##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-Q
 (MARK ONE)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR
THE TRANSITION PERIOD FROM TO.
 Commission File No. 1-13071
 Hanover Compressor Company
 (Exact name of registrant as specified in its charter)
 Delaware
    
    76-0625124(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)12001 North Houston Rosslyn, Houston, Texas
    
    77086(Address of principal executive offices)
    
    (Zip Code)
 (281) 447-8787
(Registrants telephone number, including area code)
 þ o
  o þ o
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Comprehensive Income (Loss)
    
    
    5Condensed Consolidated Statements of Cash Flows
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    36PART II. OTHER INFORMATION
    
    
    36Item 1. Legal Proceedings
    
    
    36Item 1A. Risk Factors
    
    
    36Item 6: Exhibits
    
    
    37SIGNATURES
    
    
    38EXHIBIT INDEX
    
    
    39Certification of Chief Executive Officer pursuant to Section 302Certification of Chief Financial Officer pursuant to Section 302Certification of Chief Executive Officer pursuant to Section 906Certification of Chief Financial Officer pursuant to Section 906
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 HANOVER COMPRESSOR COMPANY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  September 30,
    
    
    December 31,2006
    
    
    2005(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    55,111
    
    
    $
    48,233Accounts receivable, net of allowance of $5,223 and $4,751, respectively
    
    
    298,535
    
    
    
    243,672Inventory, net
    
    
    317,652
    
    
    
    251,069Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    79,968
    
    
    
    99,166Prepaid taxes
    
    
    10,028
    
    
    
    8,194Current deferred income taxes
    
    
    20,259
    
    
    
    13,842Assets held for sale
    
    
    2,020
    
    
    
    2,020Prepaid expenses
    
    
    51,768
    
    
    
    20,002Other current assets
    
    
    24,893
    
    
    
    18,187Total current assets
    
    
    860,234
    
    
    
    704,385Property, plant and equipment, net
    
    
    1,843,996
    
    
    
    1,823,100Goodwill, net
    
    
    181,098
    
    
    
    184,364Intangible and other assets
    
    
    53,988
    
    
    
    60,406Investments in non-consolidated affiliates
    
    
    91,850
    
    
    
    90,741Total assets
    
    $
    3,031,166
    
    
    $
    2,862,996LIABILITIES AND COMMON STOCKHOLDERS EQUITYCurrent liabilities:Short-term debt
    
    $
    11,157
    
    
    $
    4,080Current maturities of long-term debt
    
    
    641
    
    
    
    1,309Accounts payable, trade
    
    
    110,939
    
    
    
    92,980Accrued liabilities
    
    
    144,239
    
    
    
    128,805Advance billings
    
    
    145,715
    
    
    
    89,513Liabilities held for sale
    
    
    878
    
    
    
    878Billings on uncompleted contracts in excess of costs and estimated earnings
    
    
    83,271
    
    
    
    35,126Total current liabilities
    
    
    496,840
    
    
    
    352,691Long-term debt
    
    
    1,415,087
    
    
    
    1,473,559Other liabilities
    
    
    44,631
    
    
    
    38,976Deferred income taxes
    
    
    87,736
    
    
    
    76,115Total liabilities
    
    
    2,044,294
    
    
    
    1,941,341Commitments and contingencies (Note 8)Minority interest
    
    
    11,991
    
    
    
    11,873Common stockholders equity:Common stock, $.001 par value; 200,000,000 shares authorized; 103,643,390
and 102,392,918 shares issued, respectively
    
    
    104
    
    
    
    102Additional paid-in capital
    
    
    1,095,362
    
    
    
    1,097,766Deferred employee compensation  restricted stock grants
    
    
    
    
    
    
    (13,249
    )Accumulated other comprehensive income
    
    
    13,071
    
    
    
    15,214Accumulated deficit
    
    
    (129,686
    )
    
    
    (186,088
    )Treasury stock428,330 and 366,091 common shares, at cost, respectively
    
    
    (3,970
    )
    
    
    (3,963
    )Total common stockholders equity
    
    
    974,881
    
    
    
    909,782Total liabilities and common stockholders equity
    
    $
    3,031,166
    
    
    $
    2,862,996
  3




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##### Table of Contents



HANOVER COMPRESSOR COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues and other income:U.S. rentals
    
    $
    98,030
    
    
    $
    87,703
    
    
    $
    282,746
    
    
    $
    262,548International rentals
    
    
    63,792
    
    
    
    58,208
    
    
    
    193,818
    
    
    
    167,644Parts, service and used equipment
    
    
    47,951
    
    
    
    74,027
    
    
    
    152,959
    
    
    
    157,995Compressor and accessory fabrication
    
    
    90,141
    
    
    
    51,798
    
    
    
    214,960
    
    
    
    125,414Production and processing equipment fabrication
    
    
    115,890
    
    
    
    90,312
    
    
    
    298,162
    
    
    
    284,180Equity in income of non-consolidated affiliates
    
    
    6,313
    
    
    
    6,027
    
    
    
    17,391
    
    
    
    15,759Gain on sale of business and other income
    
    
    1,667
    
    
    
    1,771
    
    
    
    42,216
    
    
    
    2,714423,784
    
    
    
    369,846
    
    
    
    1,202,252
    
    
    
    1,016,254Expenses:U.S. rentals
    
    
    39,557
    
    
    
    35,503
    
    
    
    114,377
    
    
    
    102,563International rentals
    
    
    25,528
    
    
    
    19,284
    
    
    
    70,551
    
    
    
    53,930Parts, service and used equipment
    
    
    37,894
    
    
    
