts receivable, net of allowance of $5,350 and $5,474, respectively	266,286			248,467
Inventory, net (Note 5)	166,891			150,689
Accounts receivable, net of allowance of $8,773 and $6,019, respectively							Accounts receivable, net of allowance of $8,773 and $6,019, respectively	196,298		202,337
Inventory, net (Note 4)							Inventory, net (Note 4)	137,881		143,538
Contract assets (Note 2)	70,636			91,602			Contract assets (Note 2)	41,554		46,537
Other current assets	40,173			44,234			Other current assets	24,982		22,477
Current assets associated with discontinued operations (Note 4)	8,570			11,605
Current assets associated with discontinued operations (Note 3)							Current assets associated with discontinued operations (Note 3)	4,388		4,332
Total current assets	571,310			566,075			Total current assets	423,255		435,923
Property, plant and equipment, net (Note 6)	943,488			901,577
Operating lease right-of-use assets (Note 3)	29,782			—
Property, plant and equipment, net (Note 5)							Property, plant and equipment, net (Note 5)	815,064		844,410
Operating lease right-of-use assets							Operating lease right-of-use assets	27,343		26,783
Deferred income taxes	12,024			11,370			Deferred income taxes	10,102		13,994
Intangible and other assets, net	84,329			86,371			Intangible and other assets, net	82,424		93,300
Long-term assets associated with discontinued operations (Note 4)	1,629			1,661
Long-term assets held for sale							Long-term assets held for sale	624		624
Long-term assets associated with discontinued operations (Note 3)							Long-term assets associated with discontinued operations (Note 3)	2,786		2,970
Total assets	$	1,642,562		$	1,567,054		Total assets	$	1,361,598	$	1,418,004

LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:							Current liabilities:
Accounts payable, trade	$	188,109		$	165,744		Accounts payable, trade	$	84,970	$	123,444
Accrued liabilities	113,269			123,335			Accrued liabilities	95,229		104,081
Contract liabilities (Note 2)	139,975			153,483			Contract liabilities (Note 2)	106,399		82,854
Current operating lease liabilities (Note 3)	6,738			—
Current liabilities associated with discontinued operations (Note 4)	11,713			14,767
Current operating lease liabilities							Current operating lease liabilities	7,079		6,268
Current liabilities associated with discontinued operations (Note 3)							Current liabilities associated with discontinued operations (Note 3)	8,562		9,998
Total current liabilities	459,804			457,329			Total current liabilities	302,239		326,645
Long-term debt (Note 7)	433,952			403,810
Long-term debt (Note 6)							Long-term debt (Note 6)	455,341		443,587
Deferred income taxes	6,762			6,005			Deferred income taxes	742		993
Long-term contract liabilities (Note 2)	134,997			101,363			Long-term contract liabilities (Note 2)	145,211		156,262
Long-term operating lease liabilities (Note 3)	28,277			—
Long-term operating lease liabilities							Long-term operating lease liabilities	31,515		30,958
Other long-term liabilities	35,821			39,812			Other long-term liabilities	45,877		49,263
Long-term liabilities associated with discontinued operations (Note 4)	5,765			5,914
Long-term liabilities associated with discontinued operations (Note 3)							Long-term liabilities associated with discontinued operations (Note 3)	1,045		758
Total liabilities	1,105,378			1,014,233			Total liabilities	981,970		1,008,466
Commitments and contingencies (Note 15)
Commitments and contingencies (Note 13)							Commitments and contingencies (Note 13)
Stockholders’ equity:							Stockholders’ 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; 37,468,801 and 36,868,066 shares issued, respectively	375			369
Preferred stock, $0.01 par value per share; 50,000,000 shares authorized; 0 issued							Preferred stock, $0.01 par value per share; 50,000,000 shares authorized; 0 issued	—		—
Common stock, $0.01 par value per share; 250,000,000 shares authorized; 37,747,968 and 37,508,286 shares issued, respectively							Common stock, $0.01 par value per share; 250,000,000 shares authorized; 37,747,968 and 37,508,286 shares issued, respectively	377		375
Additional paid-in capital	738,448			734,458			Additional paid-in capital	747,905		747,622
Accumulated deficit	(220,255		)	(208,677		)	Accumulated deficit	(335,542)		(317,238)
Treasury stock — 1,141,491 and 721,280 common shares, at cost, respectively	(18,647		)	(11,560		)
Treasury stock — 4,597,914 and 4,467,600 common shares, at cost, respectively							Treasury stock — 4,597,914 and 4,467,600 common shares, at cost, respectively	(57,402)		(56,567)
Accumulated other comprehensive income	37,263			38,231			Accumulated other comprehensive income	24,290		35,346
Total stockholders’ equity (Note 12)	537,184			552,821
Total stockholders’ equity (Note 10)							Total stockholders’ equity (Note 10)	379,628		409,538
Total liabilities and stockholders’ equity	$	1,642,562		$	1,567,054		Total liabilities and stockholders’ equity	$	1,361,598	$	1,418,004

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

EXTERRAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

EXTERRAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS~~’ ~~EQUITY~~COMPREHENSIVE LOSS

Common Stock Additional Paid-in Capital Accumulated Deficit Treasury Stock
Accumulated
Other
Comprehensive
Income
Total
Balance, January 1, 2018 $ 362
$ 739,164
$ (223,510 ) $ (6,937 ) $ 45,707
$ 554,786
Cumulative-effect adjustment from adoption of ASC 606 (Note 2)

(10,021 )

(10,021 )
Net income

5,337

5,337
Options exercised

428

428
Foreign currency translation adjustment

757
757
Treasury stock purchased

(3,440 )

(3,440 )
Stock-based compensation, net of forfeitures 5
3,599

3,604
Balance, March 31, 2018 $ 367
$ 743,191
$ (228,194 ) $ (10,377 ) $ 46,464
$ 551,451

Balance, January 1, 2019 $ 369
$ 734,458
$ (208,677 ) $ (11,560 ) $ 38,231
$ 552,821
Cumulative-effect adjustment from adoption of ASC 842 (Note 1)

(6,184 )

(6,184 )
Net loss

(5,394 )

(5,394 )
Foreign currency translation adjustment

(968 ) (968 )
Treasury stock purchased

(7,087 )

(7,087 )
Stock-based compensation, net of forfeitures 6
3,990

3,996
Balance, March 31, 2019 $ 375
$ 738,448
$ (220,255 ) $ (18,647 ) $ 37,263
$ 537,184


	Three Months Ended March 31,
	2020		2019
Net loss	$	(18,304)	$	(5,394)
Other comprehensive loss:
Foreign currency translation adjustment	(11,056)		(968)
Comprehensive loss	$	(29,360)	$	(6,362)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

EXTERRAN CORPORATION


	Common Stock		Additional Paid-in Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Income		Total
Balance, January 1, 2019	$	369	$	734,458	$	(208,677)	$	(11,560)	$	38,231	$	552,821
Cumulative-effect adjustment from adoption of ASC 842 Leases					(6,184)						(6,184)
Net loss					(5,394)						(5,394)
Foreign currency translation adjustment									(968)		(968)
Treasury stock purchased							(7,087)				(7,087)
Stock-based compensation, net of forfeitures	6		3,990								3,996
Balance, March 31, 2019	$	375	$	738,448	$	(220,255)	$	(18,647)	$	37,263	$	537,184

Balance, January 1, 2020	$	375	$	747,622	$	(317,238)	$	(56,567)	$	35,346	$	409,538
Net loss					(18,304)						(18,304)
Foreign currency translation adjustment									(11,056)		(11,056)
Treasury stock purchased							(835)				(835)
Stock-based compensation, net of forfeitures	2		283								285
Balance, March 31, 2020	$	377	$	747,905	$	(335,542)	$	(57,402)	$	24,290	$	379,628

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

EXTERRAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

EXTERRAN CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Description of Business

On November 3, 2015, Archrock, Inc. (named Exterran Holdings, Inc. prior to November 3, 2015) (“Archrock”) completed the spin-off (the ‘‘Spin-off”) of its international contract operations, international aftermarket services and global fabrication businesses into an independent, publicly traded company named Exterran Corporation.

Basis of Presentation

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption across most industries. Efforts to mitigate the spread of COVID-19 have also resulted in decreased energy demand and additional weakness in energy pricing. While the pandemic did not materially adversely affect the Company’s financial results and business operations in the Company’s first fiscal quarter ended March 31, 2020, the broader implications of COVID-19 on our long-term future results of operations and overall financial condition remain uncertain. Due to the rapid market deterioration in March 2020, we concluded that a trigger existed and that we should evaluate our long-term assets for impairment. Our analysis concluded that no impairment existed as of March 31, 2020.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~ (“ASC 842”). The update requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by leases. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statements of operations. The update also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. On January 1, 2019, we adopted the standard using the transition method that allows us to initially apply ASC 842 as of January 1, 2019 and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Additionally, we elected certain practical expedients permitted by ASC 842 in applying the lease standard upon adoption. Upon implementation of the new lease standard, we did not to reassess whether a contract is or contains a lease at the date of initial application. For contracts entered into before the transition date, we used the lease classification under the accounting standards in effect prior to adoption. We also excluded initial direct costs for the measurement of the right-of-use asset at the date of initial application. As a result of this adoption, as a lessee, we recorded operating lease assets and lease liabilities of $21.2 million and $26.5 million, respectively, as of January 1, 2019. The difference between the lease assets and lease liabilities, including prepayments, was recorded as an adjustment to retained earnings. The adoption of this standard did not have a material effect on our statements of operations and cash flows. See ~~Note~~ 3 ~~for the required disclosures related to the impact of adopting this standard.~~

~~As a result of the adoption of the new lease guidance, the following adjustments were made to the balance sheet as of January 1, 2019 (in thousands):~~

LIABILITIES AND STOCKHOLDERS’ EQUITY

~~From a lessor perspective, new customer contracts entered into or modified on or after January 1, 2019 have been assessed in accordance with ASC 842 and ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ (“ASC 606”), as applicable and will be assessed accordingly in future periods. Additionally, for contracts determined to have lease and nonlease components, we have elected to apply the practical expedient to not separate the components and account for those components as a single component, if the applicable conditions are met. Furthermore, for contracts where the nonlease component is determined to be the predominant component, revenue will continue to be recognized in accordance with ASC 606. During the three months ended March 31, 2019, there were no new customer contracts or amendments to existing customer contracts that were assessed to be within ASC 842.

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326). The update changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new forward-looking expected loss model that will result in the earlier recognition of allowance for losses. ~~This~~On January 1, 2020, we adopted this update ~~is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. Adoption will require~~using a modified retrospective ~~approach beginning with the earliest period presented. We are currently evaluating the potential impact~~approach. The adoption of ~~the~~this update onwas immaterial to our financial statements. For more information regarding the allowance for doubtful accounts, see Note 2.

Recently Issued Accounting Pronouncements Not Yet Adopted

On January 1, 2018, we adopted ASC 606 applying the modified retrospective method to all contracts that were not completed as of the date of adoption. We recorded a net increase to accumulated deficit of $10.0 million as of January 1, 2018 due to the cumulative impact of adopting ASC 606.

Disaggregation of Revenue

Contract operations services ⁽¹⁾

Operation and maintenance services ⁽¹⁾

Other services ⁽¹⁾

Compression equipment ⁽¹⁾

Processing and treating equipment ⁽¹⁾

Production equipment ⁽²⁾

Other product sales ^{(1) (2)}

Three Months Ended March 31,
Revenue by Products and Services 2019 2018
Contract Operations Segment:
Contract operations services ⁽¹⁾
$ 85,700
$ 96,493

Aftermarket Services Segment:
Operation and maintenance services ⁽¹⁾
$ 12,673
$ 13,875
Part sales ⁽²⁾
9,796
9,133
Other services ⁽¹⁾
4,833
3,363
Total aftermarket services $ 27,302
$ 26,371

Product Sales Segment:
Compression equipment ⁽¹⁾
$ 145,439
$ 131,559
Processing and treating equipment ⁽¹⁾
89,220
86,115
Production equipment ⁽²⁾
2,435
7,998
Other product sales ^{(1) (2)}
1,350
1,847
Total product sales revenues $ 238,444
$ 227,519

Total revenues $ 351,446
$ 350,383

⁽¹⁾Revenue recognized over time.

⁽²⁾Revenue recognized at a point in time.

Contract Operations Segment Product Sales Segment
Remainder of 2019 $ 226,634
$ 520,239
2020 202,500
29,531
2021 207,204
3,721
2022 168,224
—
2023 149,805
—
Thereafter 403,044
—
Total backlog $ 1,357,411
$ 553,491

~~Our~~Certain of our aftermarket services contracts are subject to cancellation or modification at the election of the customer.

If the primary component of our contract operations contracts is the lease component, the contracts are accounted for as operating leases. For these contracts, revenues are recognized on a straight-line basis. As of March 31, 2020, the total value of our contracts operations backlog accounted for as operating leases was approximately $177 million, of which $27 million is expected to be recognized in the remainder of 2020, $37 million is expected to be recognized in 2021, $39 million is expected to be recognized in 2022, $44 million is expected to be recognized in 2023 and $24 million is expected to be recognized in 2024. Contract operations revenue recognized as operating leases for the three months ended March 31, 2020 was approximately $7 million. Our product sales backlog includes contracts where there is a significant financing component. As of March 31, 2020, we had approximately $43 million expected to be recognized in future periods as interest income within our product sales segment.

Contract Assets and Contract Liabilities

March 31, 2019 December 31, 2018
Accounts receivables, net $ 266,286
$ 248,467
Contract assets and contract liabilities:
Current contract assets 70,636
91,602
Long-term contract assets 5,403
5,430
Current contract liabilities 139,975
153,483
Long-term contract liabilities 134,997
101,363

Allowance for Doubtful Accounts

~~As discussed in~~ ~~Note~~ 1~~, on January 1, 2019, we adopted ASC 842 retrospectively through a cumulative-effect adjustment as permitted under~~The Company estimates its reserves using information about past events, current conditions and risk characteristics of each customer, and reasonable and supportable forecasts relevant to assessing risk associated with the specific transitional provisions in ASC 842. Results for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported under the accounting standards in effect for the prior period.

We primarily lease various offices, warehouses, equipment and vehicles. A right-of-use asset represents our right to use an underlying asset for the lease term and a lease liability represents our obligation to make lease payments arising from the lease. Our operating lease right-of-usecollectability of accounts receivables, contract assets and ~~lease liabilities are recognized at the present value~~long-term note receivables. The Company’s customer base, have generally similar collectability risk characteristics, although larger customers may have lower risk than smaller independent customers. The allowance for doubtful accounts as of lease payments over the lease term at the time of lease commencement, adjusted to include the impact of any lease incentives. Leases with initial terms of 12 months or less are not recorded on our balance sheetsMarch 31, 2020 and ~~leases that contain non-lease components are combined with the lease component and accounted~~changes for ~~as a single lease component.~~

Our lease agreements are negotiated on an individual basis and contain a variety of different terms and conditions. They generally do not contain any material residual value guarantees or material restrictive covenants. Certain lease agreements include rental payments adjusted periodically for inflation. Additionally, some of our leases include one or more options to renew, with renewal terms that can extend the lease term from one month to 10 years. Options to renew our lease terms are included in determining the right-of-use asset and lease liability when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. During the three months then ended March 31, 2019, we recorded expense of $2.0 million for our operating leases, of which $0.1 million of expenses related to operating leases with initial terms of 12 months or less. We do not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. We used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date. As of March 31, 2019, the weighted average remaining lease term and weighted average discount rate applied for our operating leases were nine years and 8%, respectively.

~~As of March 31, 2019, our lease assets and lease liabilities consisted of the following (in thousands):~~

~~As of March 31, 2019, maturities of our operating lease liabilities consisted of the following (in thousands):~~

Remainder of 2019 ⁽¹⁾

⁽¹⁾~~Includes anticipated lease incentives of $3.8 million.~~

~~As of December 31, 2018, commitments for future minimum rental payments with terms in excess of one year were~~are as follows (in thousands):


Balance at December 31, 2019	$	6,019
Current period provision for expected credit losses	2,754
Balance at March 31, 2020	$	8,773

~~The following table provides supplemental cash flow information related to leases for the three months ended March 31, 2019 (in thousands):~~

Note 43 - Discontinued Operations

Three Months Ended March 31, 2019 Three Months Ended March 31, 2018
Venezuela Belleli EPC Total Venezuela Belleli EPC Total
Revenue $ —
$ 137
$ 137
$ —
$ 4,967
$ 4,967
Cost of sales (excluding depreciation and amortization expense) —
(316 ) (316 ) —
2,403
2,403
Selling, general and administrative 35
541
576
32
60
92
Depreciation and amortization —
—
—
—
428
428
Other (income) expense, net —
(328 ) (328 ) 1
599
600
Provision for income taxes —
42
42
—
45
45
Income (loss) from discontinued operations, net of tax $ (35 ) $ 198
$ 163
$ (33 ) $ 1,432
$ 1,399

March 31, 2019 December 31, 2018
Venezuela Belleli EPC Total Venezuela Belleli EPC Total
Cash $ —
$ —
$ —
$ 3
$ —
$ 3
Accounts receivable —
7,883
7,883
—
11,509
11,509
Contract assets —
277
277
—
—
—
Other current assets —
410
410
7
86
93
Total current assets associated with discontinued operations —
8,570
8,570
10
11,595
11,605
Property, plant and equipment, net —
—
—
—
28
28
Intangible and other assets, net —
1,629
1,629
—
1,633
1,633
Total assets associated with discontinued operations $ —
$ 10,199
$ 10,199
$ 10
$ 13,256
$ 13,266

Accounts payable $ —
$ 3,349
$ 3,349
$ —
$ 4,382
$ 4,382
Accrued liabilities 15
5,811
5,826
12
7,831
7,843
Contract liabilities —
2,538
2,538
—
2,542
2,542
Total current liabilities associated with discontinued operations 15
11,698
11,713
12
14,755
14,767
Other long-term liabilities —
5,765
5,765
—
5,914
5,914
Total liabilities associated with discontinued operations $ 15
$ 17,463
$ 17,478
$ 12
$ 20,669
$ 20,681

Note 54 - Inventory, Net

Note 65 - Property, Plant and Equipment, Net

March 31, 2019 December 31, 2018
Compression equipment, processing facilities and other fleet assets $ 1,782,321
$ 1,713,153
Land and buildings 102,166
101,571
Transportation and shop equipment 82,618
82,960
Computer software 56,972
54,572
Other 46,034
47,210
2,070,111
1,999,466
Accumulated depreciation (1,126,623 ) (1,097,889 )
Property, plant and equipment, net $ 943,488
$ 901,577

Table of Contents

Note 76 - Debt

Debt consisted of the following (in thousands):


	March 31, 2019			December 31, 2018				March 31, 2020		December 31, 2019
Revolving credit facility due October 2023	$	65,000		$	35,000		Revolving credit facility due October 2023	$	85,500	$	74,000
8.125% senior notes due May 2025	375,000			375,000			8.125% senior notes due May 2025	375,000		375,000
Other debt	575			687			Other debt	124		237
Unamortized deferred financing costs of 8.125% senior notes	(6,174		)	(6,428		)	Unamortized deferred financing costs of 8.125% senior notes	(5,159)		(5,413)
Total debt	434,401			404,259			Total debt	455,465		443,824
Less: Amounts due within one year ⁽¹⁾	(449		)	(449		)	Less: Amounts due within one year ⁽¹⁾	(124)		(237)
Long-term debt	$	433,952		$	403,810		Long-term debt	$	455,341	$	443,587

⁽¹⁾Short-term debt and the current portion of long-term debt are included in accrued liabilities in our balance sheets.

Revolving Credit Facility Due October 2023

8.125% Senior Notes Due May 2025

Note 87 - Fair Value Measurements

•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.

~~Recurring Fair Value Measurements~~

The following table presents our assets and liabilities measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018, with pricing levels as of the date of valuation (in thousands):

March 31, 2019 December 31, 2018
(Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3)
Foreign currency derivatives liability $ —
$ 458
$ —
N/A N/A N/A

We are exposed to market risks associated with changes in foreign currency exchange rates, including foreign currency exchange rate changes recorded on intercompany obligations. From time to time, we may enter into foreign currency hedges to reduce our foreign exchange risk. During the three months ended March 31, 2019, we entered into forward currency exchange contracts with a total notional value of $26.0 million that expire at varying dates through June 2019 to mitigate exposures in U.S. dollars related to the Argentine Peso, Brazilian Real and Indonesian Rupiah. We entered into these foreign currency derivatives to manage existing exposures to foreign exchange risk related to assets and liabilities recorded on our balance sheets and intercompany activity. We did not designate these forward currency exchange contracts as hedge transactions. Changes in fair value and gains and losses on settlement on these forward currency exchange contracts are recognized in other (income) expense, net, in our statements of operations. During the three months ended March 31, 2019, we recognized losses of $0.7 million on forward currency exchange contracts, which offset foreign currency gains recognized during the period. Our estimate of the fair value of foreign currency derivatives as of March 31, 2019 was determined using quoted forward exchange rates in active markets at March 31, 2019. Foreign currency derivative liabilities are included in accrued liabilities in our balance sheets.

Nonrecurring Fair Value Measurements

Three months ended March 31, 2019 Three months ended March 31, 2018
(Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3)
Impaired assets—assets held for sale ⁽¹⁾
N/A N/A N/A $ —
$ —
$ 21,026


	Three months ended March 31, 2020										Three months ended March 31, 2019
	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)
Long-term note receivable ⁽¹⁾	$	—	$	—	$	15,039	$	—	$	—	$	14,697

⁽¹⁾Our estimate of the fair value of a note receivable was discounted based on a settlement period of eight years and a discount rate of 6.2%. The undiscounted value of the note receivable, including interest, as of March 31, 2020 was $15.5 million.

Financial Instruments

~~Note 9 - Long-Lived Asset Impairment~~

We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressor units from our active fleet, indicate that the carrying amount of an asset may not be recoverable.

In the fourth quarter of 2017, we classified our PEQ assets primarily related to inventory and property, plant and equipment, net, within our product sales business as assets held for sale in our balance sheets. In June 2018, we completed the sale of our PEQ assets. During the three months ended March 31, 2018, we recorded an impairment of $1.8 million to reduce these assets to their approximate fair values based on the expected net proceeds.

Note 108 - Restructuring and Other Charges

Note 119 - Provision for Income Taxes

Note 1210 - Stockholders’ Equity

Share Repurchase Program

Note 1311 - Stock-Based Compensation

Restricted Stock, Restricted Stock Units and Performance Units

Shares
(in thousands)

Weighted Average
Grant-Date Fair
Value Per Share
Non-vested awards, January 1, 2019 1,044
$ 25.89
Granted 806
17.01
Vested (427 ) 23.06
Cancelled (16 ) 27.24
Non-vested awards, March 31, 2019 ⁽¹⁾
1,407
21.65

Note 1412 - Net Income (Loss) Per Common Share


	Three Months Ended March 31,
	2020		2019
Numerator for basic and diluted net loss per common share:
Loss from continuing operations	$	(18,150)	$	(5,557)
Income (loss) from discontinued operations, net of tax	(154)		163
Less: Net income attributable to participating securities	—		—
Net loss — used in basic and diluted net loss per common share	$	(18,304)	$	(5,394)

Weighted average common shares outstanding including participating securities	33,163		36,462
Less: Weighted average participating securities outstanding	(510)		(816)
Weighted average common shares outstanding — used in basic net loss per common share	32,653		35,646
Net dilutive potential common shares issuable:
On exercise of options and vesting of restricted stock units	*		*
Weighted average common shares outstanding — used in diluted net loss per common share	32,653		35,646

Net loss per common share:
Basic	$	(0.56)	$	(0.15)
Diluted	$	(0.56)	$	(0.15)

Three Months Ended March 31,
2019
2018
Numerator for basic and diluted net income (loss) per common share:
Income (loss) from continuing operations $ (5,557 ) $ 3,938
Income from discontinued operations, net of tax 163
1,399
Less: Net income attributable to participating securities —
(138 )
Net income (loss) — used in basic and diluted net income (loss) per common share $ (5,394 ) $ 5,199

Weighted average common shares outstanding including participating securities 36,462
36,236
Less: Weighted average participating securities outstanding (816 ) (935 )
Weighted average common shares outstanding — used in basic net income (loss) per common share 35,646
35,301
Net dilutive potential common shares issuable:
On exercise of options and vesting of restricted stock units *
72
Weighted average common shares outstanding — used in diluted net income (loss) per common share 35,646
35,373

Net income (loss) per common share:
Basic $ (0.15 ) �� $ 0.15
Diluted $ (0.15 ) $ 0.15

* Excluded from diluted net income (loss) per common share as their inclusion would have been anti-dilutive.