    55,865
    
    
    
    124,017
    
    
    
    117,140Compressor and accessory fabrication
    
    
    74,371
    
    
    
    44,418
    
    
    
    179,546
    
    
    
    110,622Production and processing equipment fabrication
    
    
    97,675
    
    
    
    83,146
    
    
    
    255,841
    
    
    
    254,700Selling, general and administrative
    
    
    50,913
    
    
    
    45,442
    
    
    
    148,751
    
    
    
    131,509Foreign currency translation
    
    
    905
    
    
    
    1,083
    
    
    
    (2,828
    )
    
    
    6,309Other
    
    
    
    
    
    
    133
    
    
    
    1,204
    
    
    
    526Debt extinguishment costs
    
    
    
    
    
    
    7,318
    
    
    
    5,902
    
    
    
    7,318Depreciation and amortization
    
    
    45,307
    
    
    
    47,535
    
    
    
    130,352
    
    
    
    138,457Interest expense
    
    
    28,802
    
    
    
    34,612
    
    
    
    89,729
    
    
    
    105,214400,952
    
    
    
    374,339
    
    
    
    1,117,442
    
    
    
    1,028,288Income (loss) from continuing operations before income taxes
and minority interest
    
    
    22,832
    
    
    
    (4,493
    )
    
    
    84,810
    
    
    
    (12,034
    )Provision for income taxes
    
    
    11,216
    
    
    
    10,279
    
    
    
    29,209
    
    
    
    20,922Income (loss) from continuing operations before minority
interest
    
    
    11,616
    
    
    
    (14,772
    )
    
    
    55,601
    
    
    
    (32,956
    )Minority interest, net of taxes
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) from continuing operations
    
    
    11,709
    
    
    
    (14,772
    )
    
    
    55,601
    
    
    
    (32,956
    )Income (loss) from discontinued operations, net of tax
    
    
    570
    
    
    
    (214
    )
    
    
    368
    
    
    
    (706
    )Gain (loss) from sales of discontinued operations, net of tax
    
    
    
    
    
    
    48
    
    
    
    63
    
    
    
    (156
    )Income (loss) before cumulative effect of accounting changes
    
    
    12,279
    
    
    
    (14,938
    )
    
    
    56,032
    
    
    
    (33,818
    )Cumulative effect of accounting changes, net of tax
    
    
    
    
    
    
    
    
    
    
    370
    
    
    
    Net income (loss)
    
    $
    12,279
    
    
    $
    (14,938
    )
    
    $
    56,402
    
    
    $
    (33,818
    )Basic income (loss) per common share:Income (loss) from continuing operations
    
    $
    0.12
    
    
    $
    (0.16
    )
    
    $
    0.55
    
    
    $
    (0.37
    )Income (loss) from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    0.01
    
    
    
    (0.01
    )Cumulative effect of accounting changes, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    0.12
    
    
    $
    (0.16
    )
    
    $
    0.56
    
    
    $
    (0.38
    )Diluted income (loss) per common share:Income (loss) from continuing operations
    
    $
    0.11
    
    
    $
    (0.16
    )
    
    $
    0.54
    
    
    $
    (0.37
    )Income (loss) from discontinued operations, net of tax
    
    
    0.01
    
    
    
    
    
    
    
    0.01
    
    
    
    (0.01
    )Cumulative effect of accounting changes, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    0.12
    
    
    $
    (0.16
    )
    
    $
    0.55
    
    
    $
    (0.38
    )Weighted average common and equivalent shares outstanding:Basic
    
    
    101,377
    
    
    
    93,888
    
    
    
    101,053
    
    
    
    88,488Diluted
    
    
    103,399
    
    
    
    93,888
    
    
    
    102,573
    
    
    
    88,488
  4




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##### Table of Contents



HANOVER COMPRESSOR COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    12,279
    
    
    $
    (14,938
    )
    
    $
    56,402
    
    
    $
    (33,818
    )Other comprehensive income (loss):Change in fair value of derivative
financial instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    609Foreign currency translation adjustment
    
    
    1,793
    
    
    
    1,900
    
    
    
    (2,143
    )
    
    
    (2,157
    )Comprehensive income (loss)
    
    $
    14,072
    
    
    $
    (13,038
    )
    
    $
    54,259
    
    
    $
    (35,366
    )
  5




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##### Table of Contents



HANOVER COMPRESSOR COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   Nine Months EndedSeptember 30,2006
    
    
    2005Cash flows from operating activities:Net income (loss)
    
    $
    56,402
    
    
    $
    (33,818
    )Adjustments:Depreciation and amortization
    
    
    130,352
    
    
    
    138,457(Income)
loss related to discontinued operations, net of tax
    
    
    (431
    )
    
    
    862Cumulative effect of accounting changes, net of tax
    
    
    (370
    )
    
    
    Bad debt expense
    
    
    3,169
    
    
    
    1,568Gain on sale of property, plant and equipment
    
    
    (11,282
    )
    
    
    (9,736
    )Equity in income of non-consolidated affiliates, net of dividends received
    
    
    (1,125
    )
    
    
    2,924Loss on derivative instruments
    
    
    
    
    
    
    416(Gain) loss on remeasurement of intercompany balances
    
    
    (1,858
    )
    
    
    10,968Net realized gain on trading securities
    
    
    (2,208
    )
    
    
    Zero coupon subordinated notes accreted interest paid by refinancing
    
    
    (86,084
    )
    
    
    Gain on sale of business
    
    
    (28,476
    )
    