	Three Months Ended March 31,
	2020	2019
Net dilutive potential common shares issuable:
On exercise of options where exercise price is greater than average market value	57	74
Net dilutive potential common shares issuable	57	74

Three Months Ended March 31,
2019
2018
Net dilutive potential common shares issuable:
On exercise of options where exercise price is greater than average market value 74
35
Net dilutive potential common shares issuable 74
35

Table of Contents

Note 1513 - Commitments and Contingencies

Contingencies

In addition to U.S. federal, state and local and foreign income taxes, we are subject to a number of taxes that are not income-based. As many of these taxes are subject to audit by the taxing authorities, it is possible that an audit could result in additional taxes due. We accrue for such additional taxes when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, we had accrued ~~$5.2~~$3.5 million and ~~$5.1~~$3.7 million, respectively, for the outcomes of non-income-based tax audits. We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued. We do not accrue for unasserted claims for tax audits unless we believe the assertion of a claim is probable, it is probable that it will be determined that the claim is owed and we can reasonably estimate the claim or range of the claim. We do not have any unasserted claims from non-income based tax audits that we have determined are probable of assertion. We also believe the likelihood is remote that the impact of potential unasserted claims from non-income-based tax audits could be material to our financial position, but it is possible that the resolution of future audits could 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, commercial automobile liability and other coverage we believe is appropriate. 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.

Litigation and Claims

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, it believes that any ultimate liability arising from any of these actions will not have a material adverse effect on our financial position, results of operations or cash flows. However, because of the inherent uncertainty of litigation and arbitration proceedings, 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 financial position, results of operations or cash flows.

Contemporaneously with filing the Form 8-K on April 26, 2016, we self-reported the errors and possible irregularities at Belleli EPC to the SEC. On April 8, 2019, the SEC provided written notice to us stating that based on the information they ~~have~~had as of ~~this~~that date, they have concluded their investigation and dodid not intend to recommend enforcement action by the SEC against us in connection with ~~this~~that matter.

Indemnifications

Table of Contents

In conjunction with, and effective as of the completion of, the Spin-off, we entered into the separation and distribution agreement with Archrock, which governs, among other things, the treatment between Archrock and us relating to certain aspects of indemnification, insurance, confidentiality and cooperation. Generally, the separation and distribution agreement provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of Archrock’s business with Archrock. Pursuant to the agreement, we and Archrock will generally release the other party from all claims arising prior to the Spin-off that relate to the other party’s business, subject to certain exceptions. Additionally, in conjunction with, and effective as of the completion of, the Spin-off, we entered into the tax matters agreement with Archrock. Under the tax matters agreement and subject to certain exceptions, we are generally liable for, and indemnify Archrock against, taxes attributable to our business, and Archrock is generally liable for, and indemnify us against, all taxes attributable to its business. We are generally liable for, and indemnify Archrock against, 50% of certain taxes that are not clearly attributable to our business or Archrock’s business. Any payment made by us to Archrock, or by Archrock to us, is treated by all parties for tax purposes as a nontaxable distribution or capital contribution, respectively, made immediately prior to the Spin-off.

~~Table of Contents~~

Note 1614 - Reportable Segments

Our chief operating decision maker manages business operations, evaluates performance and allocates resources based upon the type of product or service provided. We have ~~three~~3 reportable segments: contract operations, aftermarket services and product sales. In our contract operations segment, we provide ~~compression,~~ processing, treating, compression and water treatment services through the operation of our natural gas compression equipment, crude oil and natural gas production and process equipment and water treatment equipment for our customers. In our aftermarket services segment, we sell parts and components and provide operations, maintenance, repair, overhaul, upgrade, startup and commissioning and reconfiguration services to customers who own their own oil and natural gas compression, production, processing, treating and related equipment. In our product sales segment, we design, engineer, manufacture, install and sell ~~natural gas compression packages as well as~~ equipment used in the treating and processing of crude oil, natural gas and water as well natural gas compression packages to our customers throughout the world and for use in our contract operations business line.

We evaluate the performance of our segments based on gross margin for each segment. Revenue only includes sales to external customers. We do not include intersegment sales when we evaluate our segments’ performance.

The following table presents revenue and other financial information by reportable segment for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 (in thousands):


Three Months Ended	Contract Operations		Aftermarket Services		Product Sales		Reportable Segments Total
March 31, 2020:
Revenue	$	94,788	$	27,909	$	87,660	$	210,357
Gross margin ⁽¹⁾	63,328		6,728		3,221		73,277
March 31, 2019:
Revenue	$	85,700	$	27,302	$	238,444	$	351,446
Gross margin ⁽¹⁾	57,109		6,584		28,909		92,602

Three Months Ended

Contract
Operations
Aftermarket Services Product Sales Reportable
Segments
Total
March 31, 2019:
Revenue $ 85,700
$ 27,302
$ 238,444
$ 351,446
Gross margin ⁽¹⁾
57,109
6,584
28,909
92,602
March 31, 2018:
Revenue $ 96,493
$ 26,371
$ 227,519
$ 350,383
Gross margin ⁽¹⁾
61,108
7,474
27,183
95,765


⁽¹⁾ ⁽¹⁾ Gross margin is defined as revenue less cost of sales (excluding depreciation and amortization expense). 19 Table of Contents	~~Gross margin is defined as revenue less cost of sales (excluding depreciation and amortization expense).~~

The following table reconciles income (loss) before income taxes to total gross margin (in thousands):


	Three Months Ended March 31,
	2020		2019
Income (loss) before income taxes	$	(8,820)	$	3,583
Selling, general and administrative	38,052		43,452
Depreciation and amortization	32,610		38,217
Restatement related charges	—		48
Restructuring and other charges	1,188		384
Interest expense	9,953		8,163
Other (income) expense, net	294		(1,245)
Total gross margin	$	73,277	$	92,602

Three Months Ended March 31,
2019
2018
Income before income taxes $ 3,583
$ 9,430
Selling, general and administrative 43,452
44,242
Depreciation and amortization 38,217
31,029
Long-lived asset impairment —
1,804
Restatement related charges 48
621
Restructuring and other charges 384
—
Interest expense 8,163
7,219
Other (income) expense, net (1,245 ) 1,420
Total gross margin $ 92,602
$ 95,765

Table of Contents

~~Note 17 - Supplemental Guarantor Financial Information~~

In April 2017, our 100% owned subsidiaries EESLP and EES Finance Corp. (together, the “Issuers”) issued the 2017 Notes, which consists of $375.0 million aggregate principal amount senior unsecured notes. The 2017 Notes are fully and unconditionally guaranteed on a joint and several senior unsecured basis by Exterran Corporation (the “Parent Guarantor” or “Parent”). All other consolidated subsidiaries of Exterran are collectively referred to as the “Non-Guarantor Subsidiaries.” As a result of the Parent’s guarantee, we are presenting the following condensed consolidating financial information pursuant to Rule 3-10 of Regulation S-X, ~~Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered~~. These schedules are presented using the equity method of accounting for all periods presented. For purposes of the following condensed consolidating financial information, the Parent Guarantor’s investments in its subsidiaries, the Issuers’ investments in the Non-Guarantors Subsidiaries and the Non-Guarantor Subsidiaries’ investments in the Issuers are accounted for under the equity method of accounting. 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.

~~Table of Contents~~

~~Condensed Consolidating Balance Sheet~~

~~March 31, 2019~~

~~(In thousands)~~

Non- Guarantor Subsidiaries
Parent Guarantor Issuers Eliminations Consolidation
ASSETS

Cash and cash equivalents $ 27
$ 1,116
$ 17,433
$ —
$ 18,576
Restricted cash —
—
178
—
178
Accounts receivable, net —
97,099
169,187
—
266,286
Inventory, net —
97,037
69,854
—
166,891
Contract assets —
47,380
23,256
—
70,636
Intercompany receivables —
172,543
385,986
(558,529 ) —
Other current assets —
6,970
33,203
—
40,173
Current assets associated with discontinued operations —
—
8,570
—
8,570
Total current assets 27
422,145
707,667
(558,529 ) 571,310
Property, plant and equipment, net —
311,674
631,814
—
943,488
Operating lease right-of-use assets —
12,374
17,408
—
29,782
Investment in affiliates 543,275
886,456
(343,181 ) (1,086,550 ) —
Deferred income taxes —
5,493
6,531
—
12,024
Intangible and other assets, net —
31,847
52,482
—
84,329
Long-term assets associated with discontinued operations —
—
1,629
—
1,629
Total assets $ 543,302
$ 1,669,989
$ 1,074,350
$ (1,645,079 ) $ 1,642,562

LIABILITIES AND EQUITY

Accounts payable, trade $ —
$ 142,709
$ 45,400
$ —
$ 188,109
Accrued liabilities 386
33,979
78,904
—
113,269
Contract liabilities —
77,426
62,549
—
139,975
Current operating lease liabilities —
1,967
4,771
—
6,738
Intercompany payables 5,732
385,986
166,811
(558,529 ) —
Current liabilities associated with discontinued operations —
—
11,713
—
11,713
Total current liabilities 6,118
642,067
370,148
(558,529 ) 459,804
Long-term debt —
433,952
—
—
433,952
Deferred income taxes —
—
6,762
—
6,762
Long-term contract liabilities —
22,851
112,146
—
134,997
Long-term operating lease liabilities —
16,484
11,793
—
28,277
Other long-term liabilities —
11,360
24,461
—
35,821
Long-term liabilities associated with discontinued operations —
—
5,765
—
5,765
Total liabilities 6,118
1,126,714
531,075
(558,529 ) 1,105,378
Total equity 537,184
543,275
543,275
(1,086,550 ) 537,184
Total liabilities and equity $ 543,302
$ 1,669,989
$ 1,074,350
$ (1,645,079 ) $ 1,642,562

~~Table of Contents~~

~~Condensed Consolidating Balance Sheet~~

~~December 31, 2018~~

~~(In thousands)~~

Non- Guarantor Subsidiaries
Parent Guarantor Issuers Eliminations Consolidation
ASSETS

Cash and cash equivalents $ 46
$ 1,185
$ 18,069
$ —
$ 19,300
Restricted cash —
—
178
—
178
Accounts receivable, net —
92,880
155,587
—
248,467
Inventory, net —
87,972
62,717
—
150,689
Contract assets —
67,323
24,279
—
91,602
Intercompany receivables —
158,977
379,628
(538,605 ) —
Other current assets —
7,744
36,490
—
44,234
Current assets associated with discontinued operations —
—
11,605
—
11,605
Total current assets 46
416,081
688,553
(538,605 ) 566,075
Property, plant and equipment, net —
303,813
597,764
—
901,577
Investment in affiliates 554,207
870,959
(316,752 ) (1,108,414 ) —
Deferred income taxes —
5,493
5,877
—
11,370
Intangible and other assets, net —
32,046
54,325
—
86,371
Long-term assets associated with discontinued operations —
—
1,661
—
1,661
Total assets $ 554,253
$ 1,628,392
$ 1,031,428
$ (1,647,019 ) $ 1,567,054

LIABILITIES AND EQUITY

Accounts payable, trade $ —
$ 133,291
$ 32,453
$ —
$ 165,744
Accrued liabilities —
47,012
76,323
—
123,335
Contract liabilities —
82,367
71,116
—
153,483
Intercompany payables 1,432
379,628
157,545
(538,605 ) —
Current liabilities associated with discontinued operations —
—
14,767
—
14,767
Total current liabilities 1,432
642,298
352,204
(538,605 ) 457,329
Long-term debt —
403,810
—
—
403,810
Deferred income taxes —
—
6,005
—
6,005
Long-term contract liabilities —
17,226
84,137
—
101,363
Other long-term liabilities —
10,851
28,961
—
39,812
Long-term liabilities associated with discontinued operations —
—
5,914
—
5,914
Total liabilities 1,432
1,074,185
477,221
(538,605 ) 1,014,233
Total equity 552,821
554,207
554,207
(1,108,414 ) 552,821
Total liabilities and equity $ 554,253
$ 1,628,392
$ 1,031,428
$ (1,647,019 ) $ 1,567,054

~~Table of Contents~~

~~Condensed Consolidating Statement of Operations and Comprehensive Loss~~

~~Three Months Ended March 31, 2019~~

~~(In thousands)~~

Non- Guarantor Subsidiaries
Parent Guarantor Issuers Eliminations Consolidation
Revenues $ —
$ 214,790
$ 164,631
$ (27,975 ) $ 351,446
Cost of sales (excluding depreciation and amortization expense) —
185,306
101,513
(27,975 ) 258,844
Selling, general and administrative 297
22,107
21,048
—
43,452
Depreciation and amortization —
14,927
23,290
—
38,217
Restatement related charges —
48
—
—
48
Restructuring and other charges —
—
384
—
384
Interest expense —
8,470
(307 ) —
8,163
Intercompany charges, net —
1,919
(1,919 ) —
—
Equity in (income) loss of affiliates 5,097
(15,033 ) 20,130
(10,194 ) —
Other (income) expense, net —
(41 ) (1,204 ) —
(1,245 )
Income (loss) before income taxes (5,394 ) (2,913 ) 1,696
10,194
3,583
Provision for income taxes —
2,184
6,956
—
9,140
Loss from continuing operations (5,394 ) (5,097 ) (5,260 ) 10,194
(5,557 )
Income from discontinued operations, net of tax —
—
163
—
163
Net loss (5,394 ) (5,097 ) (5,097 ) 10,194
(5,394 )
Other comprehensive loss (968 ) (968 ) (968 ) 1,936
(968 )
Comprehensive loss attributable to Exterran stockholders $ (6,362 ) $ (6,065 ) $ (6,065 ) $ 12,130
$ (6,362 )

~~Table of Contents~~

~~Condensed Consolidating Statement of Operations and Comprehensive Income~~

~~Three Months Ended March 31, 2018~~

~~(In thousands)~~

Non- Guarantor Subsidiaries
Parent Guarantor Issuers Eliminations Consolidation
Revenues $ —
$ 258,316
$ 116,391
$ (24,324 ) $ 350,383
Cost of sales (excluding depreciation and amortization expense) —
218,164
60,778
(24,324 ) 254,618
Selling, general and administrative 283
20,965
22,994
—
44,242
Depreciation and amortization —
9,327
21,702
—
31,029
Long-lived asset impairment —
1,804
—
—
1,804
Restatement related charges —
621
—
—
621
Interest expense —
7,213
6
—
7,219
Intercompany charges, net —
1,725
(1,725 ) —
—
Equity in (income) loss of affiliates (5,620 ) (10,054 ) 2,646
13,028
—
Other (income) expense, net —
(49 ) 1,469
—
1,420
Income before income taxes 5,337
8,600
8,521
(13,028 ) 9,430
Provision for income taxes —
1,192
2,512
1,788
5,492
Income from continuing operations 5,337
7,408
6,009
(14,816 ) 3,938
Income from discontinued operations, net of tax —
—
1,399
—
1,399
Net income 5,337
7,408
7,408
(14,816 ) 5,337
Other comprehensive income 757
757
757
(1,514 ) 757
Comprehensive income attributable to Exterran stockholders $ 6,094
$ 8,165
$ 8,165
$ (16,330 ) $ 6,094

~~Table of Contents~~

~~Condensed Consolidating Statement of Cash Flows~~

~~Three Months Ended March 31, 2019~~

~~(In thousands)~~

Non- Guarantor Subsidiaries
Parent Guarantor Issuers Eliminations Consolidation
Cash flows from operating activities:
Net cash provided by (used in) continuing operations $ (48 ) $ (1,302 ) $ 50,375
$ —
$ 49,025
Net cash provided by discontinued operations —
—
16
—
16
Net cash provided by (used in) operating activities (48 ) (1,302 ) 50,391
—
49,041

Cash flows from investing activities:
Capital expenditures —
(35,065 ) (41,289 ) —
(76,354 )
Proceeds from sale of property, plant and equipment —
721
3,291
—
4,012
Intercompany transfers —
(4,300 ) (12,627 ) 16,927
—
Settlement of foreign currency derivatives —
(207 ) —
—
(207 )
Net cash used in investing activities —
(38,851 ) (50,625 ) 16,927
(72,549 )

Cash flows from financing activities:
Proceeds from borrowings of debt —
179,000
—
—
179,000
Repayments of debt —
(149,113 ) —
—
(149,113 )
Intercompany transfers 4,300
12,627
—
(16,927 ) —
Purchases of treasury stock (4,271 ) (2,430 ) —
—
(6,701 )
Net cash provided by financing activities 29
40,084
—
(16,927 ) 23,186

Effect of exchange rate changes on cash, cash equivalents and restricted cash —
—
(402 ) —
(402 )
Net decrease in cash, cash equivalents and restricted cash (19 ) (69 ) (636 ) —
(724 )
Cash, cash equivalents and restricted cash at beginning of period 46
1,185
18,247
—
19,478
Cash, cash equivalents and restricted cash at end of period $ 27
$ 1,116
$ 17,611
$ —
$ 18,754

~~Table of Contents~~

~~Condensed Consolidating Statement of Cash Flows~~

~~Three Months Ended March 31, 2018~~

~~(In thousands)~~

Non- Guarantor Subsidiaries
Parent Guarantor Issuers Eliminations Consolidation
Cash flows from operating activities:
Net cash provided by (used in) continuing operations $ (78 ) $ (22,466 ) $ 26,170
$ —
$ 3,626
Net cash used in discontinued operations —
—
(2,849 ) —
(2,849 )
Net cash provided by (used in) operating activities (78 ) (22,466 ) 23,321
—
777

Cash flows from investing activities:
Capital expenditures —
(17,234 ) (31,985 ) —
(49,219 )
Proceeds from sale of property, plant and equipment —
—
2,260
—
2,260
Intercompany transfers —
(342 ) (2,059 ) 2,401
—
Net cash used in continuing operations —
(17,576 ) (31,784 ) 2,401
(46,959 )
Net cash provided by discontinued operations —
—
66
—
66
Net cash used in investing activities —
(17,576 ) (31,718 ) 2,401
(46,893 )

Cash flows from financing activities:
Proceeds from borrowings of debt —
66,500
—
—
66,500
Repayments of debt —
(48,563 ) —
—
(48,563 )
Intercompany transfers 341
2,060
—
(2,401 ) —
Payments for debt issuance costs —
(47 ) —
—
(47 )
Proceeds from stock options exercised —
428
—
—
428
Purchases of treasury stock —
(3,440 ) —
—
(3,440 )
Net cash provided by financing activities 341
16,938
—
(2,401 ) 14,878
��
Effect of exchange rate changes on cash, cash equivalents and restricted cash —
—
(571 ) —
(571 )
Net increase (decrease) in cash, cash equivalents and restricted cash 263
(23,104 ) (8,968 ) —
(31,809 )
Cash, cash equivalents and restricted cash at beginning of period 397
24,195
25,099
—
49,691
Cash, cash equivalents and restricted cash at end of period $ 660
$ 1,091
$ 16,131
$ —
$ 17,882

~~Table of Contents~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes thereto included in the Condensed Consolidated Financial Statements in Part I, Item 1 (“Financial Statements”) of this report and in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

Disclosure Regarding Forward-Looking Statements

This report contains “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this report are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, statements regarding our business growth strategy and projected costs; future financial position; the sufficiency of available cash flows to fund continuing operations; the expected amount of our capital expenditures; anticipated cost savings, future revenue, gross margin and other financial or operational measures related to our business and our primary business segments; the future value of our equipment; and plans and objectives of our management for our future operations. You can identify many of these statements by looking for words such as “believe,” “expect,” “intend,” “project,” “anticipate,” “estimate,” “will continue” or similar words or the negative thereof.

Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will prove to be correct. Known material factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include the risk factors described in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, and those set forth from time to time in our filings with the Securities and Exchange Commission (“SEC”), which are available through our website at www.exterran.com and through the SEC’s website at www.sec.gov, as well as the following risks and uncertainties:

•conditions in the oil and natural gas industry, including a sustained imbalance in the level of supply or demand for oil or natural gas or a sustained low price of oil or natural gas, which could depress or reduce the demand or pricing for our natural gas compression and oil and natural gas production and processing equipment and services;

•reduced profit margins or the loss of market share resulting from competition or the introduction of competing technologies by other companies;

•economic or political conditions in the countries in which we do business, including civil developments such as uprisings, riots, terrorism, kidnappings, violence associated with drug cartels, legislative changes and the expropriation, confiscation or nationalization of property without fair compensation;

•risks associated with natural disasters, pandemics and other public health crisis and other catastrophic events outside our control, including the continued spread and impact of, and the response to, the recent novel coronavirus (“COVID-19”) outbreak;

•changes in currency exchange rates, including the risk of currency devaluations by foreign governments, and restrictions on currency repatriation;

•risks associated with cyber-based attacks or network security breaches;

•changes in international trade relationships, including the imposition of trade restrictions or tariffs relating to any materials or products (such as aluminum and steel) used in the operation of our business;

•risks associated with our operations, such as equipment defects, equipment malfunctions, environmental discharges and natural disasters;

•the risk that counterparties will not perform their obligations under their contracts with ~~us;~~us or other changes that could impact our ability to recover our fixed asset investment;

•the financial condition of our customers;

•our ability to timely and cost-effectively obtain components necessary to conduct our business;

•employment and workforce factors, including our ability to hire, train and retain key employees;

•our ability to implement our business and financial objectives, including:

•winning profitable new business;

•timely and cost-effective execution of projects;

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•enhancing or maintaining our asset utilization, particularly with respect to our fleet of ~~compressors;~~compressors and other assets;

•integrating acquired businesses;

•generating sufficient cash to satisfy our operating needs, existing capital commitments and other contractual cash obligations, including our debt obligations; and

•accessing the financial markets at an acceptable cost;

•our ability to accurately estimate our costs and time required under our fixed price contracts;

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•liability related to the use of our products and services;

•changes in governmental safety, health, environmental or other regulations, which could require us to make significant expenditures; and

•our level of indebtedness and ability to fund our business.

All forward-looking statements included in this report are based on information available to us on the date of this report. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this report.

General

Exterran Corporation (together with its subsidiaries, “Exterran Corporation,” “the Company,” “our,” “we” or “us”), a Delaware corporation formed in March 2015, is a global systems and process company offering solutions in the oil, gas, water and power markets. We are a leader in natural gas processing and treatment and compression products and services, providing critical midstream infrastructure solutions to customers throughout the world. Our manufacturing facilities are located in the United States of America (“U.S.”), Singapore and the United Arab Emirates.

We provide our products and services to a global customer base consisting of companies engaged in all aspects of the oil and natural gas industry, including large integrated oil and natural gas companies, national oil and natural gas companies, independent oil and natural gas producers and oil and natural gas processors, gatherers and pipeline operators. We operate in three primary business lines: contract operations, aftermarket services and product sales. The nature and inherent interactions between and among our business lines provide us with opportunities to cross-sell orand offer integrated product and service solutions to our customers.

In our contract operations business line, we provide ~~compression,~~ processing, treating, compression and water treatment services through the operation of our natural gas compression equipment, crude oil and natural gas production and process equipment and water treatment equipment for our customers. In our aftermarket services business line, we sell parts and components and provide operations, maintenance, repair, overhaul, upgrade, startup and commissioning and reconfiguration services to customers who own their own oil and natural gas compression, production, processing, treating and related equipment. In our product sales business line, we design, engineer, manufacture, install, sell and ~~sell natural gas compression packages as well as~~finance equipment used in the treating and processing of crude oil, natural gas and water as well as natural gas compression packages to our customers throughout the world and for use in our contract operations business line. We also offer our customers, on either a contract operations basis or a sale basis, the engineering, design, project management, procurement and construction services necessary to incorporate our products into production, processing and compression facilities, which we refer to as integrated projects.