    
    (188
    )Stock compensation expense
    
    
    6,543
    
    
    
    4,059Pay-in-kind interest on zero coupon subordinated notes
    
    
    6,282
    
    
    
    17,185Sales of (purchase of) trading securities, net
    
    
    2,208
    
    
    
    Deferred income taxes
    
    
    10,703
    
    
    
    11,749Changes in assets and liabilities, excluding business combinations:Accounts receivable and notes
    
    
    (50,189
    )
    
    
    (43,835
    )Inventory
    
    
    (69,325
    )
    
    
    (35,956
    )Costs and estimated earnings versus billings on uncompleted contracts
    
    
    69,820
    
    
    
    (41,694
    )Prepaid and other current assets
    
    
    (38,526
    )
    
    
    (5,942
    )Accounts payable and other liabilities
    
    
    28,476
    
    
    
    18,792Advance billings
    
    
    56,091
    
    
    
    27,508Other
    
    
    (4,930
    )
    
    
    2,145Net cash provided by continuing operations
    
    
    75,242
    
    
    
    65,464Net cash provided by (used in) discontinued operations
    
    
    431
    
    
    
    (376
    )Net cash provided by operating activities
    
    
    75,673
    
    
    
    65,088Cash flows from investing activities:Capital expenditures
    
    
    (173,172
    )
    
    
    (103,155
    )Proceeds from sale of property, plant and equipment
    
    
    23,473
    
    
    
    38,028Proceeds from sale of business
    
    
    52,125
    
    
    
    2,500Cash used for business acquisitions
    
    
    
    
    
    
    (3,426
    )Cash used to acquire investments in and advances to non-consolidated affiliates
    
    
    
    
    
    
    (500
    )Net cash used in continuing operations
    
    
    (97,574
    )
    
    
    (66,553
    )Net cash provided by discontinued operations
    
    
    
    
    
    
    220Net cash used in investing activities
    
    
    (97,574
    )
    
    
    (66,333
    )Cash flows from financing activities:Borrowings on revolving credit facilities
    
    
    161,500
    
    
    
    120,000Repayments on revolving credit facilities
    
    
    (140,500
    )
    
    
    (79,000
    )Proceeds from issuance of senior notes
    
    
    150,000
    
    
    
    Payments for debt issue costs
    
    
    (3,832
    )
    
    
    Proceeds from warrant conversions and stock options exercised
    
    
    4,626
    
    
    
    4,829Proceeds (repayments) of other debt, net
    
    
    5,994
    
    
    
    (1,421
    )Proceeds from equity offering, net of issuance costs
    
    
    
    
    
    
    179,202Repayment of zero coupon subordinated notes principal
    
    
    (150,000
    )
    
    
    Payments of 2000B equipment lease obligations
    
    
    
    
    
    
    (57,589
    )
  6




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##### Table of Contents



HANOVER COMPRESSOR COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   Nine Months EndedSeptember 30,2006
    
    
    2005Payments of 2001A equipment lease obligations
    
    
    
    
    
    
    (172,177
    )Net cash provided by (used in) continuing operations
    
    
    27,788
    
    
    
    (6,156
    )Net cash used in discontinued operations
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    27,788
    
    
    
    (6,156
    )Effect of exchange rate changes on cash and equivalents
    
    
    991
    
    
    
    (835
    )Net increase (decrease) in cash and cash equivalents
    
    
    6,878
    
    
    
    (8,236
    )Cash and cash equivalents at beginning of period
    
    
    48,233
    
    
    
    38,076Cash and cash equivalents at end of period
    
    $
    55,111
    
    
    $
    29,840
  7




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##### Table of Contents



HANOVER COMPRESSOR COMPANY
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION
  Earnings Per Common Share
   Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Weighted average common shares outstandingused in
basic
income (loss) per common share
    
    
    101,377
    
    
    
    93,888
    
    
    
    101,053
    
    
    
    88,488Net dilutive potential common stock issuable:On exercise of options and vesting of restricted stock
    
    
    2,022
    
    
    
    **
    
    
    
    1,520
    
    
    
    **On exercise of warrants
    
    
    
    
    
    
    **
    
    
    
    
    
    
    
    **On conversion of convertible subordinated notes due
2029
    
    
    **
    
    
    
    **
    
    
    
    **
    
    
    
    **On conversion of convertible senior notes due 2008
    
    
    **
    
    
    
    **
    
    
    
    **
    
    
    
    **On conversion of convertible senior notes due 2014
    
    
    **
    
    
    
    **
    
    
    
    **
    
    
    
    **Weighted average common shares and dilutive potential
common
shares used in diluted income (loss) per common
share
    
    
    103,399
    
    
    
    93,888
    
    
    
    102,573
    
    
    
    88,488
 
 **
    
    Excluded from diluted income (loss) per common share as the effect would have been
anti-dilutive. 8




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Net dilutive potential common shares issuable:On exercise of options and vesting of restricted stock
    
    
    
    
    
    
    2,066
    
    
    
    
    
    
    
    2,534On exercise of options-exercise price greater than
average market value at end of period
    
    
    44
    
    
    
    745
    
    
    
    54
    
    
    
    749On exercise of warrants
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    3On conversion of convertible subordinated notes due 2029
    
    
    4,825
    
    
    
    4,825
    
    
    
    4,825
    
    
    
    4,825On conversion of convertible senior notes due 2008
    
    
    4,370
    
    
    
    4,370
    
    
    
    4,370
    
    
    
    4,370On conversion of convertible senior notes due 2014
    
    
    9,583
    
    
    
    9,583
    
    
    