Our chief operating decision maker manages business operations, evaluates performance and allocates resources based on the Company’s three primary business lines, which are also referred to as our segments. In order to more efficiently and effectively identify and serve our customer needs, we classify our worldwide operations into four geographic regions. The North America region is primarily comprised of our operations in ~~Mexico and~~ the U.S. The Latin America region is primarily comprised of our operations in Argentina, Bolivia, Brazil and ~~Brazil.~~Mexico. The Middle East and Africa region is primarily comprised of our operations in Bahrain, Iraq, Oman, Nigeria and the United Arab Emirates. The Asia Pacific region is primarily comprised of our operations in China, Indonesia, Singapore and Thailand.

We refer to the condensed consolidated financial statements collectively as “financial statements,” and individually as “balance sheets,” “statements of operations,” “statements of comprehensive income (loss),” “statements of stockholders’ equity” and “statements of cash flows” herein.

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Financial Results of Operations

Overview

Industry Conditions and Trends

Our business environment and corresponding operating results are affected by the level of energy industry spending for the exploration, development and production of oil and natural gas reserves. Spending by oil and natural gas exploration and production companies is dependent upon these companies’ forecasts regarding the expected future supply, demand and pricing of oil and natural gas products as well as their estimates of risk-adjusted costs to find, develop and produce reserves. Although we believe our contract operations business, and to a lesser extent our product sales business, is typically less impacted by short-term commodity prices than certain other energy products and service providers, changes in oil and natural gas exploration and production spending normally result in changes in demand for our products and services.

From a long-term perspective, industry observers anticipate strong global demand for hydrocarbons, including demand for liquefied natural gas. However, ~~customer cash flows~~the recent global demand challenges presented by the COVID-19 pandemic and ~~focus on returns on capital could drive customer investment priorities. Industry observers believe shareholders~~aggressive actions taken to contain it have caused severe downside volatility in the price for oil and a significant reduction in demand, as well as an oversupply, globally. In response, many energy companies are encouraging management teams of energy producers to focus operational and compensation strategies on returns and cash flow generation rather than solely on production growth. To accomplish these strategies, energy producers may need to better prioritizedrastically reducing their capital spending ~~which could impact resource allocation~~in 2020 in order to maintain liquidity and ~~ultimately~~returns. This will constrain the amount of new projects that customers sanction in the coming year and ~~capital spending by our customers.~~may result in the shutting in of existing oil and natural gas wells.

Our Performance Trends and Outlook

Our revenue, earnings and financial position are affected by, among other things, market conditions that impact demand and pricing for natural gas compression, ~~and~~ oil and natural gas production and processing and produced water treatment solutions along with our customers’ decisions to use our products and services, use our competitors’ products and services or own and operate the equipment themselves.

We have continued to work toward our strategy to be a company that leverages technology and operational excellence to provide complete systems and process solutions in energy and industrial applications. Over the past several years, we have made significant progress in this journey by taking actions to protect our core business, develop important organizational capabilities, commercialize new products and services and implement new processes to position Exterran for success. We are focused on optimizing our portfolio of products and services to better serve our global customers while providing a more attractive investment option for our investors. As we continue on this path, we have decided that the U.S. compression fabrication business is non-core to our strategy going forward. This business has performed well over the past year despite difficult market conditions as we worked to maximize margins and returns. We will fully explore our options and we are committed to supporting our customers, employees and other stakeholders throughout the process.

Historically, oil, natural gas and natural gas liquids prices and the level of drilling and exploration activity in North America have been volatile. The Henry Hub spot price for natural gas was ~~$2.73~~$1.71 per MMBtu at March 31, ~~2019,~~2020, which was ~~16%~~18% and 3%37% lower than the prices at December 31, ~~2018~~2019 and March 31, ~~2018,~~2019, respectively, and the U.S. natural gas liquid composite price was ~~$6.46~~$4.84 per MMBtu for the month of January ~~2019,~~2020, which was ~~1% higher~~9% and 26% lower than the ~~price~~prices for the month of December ~~2018~~2019 and ~~10% lower than the price for the month of~~ March ~~2018.~~2019, respectively. In addition, the West Texas Intermediate crude oil spot price as of March 31, ~~2019~~2020 was ~~33% higher~~66% lower than the price at December 31, ~~2018~~2019 and ~~7% lower than the price~~ at March 31, ~~2018.~~2019. Volatility in demand for energy and in commodity prices ~~and~~as well as an industry trend towards disciplined capital spending and improving returns have caused timing uncertainties in demand for our products recently. These uncertainties ~~are resulting~~have caused delays in ~~tentative customer spending~~the timing of new equipment orders and ~~investments~~lower bookings in ~~equipment in North America.~~our product sales segment. Booking activity levels for our ~~manufactured products~~product sales segment in North America during the three months ended March 31, ~~2019~~2020 were ~~$52.8~~$12.9 million, which represents ~~decreases~~a decrease of ~~66% and 72%~~76% compared to the three months ended ~~December 31, 2018 and~~ March 31, ~~2018, respectively.~~2019.

Longer-term fundamentals in our international markets partially depend on international oil and gas infrastructure projects, many of which are based on the longer-term plans of our customers that can be driven by their local market demand and local pricing for natural gas. As a result, we believe our international customers make decisions based on longer-term fundamentals that may be less tied to near term commodity prices than our North American customers. Over the ~~long term,~~long-term, we believe the demand for our products and services in international markets will continue, and we expect to have opportunities to grow our international businesses. Booking activity levels for our ~~manufactured products~~product sales segment in international markets during the three months ended March 31, ~~2019~~2020 were ~~$33.4~~$445.1 million, which represents ~~increases~~an increase of ~~971% and 1,323%~~1,233% compared to the three months ended ~~December 31, 2018 and~~ March 31, ~~2018, respectively.~~2019.

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Aggregate booking activity levels for our ~~manufactured products~~product sales segment in North America and international markets during the three months ended March 31, ~~2019~~2020 were ~~$86.2~~$458.0 million, which represents ~~decreases~~an increase of ~~46% and 55%~~432% compared to the three months ended ~~December 31, 2018 and~~ March 31, ~~2018,~~2019, respectively. Fluctuations in the size and timing of customers’ requests for bid proposals and awards of new contracts tend to create variability in booking activity levels from period to period.

The timing of ~~any~~customer order and change in activity levels by our customers is difficult to predict. As a result, our ability to project the anticipated activity level for our business, and particularly our product sales segment, is limited. Given the volatility of the global energy markets and industry capital spending activity levels, we plan to monitor and continue to control our expense levels as necessary to protect our profitability. Additionally, volatility in commodity prices could continue to delay investments by our customers in significant projects, which could result in a material adverse effect on our business, financial condition, results of operations and cash flows.

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Our level of capital spending largely depends on the demand for our contract operations services and the equipment required to provide such services to our customers. Based on ~~demand~~our current backlog of contracts, we ~~see for contract operations, we anticipate investing approximately the same level of~~currently expect to invest less capital in our contract operations business in ~~2019 as~~2020 than we did in ~~2018.~~2019.

A decline in demand for oil and natural gas or prices for those commodities, or instability and rationalization of capital funding in the global energy markets could continue to cause a reduction in demand for our products and services. We review long-lived assets, including property, plant and equipment and identifiable intangibles that are being amortized, for impairment whenever events or changes in circumstances, including the removal of compressor units from our active fleet, indicate that the carrying amount of an asset may not be recoverable.

Impact of COVID-19 on our Business

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption across most industries. Efforts to mitigate the spread of COVID-19 have also resulted in decreased energy demand and additional weakness in energy pricing.

The Company took proactive steps earlier in the first quarter to enable and verify the ability to ensure the safety of our employees while still carrying on the majority of business functions. These steps included:

•Establishing a daily global operating process to identify, monitor and discuss impacts to our business whether originating from governmental actions or as a direct result of employee illness;

•Investing in additional IT capabilities to enable employees to work remotely;

•Closing operations where and until assessments were completed to ensure we could operate in a safe manner;

•Reestablishing operations once safety mechanisms were in place. This included the acquisition of additional personal protective equipment and establishing screening and other workplace processes.

To date our actions in response to the pandemic and the primary impacts on our business are summarized below:

•As most of our operations are considered essential by local government authorities, the Company’s service operations that are provided under long-term contracts have to a large extent continued to operate under normal conditions;

•We are following local governmental guidance for viral spread mitigation, including having many of our employees who would traditionally work in an office work from home;

•We have put in place additional health and safety measures to protect our employees, customers and other parties who are working at our operating sites;

•Although early in the year we recorded significant new product sales bookings, more recently we have seen a decrease in purchasing activity from our customers which we believe is due to both the work at home mitigation measures our customers are also taking and weakness in commodity prices, causing us to lower our expectations for additional new bookings in 2020;

•Given travel restrictions and other mitigation efforts, certain of our employees have not been able to travel to work assignments, therefore although we have taken additional steps to be able to continue to provide services required by our customers, some services will be delayed until mitigation measures are eased;

•While our operations have been impacted by lower product sale bookings in 2019 and we started cost reduction efforts even prior to the current pandemic, we have continued our efforts to optimize our cost structure to align with the expected demand in our business including making work force reductions and/or managing work hours at some of our manufacturing facilities;

•We are responding to customers request to save costs by collaborating with them on how we can manage costs and/or optimize the projects performance to potentially improve our and their results;

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•We evaluated our accounts receivable and given the current energy environment and expected impact to the financials of our customers, we increased our reserve for uncollectible accounts by $2.8 million;

•Given COVID-19’s impact on demand for energy and decreased commodity prices which impact our customer’s capital spending, we tested our long-term assets for impairment and concluded that no impairment was indicated;

•As many of our suppliers have increased delivery times including as a result of disruptions in shipping, we are working with customers on revising expected due-dates for delivery.

While the pandemic did not materially adversely affect the Company’s financial results and business operations in the Company’s first fiscal quarter ended March 31, 2020, we are unable to predict the impact that COVID-19 will have on its long-term financial position and operating results due to numerous uncertainties. The long-term impact of the pandemic on our customers and the global economy will depend on various factors, including the scope, severity and duration of the pandemic. A prolonged economic downturn or recession resulting from the pandemic could adversely affect many of our customers which could, in turn, adversely impact our business, financial condition and results of operations. The Company will continue to assess the evolving impact of the COVID-19 pandemic and intends to make adjustments to its responses accordingly.

Operating Highlights

The following table summarizes our contract operations and product sales backlog (in thousands):


	March 31, 2020		December 31, 2019		March 31, 2019
Contract Operations Backlog:
Contract operations services	$	1,352,627	$	1,252,001	$	1,357,411

Product Sales Backlog:
Compression equipment	$	142,679	$	160,946	$	367,226
Processing and treating equipment	465,535		69,912		161,206
Production equipment	15		593		—
Other product sales	40,051		46,501		25,059
Total product sales backlog	$	648,280	$	277,952	$	553,491

March 31, 2019 December 31, 2018 March 31, 2018
Contract Operations Backlog:
Contract operations services $ 1,357,411
$ 1,398,644
$ 1,215,877

Product Sales Backlog:
Compression equipment $ 367,226
$ 471,827
$ 206,252
Processing and treating equipment 161,206
229,258
199,122
Production equipment —
2,438
9,481
Other product sales 25,059
2,246
12,041
Total product sales backlog $ 553,491
$ 705,769
$ 426,896

~~Financial Results of Operations~~

Summary of Results

Revenue.

Revenue during the three months ended March 31, 2020 and 2019 ~~and 2018~~ was ~~$351.4~~$210.4 million and ~~$350.4~~$351.4 million, respectively. The ~~increase~~decrease in revenue during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 was due to ~~an increase~~a decrease in revenue in our product sales segment primarily due to an overall decline in bookings, partially offset by ~~a decrease~~an increase in revenue in our contract operations segment.

Net ~~income (loss).~~loss.

We generated a net loss of ~~$5.4~~$18.3 million and ~~net income $5.3~~$5.4 million during the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~decrease~~increase in net ~~income~~loss during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 was primarily due to a decrease in gross margin for our product sales segment, an increase in ~~depreciation~~interest expenses and ~~amortization~~an increase of foreign currency losses of $1.4 million, partially offset by a decrease in selling, general and administrative (“SG&A”) expense, an increase ~~in income taxes and a decrease~~ in gross margin for our contract operations segment ~~partially offset by~~and a ~~long-lived asset impairment~~decrease in ~~the prior year period~~depreciation and ~~an increase in gross margin for our product sales segment.~~amortization expense.