    9,583
    
    
    
    9,58318,822
    
    
    
    21,591
    
    
    
    18,832
    
    
    
    22,064
 Reclassifications
  2. STOCK OPTIONS AND STOCK-BASED COMPENSATION
       9




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##### Table of Contents



Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30, 2005
    
    
    September 30, 2005Net loss, before stock-based compensation for employees
    
    $
    (14,938
    )
    
    $
    (33,818
    )Add back: Stock-based compensation expense for employees
previously determined under intrinsic value method, net of
tax effect
    
    
    1,836
    
    
    
    4,059Deduct: Stock-based employee compensation expense for
employees determined under the fair value method, net of tax
    
    
    (2,297
    )
    
    
    (5,846
    )Net loss, after effect of stock-based compensation for employees
    
    $
    (15,399
    )
    
    $
    (35,605
    )Net loss per share:Basic as reported for prior period
    
    $
    (0.16
    )
    
    $
    (0.38
    )Basic after effect of stock-based compensation for employees
    
    $
    (0.16
    )
    
    $
    (0.40
    )Diluted as reported for prior period
    
    $
    (0.16
    )
    
    $
    (0.38
    )Diluted after effect of stock-based compensation for employees
    
    $
    (0.16
    )
    
    $
    (0.40
    )
 Incentive Plans
   Stock Options
    10




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##### Table of Contents



WeightedAverageWeighted
    
    
    RemainingAverage Exercise
    
    
    Contractual
    
    
    AggregateShares
    
    
    Price per Share
    
    
    Life (in years)
    
    
    Intrinsic ValueOutstanding at December 31, 2005
    
    
    3,021
    
    
    $
    11.77Granted
    
    
    
    
    
    $
    Exercised
    
    
    (442
    )
    
    $
    10.46Forfeited
    
    
    (112
    )
    
    $
    12.24Outstanding at September 30, 2006
    
    
    2,467
    
    
    $
    11.97
    
    
    
    4.8
    
    
    $
    15,652Exercisable at September 30, 2006
    
    
    2,019
    
    
    $
    12.05
    
    
    
    4.1
    
    
    $
    12,690
  Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    AverageContractual
    
    Exercise
    
    
    
    
    
    ExerciseRange of exercise prices
    
    Shares
    
    Life (in years)
    
    Price
    
    Shares
    
    Price$7.5110.00
    
    
    901
    
    
    
    2.2
    
    
    $
    9.76
    
    
    
    854
    
    
    $
    9.75$10.0112.50
    
    
    941
    
    
    
    7.1
    
    
    $
    11.76
    
    
    
    547
    
    
    $
    11.74$12.5115.00
    
    
    496
    
    
    
    5.2
    
    
    $
    14.44
    
    
    
    489
    
    
    $
    14.46$15.0117.50
    
    
    75
    
    
    
    5.5
    
    
    $
    17.25
    
    
    
    75
    
    
    $
    17.25$17.5120.00
    
    
    21
    
    
    
    5.4
    
    
    $
    18.95
    
    
    
    21
    
    
    $
    18.95$22.5125.00
    
    
    33
    
    
    
    4.8
    
    
    $
    25.00
    
    
    
    33
    
    
    $
    25.002,467
    
    
    
    
    
    
    
    
    
    
    
    2,019
  Weighted-AverageGrant DateShares
    
    Fair ValueUnvested stock options:Unvested at December 31, 2005
    
    
    914
    
    
    $
    5.31Granted
    
    
    
    
    
    $
    Vested
    
    
    (402
    )
    
    $
    5.58Forfeited
    
    
    (64
    )
    
    $
    5.24Unvested at September 30, 2006
    
    
    448
    
    
    $
    5.03
  Restricted Stock Awards
  11




---



##### Table of Contents



Weighted-AverageGrant DateShares
    
    Fair ValueUnvested restricted stock awards:Unvested at December 31, 2005
    
    
    1,280
    
    
    $
    11.80Granted
    
    
    764
    
    
    $
    16.32Vested
    
    
    (355
    )
    
    $
    11.97Forfeited
    
    
    (119
    )
    
    $
    11.73Change in expected vesting of performance awards
    
    
    48
    
    
    $
    11.39Unvested at September 30, 2006
    
    
    1,618
    
    
    $
    13.89
  3. INVENTORY
  September 30,
    
    
    December 31,2006
    
    
    2005Parts and supplies
    
    $
    138,162
    
    
    $
    135,310Work in progress
    
    
    168,902
    
    
    
    105,405Finished goods
    
    
    10,588
    
    
    
    10,354$
    317,652
    
    
    $
    251,069
  4. PROPERTY, PLANT AND EQUIPMENT
  September 30,
    
    
    December 31,2006
    
    
    2005Compression equipment, facilities and other rental assets
    
    $
    2,539,882
    
    
    $
    2,441,119Land and buildings
    
    
    97,987
    
    
    
    87,604Transportation and shop equipment
    
    
    84,361
    
    
    
    77,507Other
    
    
    56,644
    
    
    
    53,8242,778,874
    
    
    
    2,660,054Accumulated depreciation
    
    
    (934,878
    )
    
    
    (836,954
    )$
    1,843,996
    
    
    $
    1,823,100
 12




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##### Table of Contents



5. INVESTMENTS IN NON-CONSOLIDATED AFFILIATES
   OwnershipInterest
    
    Location
    
    Type of BusinessPIGAP II
    
    
    30.0
    %
    
    Venezuela
    
    Gas Compression PlantEl Furrial
    
    
    33.3
    %
    
    Venezuela
    
    Gas Compression PlantSimco/Harwat Consortium
    
    
    35.5
    %
    
    Venezuela
    
    Water Injection Plant
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2005
    
    2006
    
    2005Revenues
    
    $
    51,692
    
    
    $
    51,894
    
    
    $
    151,441
    
    
    $
    148,198Operating income
    
    
    25,991
    
    
    
    27,369
    
    
    
    74,700
    
    
    
    74,914Net income
    
    
    16,053
    
    
    
    13,783
    
    
    
    37,200
    
    
    
    40,925
 6. DEBT
  September 30,
    
    
    December 31,2006
    
    
    2005Bank credit facility due November 2010
    
    $
    69,000
    
    
    $
    48,0004.75% convertible senior notes due 2008*
    
    
    192,000
    
    
    
    192,0004.75% convertible senior notes due 2014*
    
    
    143,750
    
    
    
    143,7508.625% senior notes due 2010**
    
    
    200,000
    
    
    
    200,0007.5% senior notes due 2013**
    
    
    150,000
    
    
    
    9.0% senior notes due 2014**
    
    
    200,000
    
    
    
    200,0002001A equipment lease notes, interest at 8.5%, due September 2008
    
    
    133,000
    
    
    
    133,0002001B equipment lease notes, interest at 8.75%, due September 2011
    
    
    250,000
    
    
    
    250,000Zero coupon subordinated notes, interest at 11.0%*
    
    
    
    
    
    
    229,8037.25% convertible subordinated notes due 2029*
    
    
    86,245
    
    
    
    86,250Fair value adjustment  fixed to floating interest rate swaps
    
    
    (9,130
    )
    
    
    (9,686
    )Other, interest at various rates, collateralized by equipment and
other assets, net of unamortized discount
    
    
    863
    
    
    
    1,7511,415,728
    
    
    
    1,474,868Less-current maturities
    
    
    (641
    )
    
    
    (1,309
    )Long-term debt
    
    $
    1,415,087
    
    
    $
    1,473,559
 
 *
    
    Securities issued by Hanover (parent company).**
    
    Securities issued by Hanover (parent company) and guaranteed by Hanover Compression Limited
Partnership (HCLP).  13




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7.5% Senior Notes due 2013
   7. ACCOUNTING FOR DERIVATIVES
  14




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##### Table of Contents



Fair Value ofFixed Rate to be
    
    Notional
    
    Swap atFloating Rate to be Paid
    
    Maturity Date
    
    Received
    
    Amount
    
    September 30, 2006Six Month LIBOR +4.72%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (4,687
    )Six Month LIBOR +4.64%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (4,443
    )
   8. COMMITMENTS AND CONTINGENCIES
  Maximum PotentialUndiscountedPayments as ofTerm
    
    
    September 30, 2006Indebtedness of non-consolidated affiliates:Simco/Harwat Consortium (1)
    
    
    2009
    
    
    $
    4,999El Furrial (1)
    
    
    2013
    
    
    
    29,019Other:Performance guarantees through letters of credit (2)
    
    
    2006-2010
    
    
    
    155,490Standby letters of credit
    
    
    2006-2007
    
    
    
    13,739Commercial letters of credit
    
    
    2006-2007
    
    
    
    15,833Bid bonds and performance bonds (2)
    
    
    2006-2011
    
    
    
    125,564$
    344,644
 
 (1)
    
    We have guaranteed the amount included above, which is a percentage of the total debt of this
non-consolidated affiliate equal to our ownership percentage in such affiliate.(2)
    
    We have issued guarantees to third parties to ensure performance of our obligations, some of
which may be fulfilled by third parties.    15




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9. RELATED-PARTY TRANSACTIONS
  16




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10. RECENT ACCOUNTING PRONOUNCEMENTS
    Accounting for Stock Issued to Employees,
   17




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Accounting for Income
Taxes
  11. REPORTABLE SEGMENTS
    18




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Production and
    
    
    
    
    
    TotalParts,
    
    Compressor
    
    Processing
    
    
    
    
    
    revenuesservice and
    
    and
    
    Surface
    
    
    
    
    
    
    
    
    
    andU.S.
    
    International
    
    used
    
    accessory
    
    equipment
    
    
    
    
    
    Other
    
    otherrentals
    
    rentals
    
    equipment
    
    fabrication
    
    fabrication
    
    Belleli
    
    income
    
    income(in thousands)September 30, 2006:Revenue from external customers
    
    $
    98,030
    
    
    $
    63,792
    
    
    $
    47,951
    
    
    $
    90,141
    
    
    $
    50,776
    
    
    $
    65,114
    
    
    $
    7,980
    
    
    $
    423,784Gross profit
    
    
    58,473
    
    
    
    38,264
    
    
    
    10,057
    
    
    
    15,770
    
    
    
    10,471
    
    
    
    7,744
    
    
    
    7,980
    
    
    
    148,759September 30, 2005:Revenue from external customers
    
    $
    87,703
    
    
    $
    58,208
    
    
    $
    74,027
    
    
    $
    51,798
    
    
    $
    43,421
    
    
    $
    46,891
    
    
    $
    7,798
    
    
    $
    369,846Gross profit
    
    
    52,200
    
    
    
    38,924
    
    
    
    18,162
    
    
    
    7,380
    
    
    
    4,000
    
    
    
    3,166
    
    
    
    7,798
    
    
    
    131,630
  Production and
    
    
    
    
    
    TotalParts,
    
    Compressor
    
    Processing
    
    
    
    
    
    revenuesservice and
    
    and
    
    Surface
    
    
    
    
    
    
    
    
    
    andU.S.
    