EBITDA, as adjusted.

Our EBITDA, as adjusted, was ~~$50.2~~$33.8 million and ~~$50.7~~$50.2 million during the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. EBITDA, as adjusted, during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 decreased primarily due to a decrease in gross margin for our ~~contract operations~~product sales segment, partially offset by a decrease ~~of foreign currency losses, excluding the remeasurement of intercompany balances, of $1.6 million~~in SG&A and an increase in gross margin for our ~~product sales~~contract operations segment.

EBITDA, as adjusted, is a non-GAAP financial measure. For a reconciliation of EBITDA, as adjusted, to net ~~income (loss),~~loss, its most directly comparable financial measure calculated and presented in accordance with GAAP, please read “— Non-GAAP Financial Measures” included elsewhere in this Quarterly Report.

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The Three Months Ended March 31, ~~2019~~2020 Compared to the Three Months Ended March 31, ~~2018~~2019

Contract Operations

(dollars in thousands)


	Three Months Ended March 31,												Three Months Ended March 31,
	2019			2018			Change			% Change			2020			2019			Change			% Change
Revenue	$	85,700		$	96,493		$	(10,793	)	(11	)%	Revenue	$	94,788		$	85,700		$	9,088		11	%
Cost of sales (excluding depreciation and amortization expense)	28,591			35,385			(6,794		)	(19	)%	Cost of sales (excluding depreciation and amortization expense)	31,460			28,591			2,869			10	%
Gross margin	$	57,109		$	61,108		$	(3,999	)	(7	)%	Gross margin	$	63,328		$	57,109		$	6,219		11	%
Gross margin percentage ⁽¹⁾	67		%	63		%	4		%	6	%	Gross margin percentage ⁽¹⁾	67		%	67		%	—		%	—	%

___________________

⁽¹⁾ Defined as gross margin divided by revenue.

The ~~decrease~~increase in revenue during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 was primarily due to ~~decreases~~increases in revenue of ~~$8.2~~$6.1 million and ~~$3.9 million in the Latin America region and Asia Pacific region, respectively, partially offset by an increase in revenue of $1.5~~$2.5 million in the Middle East and Africa ~~region. The revenue decrease in~~region and the Latin America region, was primarily driven by a decrease of $5.3 million in Argentina largely resulting from the current year impact of the devaluation of the Argentine Peso during the second half of 2018 and a $2.6 million decrease in Brazil primarily driven by projects that terminated in 2018 and 2019 and the impact of foreign currency exchange rates. The revenue decrease in the Asia Pacific region was primarily driven by a $2.8 million recovery of an early termination fee in the first quarter of 2018 for a contract that terminated in January 2016.respectively. The revenue increase in the Middle East and Africa region was primarily due to the start-up of a project that was not operating in the prior year period. The revenue increase in the Latin America region was primarily driven by an increase of $6.7 million in Brazil for the sale of equipment pursuant to a customer purchase of contracted equipment during the current year period, partially offset by the impact of foreign currency exchange rates and, a $4.4 million increase in Bolivia primarily driven by the start-up of a project during the second half of 2019. These revenue increases in the Latin America region were partially offset by a decrease of $8.4 million in Mexico from the sale of equipment pursuant to a customer exercised purchase option during the fourth quarter of 2019 and the impact of renegotiations on a contract extension that resulted in lower revenue in the current year period. Gross margin ~~decreased~~ increased during the three months ended March 31, 2020 compared to the three months ended March 31, 2019 due to the revenue increases explained above. Gross margin percentage during the three months ended March 31, 2020 compared to the three months ended March 31, ~~2018 primarily due to the revenue decreases explained above. Gross margin percentage~~ ~~during the three months~~ ~~ended March 31,~~ 2019 ~~compared to the~~ ~~three months ended March 31, 2018~~ ~~increased primarily due to~~ ~~the devaluation of the Argentine Peso~~ ~~discussed above.~~remained flat.

Aftermarket Services

(dollars in thousands)


	Three Months Ended March 31,
	2020			2019			Change			% Change
Revenue	$	27,909		$	27,302		$	607		2	%
Cost of sales (excluding depreciation and amortization expense)	21,181			20,718			463			2	%
Gross margin	$	6,728		$	6,584		$	144		2	%
Gross margin percentage	24		%	24		%	—		%	—	%

Three Months Ended
March 31,
2019 2018 Change % Change
Revenue $ 27,302
$ 26,371
$ 931
4 %
Cost of sales (excluding depreciation and amortization expense) 20,718
18,897
1,821
10 %
Gross margin $ 6,584
$ 7,474
$ (890 ) (12 )%
Gross margin percentage 24 % 28 % (4 )% (14 )%

The increase in revenue during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 was primarily due to increases in ~~commissioning services, preventative~~part sales and operation and maintenance services, ~~and part sales,~~ offset by a decrease in ~~operation and maintenance~~installation services. Gross margin ~~and gross margin percentage decreased~~increased during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 primarily due to ~~a shift in services mix in~~ the ~~Latin America region.~~revenue increase explained above. Gross margin percentage during the three months ended March 31, 2020 compared to the three months ended March 31, 2019 remained flat.

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Product Sales

(dollars in thousands)


	Three Months Ended March 31,
	2020			2019			Change			% Change
Revenue	$	87,660		$	238,444		$	(150,784)		(63)	%
Cost of sales (excluding depreciation and amortization expense)	84,439			209,535			(125,096)			(60)	%
Gross margin	$	3,221		$	28,909		$	(25,688)		(89)	%
Gross margin percentage	4		%	12		%	(8)		%	(67)	%

Three Months Ended
March 31,
2019 2018 Change % Change
Revenue $ 238,444
$ 227,519
$ 10,925
5 %
Cost of sales (excluding depreciation and amortization expense) 209,535
200,336
9,199
5 %
Gross margin $ 28,909
$ 27,183
$ 1,726
6 %
Gross margin percentage 12 % 12 % — % — %

The ~~increase~~decrease in revenue during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 was primarily due to ~~an increase in revenue of $54.5 million in the Middle East and Africa region, partially offset by~~ decreases in revenue of ~~$32.3~~$123.6 million and ~~$11.9~~$35.3 million in the North America and ~~Asia Pacific regions, respectively. The increase in revenue in the~~ Middle East and Africa ~~region was primarily due to~~regions, respectively, partially offset by an increase in revenue of ~~$54.6~~$10.6 million in ~~processing and treating equipment revenue.~~the Asia Pacific region. The decrease in revenue in the North America region was primarily due to decreases of ~~$51.4~~$95.5 million and ~~$6.2~~$28.2 million in compression revenue and processing and treating equipment revenue, respectively, due to an overall decline in bookings. The decrease in revenue in the Middle East and Africa region was primarily due to a decrease of $49.3 million in processing and treating equipment revenue ~~and production equipment revenue, respectively,~~due to nearing completion on a specific project, partially offset by ~~an increase~~increases of ~~$25.4~~$7.9 million and $5.5 million in compression ~~equipment revenue. In June 2018, we completed the sale of our North America production equipment assets (“PEQ assets”).~~revenue and water solutions revenue, respectively. The ~~decrease~~increase in revenue in the Asia Pacific region was primarily due to ~~a decrease~~an increase of ~~$11.2~~$11.0 million in compression ~~equipment~~ revenue. Gross margin ~~increased~~ decreased during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 due to the revenue ~~increase~~decrease explained ~~above.~~above and higher expenses on a specific project in the Middle East and Africa region. Gross margin percentage during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~ ~~remained flat.~~2019 decreased primarily due to the higher expenses discussed above and a shift in product mix in the North America region during the current year period.

Costs and Expenses

(dollars in thousands)


	Three Months Ended March 31,											Three Months Ended March 31,
	2019			2018		Change			% Change			2020		2019		Change		% Change
Selling, general and administrative	$	43,452		$	44,242	$	(790	)	(2	)%	Selling, general and administrative	$	38,052	$	43,452	$	(5,400)	(12)	%
Depreciation and amortization	38,217			31,029		7,188			23	%	Depreciation and amortization	32,610		38,217		(5,607)		(15)	%
Long-lived asset impairment	—			1,804		(1,804		)	(100	)%
Restatement related charges	48			621		(573		)	(92	)%	Restatement related charges	—		48		(48)		(100)	%
Restructuring and other charges	384			—		384			N/A		Restructuring and other charges	1,188		384		804		209	%
Interest expense	8,163			7,219		944			13	%	Interest expense	9,953		8,163		1,790		22	%
Other (income) expense, net	(1,245		)	1,420		(2,665		)	(188	)%	Other (income) expense, net	294		(1,245)		1,539		(124)	%

Selling, general and administrative

Depreciation and amortization

~~Long-lived asset impairment~~

InLatin America region in the fourth quarter of ~~2017,~~2019 and a decrease of $2.0 million in compressor equipment for equipment that was impaired in the fourth quarter of 2019. This decrease was partially offset by an increase of $5.2 million in depreciation for installation costs on contract operations projects that were not operating in the prior year period. Capitalized installation costs included, among other things, civil engineering, piping, electrical instrumentation and project management costs.

Restructuring and other charges

~~Restatement related charges~~

During the first quarter of 2016, our senior management identified errors relating to the application of percentage-of-completion accounting principles to specific Belleli EPC product sales projects. During the three months ended March 31, 2018, we incurred $0.6 million of external costs associated with an SEC investigation and remediation activities related to the restatement of our financial statements.

~~Restructuring and other charges~~

Other (income) expense, net

(dollars in thousands)

Discontinued Operations

(dollars in thousands)

Three Months Ended
March 31,
2019 2018 Change % Change
Income from discontinued operations, net of tax $ 163
$ 1,399
$ (1,236 ) (88 )%


	Three Months Ended March 31,
	2020		2019		Change		% Change
Income (loss) from discontinued operations, net of tax	$	(154)	$	163	$	(317)	(194)	%

Income (loss) from discontinued operations, net of tax, ~~decreased primarily due to decreased activities resulting from our exit of Belleli EPC~~ during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018.~~2019 decreased primarily due to a $0.4 million decrease in income from Belleli EPC. For further details on our discontinued operations, see Note 43 to the Financial Statements.

Operating Activities. The ~~increase~~decrease in net cash provided by operating activities during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 was primarily attributable to ~~better collections of in-period billings during the current year period and an increase~~a decrease in cash received from upfront billings on contract operations ~~jobs.~~projects. Working capital changes during the three months ended March 31, 2020 included a decrease of $50.8 million in accounts payable and other liabilities and an increase of $27.2 million in contract liabilities. Working capital changes during the three months ended March 31, 2019 included an increase of $24.1 million in contract liabilities, an increase of $19.4 million in inventory and ~~an increase~~a decrease of ~~$16.7 million in accounts receivable. Working capital changes during the three months ended March 31, 2018 included an increase of $34.3 million in inventory, an increase of $31.4~~$17.2 million in contract ~~assets and a decrease of $20.8 million in accounts receivable.~~assets.

Investing Activities. The ~~increase~~decrease in net cash used in investing activities during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 was primarily attributable to a ~~$27.1~~$59.3 million ~~increase~~decrease in capital expenditures. The ~~increase~~decrease in capital expenditures was primarily driven by an ~~increase in growth capital expenditures~~increased focus on ~~contract operations services contracts in~~cash management throughout the ~~Latin America region.~~regions.

Financing Activities. The ~~increase~~decrease in net cash provided by financing activities during the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 was primarily attributable to ~~an increase~~a decrease in net borrowings of ~~$12.0~~$18.5 million on our long-term debt, partially offset by ~~an increase~~a decrease of ~~$3.3~~$5.9 million in purchases of treasury stock.

Capital Requirements. Our contract operations business is capital intensive, requiring significant investment to maintain and upgrade existing operations. Our capital spending is primarily dependent on the demand for our contract operations services and the availability of the type of equipment required for us to render those contract operations services to our customers. Our capital requirements have consisted primarily of, and we anticipate will continue to consist of, the following:

•growth capital expenditures, which are made to expand or to replace partially or fully depreciated assets or to expand the operating capacity or revenue generating capabilities of existing or new assets, whether through construction, acquisition or modification; and

•maintenance capital expenditures, which are made to maintain the existing operating capacity of our assets and related cash flows further extending the useful lives of the assets.