    International
    
    used
    
    accessory
    
    equipment
    
    
    
    
    
    Other
    
    otherrentals
    
    rentals
    
    equipment
    
    fabrication
    
    fabrication
    
    Belleli
    
    income
    
    income(in thousands)September 30, 2006:Revenue from external customers
    
    $
    282,746
    
    
    $
    193,818
    
    
    $
    152,959
    
    
    $
    214,960
    
    
    $
    133,992
    
    
    $
    164,170
    
    
    $
    59,607
    
    
    $
    1,202,252Gross profit
    
    
    168,369
    
    
    
    123,267
    
    
    
    28,942
    
    
    
    35,414
    
    
    
    24,888
    
    
    
    17,433
    
    
    
    59,607
    
    
    
    457,920September 30, 2005:Revenue from external customers
    
    $
    262,548
    
    
    $
    167,644
    
    
    $
    157,995
    
    
    $
    125,414
    
    
    $
    145,051
    
    
    $
    139,129
    
    
    $
    18,473
    
    
    $
    1,016,254Gross profit
    
    
    159,985
    
    
    
    113,714
    
    
    
    40,855
    
    
    
    14,792
    
    
    
    18,778
    
    
    
    10,702
    
    
    
    18,473
    
    
    
    377,299
 12. ASSETS HELD FOR SALE AND DISPOSITIONS
     19




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues and other:U.S. rentals
    
    $
    
    
    
    $
    250
    
    
    $
    15
    
    
    $
    320Other
    
    
    776
    
    
    
    74
    
    
    
    776
    
    
    
    79776
    
    
    
    324
    
    
    
    791
    
    
    
    399Expenses:U.S. rentals
    
    
    48
    
    
    
    274
    
    
    
    182
    
    
    
    657Selling, general and administrative
    
    
    1
    
    
    
    101
    
    
    
    84
    
    
    
    280Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Interest expense
    
    
    
    
    
    
    163
    
    
    
    
    
    
    
    16349
    
    
    
    538
    
    
    
    266
    
    
    
    1,105Income (loss) from discontinued
operations before income taxes
    
    
    727
    
    
    
    (214
    )
    
    
    525
    
    
    
    (706
    )Provision for income taxes
    
    
    157
    
    
    
    
    
    
    
    157
    
    
    
    Income (loss) from discontinued operations
    
    $
    570
    
    
    $
    (214
    )
    
    $
    368
    
    
    $
    (706
    )
  September 30,
    
    
    December 31,2006
    
    
    2005Current asset
    
    $
    2,020
    
    
    $
    2,020Current liabilities
    
    
    (878
    )
    
    
    (878
    )Net assets held for sale
    
    $
    1,142
    
    
    $
    1,142
 13. INCOME TAXES
    20




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21




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Special Note Regarding Forward-Looking Statements
  
    
    our inability to renew our short-term leases of equipment with our customers so as to
fully recoup our cost of the equipment;
    
    a prolonged substantial reduction in oil and natural gas prices, which could cause a
decline in the demand for our compression and oil and natural gas production and processing
equipment;
    
    reduced profit margins or the loss of market share resulting from competition or the
introduction of competing technologies by other companies;
    
    changes in economic or political conditions in the countries in which we do business,
including civil uprisings, riots, terrorism, kidnappings, the taking of property without
fair compensation and legislative changes;
    
    changes in currency exchange rates;
    
    the inherent risks associated with our operations, such as equipment defects, malfunctions and natural disasters;
    
    our inability to implement certain business objectives, such as:
 
    
    international expansion, including our ability to timely and cost-effectively
execute projects in new international operating environments,
    
    integrating acquired businesses,
    
    generating sufficient cash,
    
    accessing the capital markets, and
    
    refinancing existing or incurring additional indebtedness to fund our business;
 
    
    risks associated with any significant failure or malfunction of our enterprise resource planning system;
    
    governmental safety, health, environmental and other regulations, which could require us
to make significant expenditures; and
    
    our inability to comply with covenants in our debt agreements and the decreased financial
flexibility associated with our substantial debt.
   22




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GENERAL
   OVERVIEW
     Industry Conditions
  23




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##### Table of Contents



U.S. Tax Position
  RESULTS OF OPERATIONS
 THREE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2005
 Summary of Business Line Results
 U.S. Rentals
 Three months endedSeptember 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)Revenue
    
    $
    98,030
    
    
    $
    87,703
    
    
    
    12
    %Operating expense
    
    
    39,557
    
    
    
    35,503
    
    
    
    11
    %Gross profit
    
    $
    58,473
    
    
    $
    52,200
    
    
    
    12
    %Gross margin
    
    
    60
    %
    
    
    60
    %
    
    
    0
    %
  International Rentals
 Three months endedSeptember 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)Revenue
    
    $
    63,792
    
    
    $
    58,208
    
    
    
    10
    %Operating expense
    
    
    25,528
    
    
    
    19,284
    
    
    
    32
    %Gross profit
    
    $
    38,264
    
    
    $
    38,924
    
    
    
    (2
    )%Gross margin
    
    
    60
    %
    
    
    67
    %
    
    
    (7
    )%
  24




---



##### Table of Contents



Parts, Service and Used Equipment
 Three months endedSeptember 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)Revenue
    
    $
    47,951
    
    
    $
    74,027
    
    
    
    (35
    )%Operating expense
    
    
    37,894
    
    
    
    55,865
    
    
    
    (32
    )%Gross profit
    
    $
    10,057
    
    
    $
    18,162
    
    
    