Long-Term Debt. We and our wholly owned subsidiary, Exterran Energy Solutions, L.P. (“EESLP”), are parties to an amended and restated credit agreement (the “Credit Agreement”) consisting of a $700.0 million revolving credit facility expiring in October 2023.

•Senior unsecured obligations of each of the Issuers and the Parent, as applicable;

•Equal in right of payment with all of the existing and future senior unsecured indebtedness and senior unsecured guarantees of each of the Issuers and the Parent, as applicable;

•Senior in right of payment to all subordinated indebtedness and subordinated guarantees of each of the Issuers and the Parent, as applicable;

•Effectively junior in right of payment to all existing and future secured indebtedness and secured guarantees of each of the Issuers and the Parent, as applicable, to the extent of the value of the assets securing such indebtedness or guarantees; and

•Structurally junior in right of payment to all existing and future indebtedness, guarantees and other liabilities (including trade payables) and any preferred equity of each of the Parent’s subsidiaries (other than the Issuers) that are not guarantors of the 2017 Notes.

Parent’s guarantee will be automatically and unconditionally released and discharged upon (i) the merger of the Parent into the Issuers, (ii) a legal defeasance, covenant defeasance or satisfaction and discharge of the indenture governing the 2017 Notes or (iii) the liquidation or dissolution of the Parent, provided in each case no default or event of default has occurred and is continuing under the indenture governing the 2017 Notes.

Federal bankruptcy and state fraudulent transfer laws permit a court to void all or a portion of the obligations of the Parent pursuant to its guarantee, or to subordinate the Parent’s obligations under its guarantee to claims of the Parent’s other creditors, reducing or eliminating the ability to recover under the guarantee. Although laws differ among jurisdictions, in general, under applicable fraudulent transfer or conveyance laws, the guarantee could be voided as a fraudulent transfer or conveyance if (i) the guarantee was incurred with the intent of hindering, delaying or defrauding creditors or (ii) the Parent received less than reasonably equivalent value or fair consideration in return for incurring the guarantee and either (x) the Parent was insolvent or rendered insolvent by reason of the incurrence of the guarantee or subsequently became insolvent for other reasons, (y) the incurrence of the guarantee left the Parent with an unreasonably small amount of capital to carry on the business, or (z) the Parent intended to, or believed that it would, incur debts beyond its ability to pay such debts as they mature. A court would likely find that Parent did not receive reasonably equivalent value or fair consideration for its guarantee if it determined that the Parent did not substantially benefit directly or indirectly from the issuance of the 2017 Notes. If a court were to void a guarantee, noteholders would no longer have a claim against the Parent. In addition, the court might direct noteholders to repay any amounts that you already received from the Parent. Parent’s guarantee contains a provision intended to limit the Parent’s liability under the guarantee to the maximum amount that the Parent could incur without causing the incurrence of obligations under its guarantee to be deemed a fraudulent transfer. This provision may not be effective to protect the guarantee from being voided under fraudulent transfer law.

All consolidated subsidiaries of Exterran other than the Issuers are collectively referred to as the “Non-Guarantor Subsidiaries.” The 2017 Notes are structurally subordinated to any indebtedness and other liabilities (including trade payables) of any of the Non-Guarantor Subsidiaries. The Non-Guarantor Subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the 2017 Notes, or to make any funds available therefor, whether by dividends, loans, distributions or other payments. Holders of the 2017 Notes will have no claim as a creditor against any Non-Guarantor Subsidiaries. In the event of bankruptcy, liquidation or reorganization of any of the Non-Guarantor Subsidiaries, such subsidiaries will pay current outstanding obligations to the holders of their debt and their trade creditors before they will be able to distribute any of their assets to the Parent or the Issuers. As a result, in the context of a bankruptcy, liquidation or reorganization, holders of the 2017 Notes would likely receive less, ratably, than holders of indebtedness and other liabilities (including trade payables of such entities).

The Parent and EESLP are also parties to our credit agreement, which covenants with which the Parent, EESLP and our respective restricted subsidiaries must comply, including, but not limited to, limitations on the incurrence of indebtedness, investments, liens on assets, repurchasing equity, making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. These covenants may impact the ability of the Parent and EESLP to repay the 2017 Notes or amounts owing under Parent’s guarantee.

Summarized Financial Information (in thousands)

As a result of the Parent’s guarantee, we are presenting the following summarized financial information for the Issuers’ and Parent (collectively referred to as “the Obligated Group”) pursuant to Rule 13-01 of Regulation S-X, Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. For purposes of the following summarized financial information, transactions between the Parent and the Issuers, presented on a combined basis, have been eliminated and information for the Non-Guarantor Subsidiaries have been excluded. Amounts due from or due to the Non-Guarantor Subsidiaries and other related parties, as applicable, have been separately presented within the summarized financial information.

Cost of sales⁽¹⁾

⁽¹⁾Includes $24.5 million of revenue and $16.6 million of cost of sales for intercompany sales from the Obligated Group the Non-Guarantor Subsidiaries.


	March 31, 2020		December 31, 2019
Summarized Balance Sheet:
ASSETS
Intercompany receivables due from non-guarantors	$	171,768	$	177,649
Total current assets	328,559		353,431
Total long-term assets	245,377		249,732
LIABILITIES AND STOCKHOLDERS’ EQUITY
Intercompany payables due to non-guarantors	$	398,243	$	399,645
Total current liabilities	528,083		552,941
Long-term liabilities	510,225		495,829

Unrestricted Cash. Of our ~~$18.6~~$18.1 million unrestricted cash balance at March 31, ~~2019, $17.7~~2020, $16.9 million was held by our non-U.S. subsidiaries. In the event of a distribution of earnings to the U.S. in the form of dividends, we may be subject to foreign withholding taxes. We do not believe that the cash held by our non-U.S. subsidiaries has an adverse impact on our liquidity because we expect that the cash we generate in the U.S., the available borrowing capacity under our revolving credit facility and the repayment of intercompany liabilities from our non-U.S. subsidiaries will be sufficient to fund the cash needs of our U.S. operations for the foreseeable future.

Share Repurchase Program. On February 20, 2019, our board of directors approved a share repurchase program under which the Company is authorized to purchase up to $100.0 million of its outstanding common stock through February 2022. The timing and method of any repurchases under the program will depend on a variety of factors, including prevailing market conditions among others. Purchases under the program may be suspended or discontinued at any time and we have no obligation to repurchase any amount of our common shares under the program. Shares of common stock acquired through the repurchase program are held in treasury at cost. During the three months ended March 31, 2019, we repurchased 268,500 shares of our common stock for $4.7 million in connection with our share repurchase program. During the three months ended March 31, 2020, we did not repurchase any shares under this program. As of March 31, ~~2019,~~2020, the remaining authorized repurchase amount under the share repurchase program was ~~$95.3~~$57.7 million.

Dividends. We do not currently anticipate paying cash dividends on our common stock. We currently intend to retain our future earnings to support the growth and development of our business. The declaration of any future cash dividends and, if declared, the amount of any such dividends, will be subject to our financial condition, earnings, capital requirements, financial covenants, applicable law and other factors our board of directors deems relevant.

Three Months Ended
March 31,
2019
2018
Net income (loss) $ (5,394 ) $ 5,337
Income from discontinued operations, net of tax (163 ) (1,399 )
Depreciation and amortization 38,217
31,029
Long-lived asset impairment —
1,804
Restatement related charges 48
621
Restructuring and other charges 384
—
Interest expense 8,163
7,219
(Gain) loss on currency exchange rate remeasurement of intercompany balances (238 ) 630
Provision for income taxes 9,140
5,492
EBITDA, as adjusted $ 50,157
$ 50,733

Management’s Evaluation of Disclosure Controls and Procedures

Changes in Internal Control over Financial Reporting

PART II. OTHER INFORMATION

Natural disasters, public health crises, including the COVID-19 pandemic, and other catastrophic events outside of our control may adversely affect our business or the business of third parties on which we depend.

We are following local governmental guidance for viral spread mitigation, including having many of our employees who would traditionally work in an office work from home, and have put in place additional health and safety measures to protect our employees, customers and other parties who are working at our operating sites. However, the ability of our employees and our suppliers’ and customers’ employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, or as a result of the mitigation measures noted above, which may affect our ability to fulfill our obligations to our customers. See Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of COVID-19 on our Business for further discussion of our response to, and the possible impact of, the COVID-19 pandemic on our business.

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers or other employees.

Total Number of Shares

Purchased as Part of

Plans or Programs ⁽²⁾

Approximate Dollar Value of Shares yet to be Purchased Under the Publicly Announced

Plans or Programs ⁽²⁾

Total Number of Shares

Purchased as Part of

Approximate Dollar Value of Shares yet to be Purchased Under the Publicly Announced

____________________

⁽¹⁾ Total number of shares repurchased includes 114,725 shares withheld to satisfy employees’ tax withholding obligations in connection with vesting of restricted stock awards during the period.

⁽²⁾ On February 20, 2019, our board of directors approved a share repurchase program, under which the Company is authorized to purchase up to $100.0 million of its outstanding common stock through February 2022. The timing and method of any repurchases under the program will depend on a variety of factors, including prevailing market conditions among others. Purchases under the program may be suspended or discontinued at any time, and we have no obligation to repurchase any amount of our common shares under the program. Shares of common stock acquired through the repurchase program are held in treasury at cost.



†						Management contract or ~~compensatory~~compensation plan or arrangement.
*						Filed herewith.
**						Furnished, not filed.

Exterran Corporation

Date: May ~~2, 2019~~11, 2020

By:

/s/ DAVID A. BARTA

David A. Barta

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)


	Three Months Ended March 31,
	2020		2019
Cash flows from operating activities:
Net loss	$	(18,304)	$	(5,394)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization	32,610		38,217
Amortization of deferred financing costs	628		628
(Income) loss from discontinued operations, net of tax	154		(163)
Provision for doubtful accounts	2,742		—
Gain on sale of property, plant and equipment	(161)		(1,000)
Gain on remeasurement of intercompany balances	(1,121)		(446)
Loss on foreign currency derivatives	—		665
Stock-based compensation expense	285		3,996
Deferred income tax expense (benefit)	1,361		(980)
Changes in assets and liabilities:
Accounts receivable and notes	1,801		(16,684)
Inventory	4,632		(19,427)
Contract assets	3,301		17,245
Other current assets	(382)		528
Accounts payable and other liabilities	(50,836)		7,759
Contract liabilities	27,203		24,051
Other	5,536		30
Net cash provided by continuing operations	9,449		49,025
Net cash provided by (used in) discontinued operations	(1,177)		16
Net cash provided by operating activities	8,272		49,041

Cash flows from investing activities:
Capital expenditures	(17,025)		(76,354)
Proceeds from sale of property, plant and equipment	164		4,012
Settlement of foreign currency derivatives	—		(207)
Net cash used in investing activities	(16,861)		(72,549)

Cash flows from financing activities:
Proceeds from borrowings of debt	112,000		179,000
Repayments of debt	(100,613)		(149,113)
Purchases of treasury stock (Note 10)	(835)		(6,701)
Net cash provided by financing activities	10,552		23,186

Effect of exchange rate changes on cash, cash equivalents and restricted cash	(513)		(402)
Net increase (decrease) in cash, cash equivalents and restricted cash	1,450		(724)
Cash, cash equivalents and restricted cash at beginning of period	16,702		19,478
Cash, cash equivalents and restricted cash at end of period	$	18,152	$	18,754

Supplemental disclosure of non-cash transactions:
Accrued capital expenditures	$	6,959	$	18,964


	Contract Operations Segment		Product Sales Segment
Remainder of 2020	$	211,498	$	277,862
2021	250,949		274,320
2022	199,409		45,700
2023	176,134		12,000
2024	149,701		9,000
Thereafter	364,936		29,398
Total backlog	$	1,352,627	$	648,280



Maturity of Operating Lease Liabilities	March 31, 2019
Remainder of 2019 ⁽¹⁾	$	1,546
2020	6,998
2021	6,396
2022	5,437
2023	4,771
Thereafter	25,352
Total lease payments	50,500
Less: Imputed interest	(15,485		)
Present value of lease liabilities	$	35,015



Cash Flow Information	Classification	Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities	Net cash provided by operating activities	$	(2,061	)
Leased assets obtained in exchange for new operating lease liabilities	Non-cash	9,864