    (45
    )%Gross margin
    
    
    21
    %
    
    
    25
    %
    
    
    (4
    )%
  Compressor and Accessory Fabrication
 Three months endedSeptember 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)Revenue
    
    $
    90,141
    
    
    $
    51,798
    
    
    
    74
    %Operating expense
    
    
    74,371
    
    
    
    44,418
    
    
    
    67
    %Gross profit
    
    $
    15,770
    
    
    $
    7,380
    
    
    
    114
    %Gross margin
    
    
    17
    %
    
    
    14
    %
    
    
    3
    %
  Production and Processing Equipment Fabrication
 Three months endedSeptember 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)Revenue
    
    $
    115,890
    
    
    $
    90,312
    
    
    
    28
    %Operating expense
    
    
    97,675
    
    
    
    83,146
    
    
    
    17
    %Gross profit
    
    $
    18,215
    
    
    $
    7,166
    
    
    
    154
    %Gross margin
    
    
    16
    %
    
    
    8
    %
    
    
    8
    %
  25




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##### Table of Contents



Expenses
   1 2
   Three Months EndedSeptember 30,2006
    
    
    2005Canada
    
    $
    (61
    )
    
    $
    (1,447
    )Argentina
    
    
    (73
    )
    
    
    (112
    )Venezuela
    
    
    6
    
    
    
    304Italy
    
    
    (637
    )
    
    
    (273
    )All other countries
    
    
    (140
    )
    
    
    445Exchange gain (loss)
    
    $
    (905
    )
    
    $
    (1,083
    )
  Income Taxes
  26




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NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2005
 Summary of Business Line Results
 U.S. Rentals
 Nine months endedSeptember 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)Revenue
    
    $
    282,746
    
    
    $
    262,548
    
    
    
    8
    %Operating expense
    
    
    114,377
    
    
    
    102,563
    
    
    
    12
    %Gross profit
    
    $
    168,369
    
    
    $
    159,985
    
    
    
    5
    %Gross margin
    
    
    60
    %
    
    
    61
    %
    
    
    (1
    )%
  International Rentals
 Nine months endedSeptember 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)Revenue
    
    $
    193,818
    
    
    $
    167,644
    
    
    
    16
    %Operating expense
    
    
    70,551
    
    
    
    53,930
    
    
    
    31
    %Gross profit
    
    $
    123,267
    
    
    $
    113,714
    
    
    
    8
    %Gross margin
    
    
    64
    %
    
    
    68
    %
    
    
    (4
    )%
  Parts, Service and Used Equipment
 Nine months endedSeptember 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)Revenue
    
    $
    152,959
    
    
    $
    157,995
    
    
    
    (3
    )%Operating expense
    
    
    124,017
    
    
    
    117,140
    
    
    
    6
    %Gross profit
    
    $
    28,942
    
    
    $
    40,855
    
    
    
    (29
    )%Gross margin
    
    
    19
    %
    
    
    26
    %
    
    
    (7
    )%
 27




---



##### Table of Contents



Compressor and Accessory Fabrication
 Nine months endedSeptember 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)Revenue
    
    $
    214,960
    
    
    $
    125,414
    
    
    
    71
    %Operating expense
    
    
    179,546
    
    
    
    110,622
    
    
    
    62
    %Gross profit
    
    $
    35,414
    
    
    $
    14,792
    
    
    
    139
    %Gross margin
    
    
    16
    %
    
    
    12
    %
    
    
    4
    %
  Production and Processing Equipment Fabrication
 Nine months endedSeptember 30,
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)Revenue
    
    $
    298,162
    
    
    $
    284,180
    
    
    
    5
    %Operating expense
    
    
    255,841
    
    
    
    254,700
    
    
    
    0
    %Gross profit
    
    $
    42,321
    
    
    $
    29,480
    
    
    
    44
    %Gross margin
    
    
    14
    %
    
    
    10
    %
    
    
    4
    %
   Gain on sale of business and other income
  28




---



##### Table of Contents



Expenses
    1 2
   Nine Months EndedSeptember 30,2006
    
    
    2005Canada
    
    $
    (1,078
    )
    
    $
    (1,252
    )Argentina
    
    
    (1,020
    )
    
    
    362Venezuela
    
    
    581
    
    
    
    3,453Italy
    
    
    3,617
    
    
    
    (9,165
    )All other countries
    
    
    728
    
    
    
    293Exchange gain/(loss)
    
    $
    2,828
    
    
    $
    (6,309
    )
  Income Taxes
  29




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Cumulative Effect of Accounting Change, Net of Tax
  LIQUIDITY AND CAPITAL RESOURCES
   Nine Months EndedSeptember 30,2006
    
    
    2005Net cash provided by (used in) continuing operations:Operating activities
    
    $
    75,242
    
    
    $
    65,464Investing activities
    
    
    (97,574
    )
    
    
    (66,553
    )Financing activities
    
    
    27,788
    
    
    
    (6,156
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    991
    
    
    
    (835
    )Net cash
provided by (used in) discontinued operations
    
    
    431
    
    
    
    (156
    )Net change in cash and cash equivalents
    
    $
    6,878
    
    
    $
    (8,236
    )
     30




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1 2  1 2 1 2 1 2
    31




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##### Table of Contents



1 2 1 2
  StandardMoodys
    
    & PoorsOutlook
    
    Positive
    
    StableSenior implied rating
    
    B1
    
    BB-Liquidity rating
    
    SGL-3
    
    2001A equipment lease notes, interest at 8.5%, due September 2008
    
    Ba3, LGD 3
    
    B+2001B equipment lease notes, interest at 8.75%, due September 2011
    
    Ba3, LGD 3
    
    B+4.75% convertible senior notes due 2008
    
    B3, LGD 5
    
    B4.75% convertible senior notes due 2014
    
    B3, LGD 5
    
    B8.625% senior notes due 2010
    
    B2, LGD 4
    
    B9.0% senior notes due 2014
    
    B2, LGD 4
    
    B7 1/2% senior notes due 2013
    
    B2, LGD 4
    
    B7.25% convertible subordinated notes due 2029*
    
    B3, LGD 6
    
    B-
 
 *
    
    Rating is on the Mandatorily Redeemable Convertible Preferred Securities issued by Hanover
Compressor Capital Trust, a trust that we sponsored. Prior to adoption of FIN 46 in 2003,
these securities were reported on our balance sheet as mandatorily redeemable convertible
preferred securities. Because we only have a limited ability to make decisions about its
activities and we are not the primary beneficiary of the trust, the trust is a VIE under FIN
46. As such, the Mandatorily Redeemable Convertible Preferred Securities issued by the trust
are no longer reported on our balance sheet. Instead, we now report our subordinated notes
payable to the trust as a debt. These notes were removed from our
consolidated financial statements effective July 1, 2003 in
connection with our adoption of FIN 46.  Derivative Financial Instruments.
 32




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##### Table of Contents



Fair Value ofFixed Rate to be
    
    
    
    
    
    Swap atFloating Rate to be Paid
    
    Maturity Date
    
    Received
    
    Notional Amount
    
    September 30, 2006Six Month LIBOR +4.72%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (4,687
    )Six Month LIBOR +4.64%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (4,443
    )
   International Operations
     33




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##### Table of Contents



Nine Months EndedSeptember 30,2006
    
    
    2005Canada
    
    $
    (1,078
    )
    
    $
    (1,252
    )Argentina
    
    
    (1,020
    )
    
    
    362Venezuela
    
    
    581
    
    
    
    3,453Italy
    
    
    3,617
    
    
    
    (9,165
    )All other countries
    
    
    728
    
    
    
    293Exchange gain/(loss)
    
    $
    2,828
    
    
    $
    (6,309
    )
        34




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##### Table of Contents



NEW ACCOUNTING PRONOUNCEMENTS
    Accounting for Stock Issued to Employees,
    35




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##### Table of Contents



Accounting for Income
Taxes
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  36




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##### Table of Contents



Item 6: Exhibits
  10.1
    
    2006 Long Term Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to Hanover Compressor
Companys Current Report on Form 8-K filed with the SEC on July 27, 2006)10.2
    
    Form of Award Notice Time Vested Restricted Stock (incorporated by reference to Exhibit 10.2 to Hanover
Compressor Companys Current Report on Form 8-K filed with the SEC on July 27, 2006)10.3
    
    Form of Award Notice Time Vested Restricted Stock Units (stock settled) (incorporated by reference to
Exhibit 10.3 to Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 27,
2006)10.4
    
    Form of Award Notice Performance Vested Restricted Stock (incorporated by reference to Exhibit 10.4 to
Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 27, 2006)10.5
    
    Form of Award Notice Performance Vested Restricted Stock Units (stock settled) (incorporated by
reference to Exhibit 10.5 to Hanover Compressor Companys Current Report on Form 8-K filed with the SEC
on July 27, 2006)10.6
    
    Form of Award Notice Cash Incentive Plan (incorporated by reference to Exhibit 10.6 to Hanover
Compressor Companys Current Report on Form 8-K filed with the SEC on July 27, 2006)10.7
    
    Schedule of Compensation for Non-Employee Directors (incorporated by reference to Exhibit 10.8 to
Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 27, 2006)31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*31.2
    
    Certification of the Chief 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**
 
 *
    
    Filed herewith.**
    
    Furnished herewith. 37




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##### Table of Contents



SIGNATURES
    By:
    
    /s/ JOHN E. JACKSON

John E. JacksonPresident and Chief Executive Officer
  By:
    
    /s/ LEE E. BECKELMAN

Lee E. BeckelmanSenior Vice President and Chief Financial Officer
 38




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##### Table of Contents



EXHIBIT INDEX
 10.1
    
    2006 Long Term Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to Hanover Compressor
Companys Current Report on Form 8-K filed with the SEC on July 27, 2006)10.2
    
    Form of Award Notice Time Vested Restricted Stock (incorporated by reference to Exhibit 10.2 to
Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 27, 2006)10.3
    
    Form of Award Notice Time Vested Restricted Stock Units (stock settled) (incorporated by reference to
Exhibit 10.3 to Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 27,
2006)10.4
    
    Form of Award Notice Performance Vested Restricted Stock (incorporated by reference to Exhibit 10.4 to
Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 27, 2006)10.5
    
    Form of Award Notice Performance Vested Restricted Stock Units (stock settled) (incorporated by
reference to Exhibit 10.5 to Hanover Compressor Companys Current Report on Form 8-K filed with the
SEC on July 27, 2006)10.6
    
    Form of Award Notice Cash Incentive Plan (incorporated by reference to Exhibit 10.6 to Hanover
Compressor Companys Current Report on Form 8-K filed with the SEC on July 27, 2006)10.7
    
    Schedule of Compensation for Non-Employee Directors (incorporated by reference to Exhibit 10.8 to
Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 27, 2006)31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*31.2
    
    Certification of the Chief 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**
 
 *
    
    Filed herewith.**
    
    Furnished herewith. 39