	March 31, 2020		December 31, 2019
Parts and supplies	$	85,876	$	92,005
Work in progress	45,036		44,565
Finished goods	6,969		6,968
Inventory, net	$	137,881	$	143,538



	Impact of Changes in Accounting Policies
	December 31, 2018			Adjustments			January 1, 2019
ASSETS

Other current assets	$	44,234		$	(506	)	$	43,728
Operating lease right-of-use assets	—			21,181			21,181
Intangible and other assets, net	86,371			(353		)	86,018
Total assets	$	1,567,054		$	20,322		$	1,587,376

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current operating lease liabilities	$	—		$	6,769		$	6,769
Long-term operating lease liabilities	—			19,737			19,737
Total liabilities	1,014,233			26,506			1,040,739
Accumulated deficit	(208,677		)	(6,184		)	(214,861		)
Total stockholders’ equity	552,821			(6,184		)	546,637
Total liabilities and stockholders’ equity	$	1,567,054		$	20,322		$	1,587,376


	Three Months Ended March 31,
Revenue by Products and Services	2020		2019
Contract Operations Segment:
Contract operations services ⁽¹⁾	$	94,788	$	85,700

Aftermarket Services Segment:
Operation and maintenance services ⁽¹⁾	$	12,939	$	12,673
Part sales ⁽²⁾	10,824		9,796
Other services ⁽¹⁾	4,146		4,833
Total aftermarket services	$	27,909	$	27,302

Product Sales Segment:
Compression equipment ⁽¹⁾	$	68,719	$	145,439
Processing and treating equipment ⁽¹⁾	11,809		89,220
Production equipment ⁽²⁾	578		2,435
Other product sales ^{(1) (2)}	6,554		1,350
Total product sales revenues	$	87,660	$	238,444

Total revenues	$	210,357	$	351,446


	Three Months Ended March 31,
Revenue by Geographical Regions	2020		2019
North America	$	58,539	$	181,005
Latin America	76,797		78,487
Middle East and Africa	55,713		82,791
Asia Pacific	19,308		9,163
Total revenues	$	210,357	$	351,446



	Contract Operations Segment		Product Sales Segment
Remainder of 2019	$	226,634	$	520,239
2020	202,500		29,531
2021	207,204		3,721
2022	168,224		—
2023	149,805		—
Thereafter	403,044		—
Total backlog	$	1,357,411	$	553,491


	March 31, 2020		December 31, 2019
Accounts receivables, net	$	196,298	$	202,337
Contract assets and contract liabilities:
Current contract assets	41,554		46,537
Long-term contract assets	11,387		16,280
Current contract liabilities	106,399		82,854
Long-term contract liabilities	145,211		156,262



Leases	Classification	March 31, 2019
Assets
Operating lease assets	Operating lease right-of-use assets	$	29,782

Liabilities
Operating - current	Current operating lease liabilities	$	6,738
Operating - noncurrent	Long-term operating lease liabilities	28,277
Total lease liabilities		$	35,015



Future Minimum Rental Payments	December 31, 2018
2019	$	6,076
2020	5,929
2021	4,583
2022	3,756
2023	3,038
Thereafter	11,615
Total lease payments	$	34,997


	Three Months Ended March 31, 2020				Three Months Ended March 31, 2019
	Belleli EPC		Venezuela			Belleli EPC		Total
Revenue	$	124	$	—		$	137	$	137
Cost of sales (excluding depreciation and amortization expense)	96		—			(316)		(316)
Selling, general and administrative	113		35			541		576
Other (income) expense, net	44		—			(328)		(328)
Provision for income taxes	25		—			42		42
Income (loss) from discontinued operations, net of tax	$	(154)	$	(35)		$	198	$	163



	Three Months Ended March 31, 2019									Three Months Ended March 31, 2018
	Venezuela			Belleli EPC			Total			Venezuela			Belleli EPC		Total
Revenue	$	—		$	137		$	137		$	—		$	4,967	$	4,967
Cost of sales (excluding depreciation and amortization expense)	—			(316		)	(316		)	—			2,403		2,403
Selling, general and administrative	35			541			576			32			60		92
Depreciation and amortization	—			—			—			—			428		428
Other (income) expense, net	—			(328		)	(328		)	1			599		600
Provision for income taxes	—			42			42			—			45		45
Income (loss) from discontinued operations, net of tax	$	(35	)	$	198		$	163		$	(33	)	$	1,432	$	1,399


	March 31, 2020		December 31, 2019
Compression equipment, processing facilities and other fleet assets	$	1,573,917	$	1,607,769
Land and buildings	67,014		67,187
Transportation and shop equipment	58,330		59,693
Computer software	51,390		51,663
Other	38,576		38,111
	1,789,227		1,824,423
Accumulated depreciation	(974,163)		(980,013)
Property, plant and equipment, net	$	815,064	$	844,410


⁽¹⁾	Our estimate of the fair value of the impaired North America production equipment assets (“PEQ assets”), which were classified as assets held for sale as of March 31, 2018 and sold in June 2018, was based on the expected net proceeds from the sale of the assets.


	Cost Reduction Plan		Relocation Plan		Total
Beginning balance at January 1, 2019	$	—	$	309	$	309
Additions for costs expensed	—		384		384
Reductions for payments	—		(411)		(411)
Ending balance at March 31, 2019	$	—	$	282	$	282

Beginning balance at January 1, 2020	$	2,281	$	—	$	2,281
Additions for costs expensed, net	1,188		—		1,188
Reductions for payments	(321)		—		(321)
Foreign exchange impact	(289)		—		(289)
Ending balance at March 31, 2020	$	2,859	$	—	$	2,859


	Total
Employee termination benefits	$	7,371
Relocation costs	907
Consulting fees	841
Other	488
Total restructuring and other charges	$	9,607


	Equity Awards				Liability Awards
	Shares (in thousands)	Weighted Average Grant-Date Fair Value Per Share		Shares (in thousands)	Weighted Average Grant-Date Fair Value Per Share
Non-vested awards, January 1, 2020	842	$	22.79	318	$	17.01
Granted	135	7.27		1,182	8.54
Vested	(400)	21.30		(79)	26.24
Cancelled	(198)	30.16		(14)	17.01
Non-vested awards, March 31, 2020	379	14.98		1,407	9.38



	Shares (in thousands)		Weighted Average Grant-Date Fair Value Per Share
Non-vested awards, January 1, 2019	1,044		$	25.89
Granted	806		17.01
Vested	(427	)	23.06
Cancelled	(16	)	27.24
Non-vested awards, March 31, 2019 ⁽¹⁾	1,407		21.65


⁽¹⁾	~~361,000 of the non-vested awards as of March 31, 2019 are presented within our balance sheets as liabilities due to their expected cash settlement.~~


*	~~Excluded from diluted net income (loss) per common share as their inclusion would have been anti-dilutive.~~



					Non- Guarantor Subsidiaries
	Parent Guarantor		Issuers		Non- Guarantor Subsidiaries			Eliminations			Consolidation
ASSETS

Cash and cash equivalents	$	27	$	1,116	$	17,433		$	—		$	18,576
Restricted cash	—		—		178			—			178
Accounts receivable, net	—		97,099		169,187			—			266,286
Inventory, net	—		97,037		69,854			—			166,891
Contract assets	—		47,380		23,256			—			70,636
Intercompany receivables	—		172,543		385,986			(558,529		)	—
Other current assets	—		6,970		33,203			—			40,173
Current assets associated with discontinued operations	—		—		8,570			—			8,570
Total current assets	27		422,145		707,667			(558,529		)	571,310
Property, plant and equipment, net	—		311,674		631,814			—			943,488
Operating lease right-of-use assets	—		12,374		17,408			—			29,782
Investment in affiliates	543,275		886,456		(343,181		)	(1,086,550		)	—
Deferred income taxes	—		5,493		6,531			—			12,024
Intangible and other assets, net	—		31,847		52,482			—			84,329
Long-term assets associated with discontinued operations	—		—		1,629			—			1,629
Total assets	$	543,302	$	1,669,989	$	1,074,350		$	(1,645,079	)	$	1,642,562

LIABILITIES AND EQUITY

Accounts payable, trade	$	—	$	142,709	$	45,400		$	—		$	188,109
Accrued liabilities	386		33,979		78,904			—			113,269
Contract liabilities	—		77,426		62,549			—			139,975
Current operating lease liabilities	—		1,967		4,771			—			6,738
Intercompany payables	5,732		385,986		166,811			(558,529		)	—
Current liabilities associated with discontinued operations	—		—		11,713			—			11,713
Total current liabilities	6,118		642,067		370,148			(558,529		)	459,804
Long-term debt	—		433,952		—			—			433,952
Deferred income taxes	—		—		6,762			—			6,762
Long-term contract liabilities	—		22,851		112,146			—			134,997
Long-term operating lease liabilities	—		16,484		11,793			—			28,277
Other long-term liabilities	—		11,360		24,461			—			35,821
Long-term liabilities associated with discontinued operations	—		—		5,765			—			5,765
Total liabilities	6,118		1,126,714		531,075			(558,529		)	1,105,378
Total equity	537,184		543,275		543,275			(1,086,550		)	537,184
Total liabilities and equity	$	543,302	$	1,669,989	$	1,074,350		$	(1,645,079	)	$	1,642,562



	March 31, 2019		December 31, 2018		March 31, 2018
Contract Operations Backlog:
Contract operations services	$	1,357,411	$	1,398,644	$	1,215,877

Product Sales Backlog:
Compression equipment	$	367,226	$	471,827	$	206,252
Processing and treating equipment	161,206		229,258		199,122
Production equipment	—		2,438		9,481
Other product sales	25,059		2,246		12,041
Total product sales backlog	$	553,491	$	705,769	$	426,896


	Three Months Ended March 31, 2020
Summarized Statement of Operations:
Revenues⁽¹⁾	$	97,104
Cost of sales⁽¹⁾	81,972
Loss from continuing operations	(35,384)
Net loss	(35,384)



Period	Total Number of Shares Repurchased⁽¹⁾	Average Price Paid Per Unit		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Approximate Dollar Value of Shares yet to be Purchased Under the Publicly Announced Plans or Programs ⁽²⁾
January 1, 2019 - January 31, 2019	—	$	—	N/A	N/A
February 1, 2019 - February 28, 2019	208	17.25		—	$	100,000,000
March 1, 2019 - March 31, 2019	142,653	17.01		268,500	95,342,742
Total	142,861	17.01		268,500	95,342,742


⁽¹⁾	~~Includes shares withheld to satisfy employees’ tax withholding obligations in connection with vesting of restricted stock awards during the period.~~



Exhibit No.		Description
2.1		Separation and Distribution Agreement, dated as of November 3, 2015, by and among Exterran Holdings, Inc., Exterran General Holdings LLC, Exterran Energy Solutions, L.P., Exterran Corporation, AROC Corp., EESLP LP LLC, AROC Services GP LLC, AROC Services LP LLC and Archrock Services, L.P., incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on November 5, 2015
2.2		First Amendment to Separation and Distribution Agreement, dated as of December 15, 2015, by and among Archrock, Inc., Exterran General Holdings LLC, Exterran Energy Solutions, L.P., Exterran Corporation, AROC Corp., EESLP LP LLC, AROC Services GP LLC, AROC Services LP LLC and Archrock Services, L.P., incorporated by reference to Exhibit 2.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015
10.1†*10.1		Chai Trust Agreement, dated February 29, 2020, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 2, 2020
10.2†*		Exterran Corporation 2020 Omnibus Incentive Plan, incorporated by reference to Appendix C to the Registrant’s Definitive Proxy Statement filed on March 18, 20200
10.3†*		Form of Award Notice and Agreement for Performance Cash-Settled Units pursuant to the 2015 Stock Incentive Plan
~~10.2†~~10.4†*		Form of Award Notice and Agreement for Time-Vested Cash-Settled Restricted Stock pursuant to the 2015 Stock Incentive Plan
~~10.3†~~10.5†*		~~Form of Award Notice and Agreement for Time-Vested Restricted Stock Units pursuant to the 2015 Stock Incentive Plan~~
10.4†*	Form of Award Notice and Agreement for Common Stock Award for Non-Employee Directors pursuant to the 2015 Stock Incentive Plan
31.122.1		List of Guarantor Subsidiaries
31.1*		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance ~~Document.~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.