##### 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 MARCH 31, 2007
 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
 
 þ o 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
    
    
    5Condensed Consolidated Statements of Cash Flows
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    32PART II. OTHER INFORMATION
    
    
    32Item 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 6: Exhibits
    
    
    32SIGNATURES
    
    
    34EXHIBIT INDEX
    
    
    35Second Amendment to Credit AgreementCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO 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
  March 31,
    
    
    December 31,2007
    
    
    2006(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    56,935
    
    
    $
    73,286Accounts receivable, net of allowance of $5,323 and $4,938
    
    
    313,019
    
    
    
    283,073Inventory, net
    
    
    298,278
    
    
    
    308,093Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    102,605
    
    
    
    109,732Current deferred income taxes
    
    
    20,355
    
    
    
    20,129Other current assets
    
    
    92,128
    
    
    
    86,350Total current assets
    
    
    883,320
    
    
    
    880,663Property, plant and equipment, net
    
    
    1,874,865
    
    
    
    1,863,452Goodwill, net
    
    
    181,098
    
    
    
    181,098Intangible and other assets
    
    
    56,133
    
    
    
    55,702Investments in non-consolidated affiliates
    
    
    93,836
    
    
    
    89,974Total assets
    
    $
    3,089,252
    
    
    $
    3,070,889LIABILITIES AND COMMON STOCKHOLDERS EQUITYCurrent liabilities:Short-term debt
    
    $
    4,072
    
    
    $
    4,433Current maturities of long-term debt
    
    
    192,041
    
    
    
    455Accounts payable, trade
    
    
    126,670
    
    
    
    136,908Accrued liabilities
    
    
    139,740
    
    
    
    147,320Advance billings
    
    
    133,789
    
    
    
    170,859Billings on uncompleted contracts in excess of costs and estimated earnings
    
    
    84,916
    
    
    
    94,123Total current liabilities
    
    
    681,228
    
    
    
    554,098Long-term debt
    
    
    1,169,556
    
    
    
    1,365,043Other liabilities
    
    
    55,964
    
    
    
    48,953Deferred income taxes
    
    
    81,818
    
    
    
    76,522Total liabilities
    
    
    1,988,566
    
    
    
    2,044,616Commitments and contingencies (Note 6)Minority interest
    
    
    11,991
    
    
    
    11,991Common stockholders equity:Common stock, $.001 par value; 200,000,000 shares authorized; 106,717,000
and 103,825,732 shares issued, respectively
    
    
    107
    
    
    
    104Additional paid-in capital
    
    
    1,156,832
    
    
    
    1,104,730Accumulated other comprehensive income
    
    
    13,611
    
    
    
    12,983Accumulated deficit
    
    
    (77,885
    )
    
    
    (99,565
    )Treasury stock458,756 and 449,763 common shares, at cost, respectively
    
    
    (3,970
    )
    
    
    (3,970
    )Total common stockholders equity
    
    
    1,088,695
    
    
    
    1,014,282Total liabilities and common stockholders equity
    
    $
    3,089,252
    
    
    $
    3,070,889
  3




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HANOVER COMPRESSOR COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three Months EndedMarch 31,2007
    
    
    2006Revenues and other income:U.S. rentals
    
    $
    99,636
    
    
    $
    91,643International rentals
    
    
    67,291
    
    
    
    62,506Parts, service and used equipment
    
    
    81,340
    
    
    
    49,271Compressor and accessory fabrication
    
    
    78,708
    
    
    
    54,691Production and processing equipment fabrication
    
    
    133,238
    
    
    
    78,619Equity in income of non-consolidated affiliates
    
    
    5,683
    
    
    
    5,848Gain on sale of business and other income
    
    
    7,332
    
    
    
    30,219473,228
    
    
    
    372,797Expenses:U.S. rentals
    
    
    38,877
    
    
    
    38,091International rentals
    
    
    23,305
    
    
    
    21,332Parts, service and used equipment
    
    
    66,845
    
    
    
    41,062Compressor and accessory fabrication
    
    
    63,245
    
    
    
    46,693Production and processing equipment fabrication
    
    
    111,538
    
    
    
    68,963Selling, general and administrative
    
    
    51,794
    
    
    
    48,055Merger expenses
    
    
    324
    
    
    
    Depreciation and amortization
    
    
    50,896
    
    
    
    41,968Interest expense
    
    
    26,865
    
    
    
    31,640Foreign currency translation
    
    
    (308
    )
    
    
    (1,497
    )Debt extinguishment costs
    
    
    
    
    
    
    5,902433,381
    
    
    
    342,209Income from continuing operations before income taxes
    
    
    39,847
    
    
    
    30,588Provision for income taxes
    
    
    14,445
    
    
    
    8,447Income from continuing operations
    
    
    25,402
    
    
    
    22,141Loss from discontinued operations, net of tax
    
    
    
    
    
    
    (139
    )Gain from sales of discontinued operations, net of tax
    
    
    
    
    
    
    47Income before cumulative effect of accounting changes
    
    
    25,402
    
    
    
    22,049Cumulative effect of accounting changes, net of tax
    
    
    
    
    
    
    370Net income
    
    $
    25,402
    
    
    $
    22,419Basic income per common share:Income from continuing operations
    
    $
    0.25
    
    
    $
    0.22Loss from discontinued operations, net of tax
    
    
    
    
    
    
    Cumulative effect of accounting changes, net of tax
    
    
    
    
    
    
    Net income
    
    $
    0.25
    
    
    $
    0.22Diluted income per common share:Income from continuing operations
    
    $
    0.23
    
    
    $
    0.22Loss from discontinued operations, net of tax
    
    
    
    
    
    
    Cumulative effect of accounting changes, net of tax
    
    
    
    
    
    
    Net income
    
    $
    0.23
    
    
    $
    0.22Weighted average common and equivalent shares outstanding:Basic
    
    
    103,405
    
    
    
    100,759Diluted
    
    
    117,619
    
    
    
    111,428
  4




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HANOVER COMPRESSOR COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 Three Months EndedMarch 31,2007
    
    
    2006Net income
    
    $
    25,402
    
    
    $
    22,419Other comprehensive income:Foreign currency translation adjustment
    
    
    628
    
    
    
    347Comprehensive income
    
    $
    26,030
    
    
    $
    22,766
  5




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##### Table of Contents



HANOVER COMPRESSOR COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Three Months EndedMarch 31,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    25,402
    
    
    $
    22,419Adjustments:Depreciation and amortization
    
    
    50,896
    
    
    
    41,968Loss from discontinued operations, net of tax
    
    
    
    
    
    
    92Cumulative effect of accounting changes, net of tax
    
    
    
    
    
    
    (370
    )Bad debt expense
    
    
    500
    
    
    
    527Gain on sale of property, plant and equipment
    
    
    (4
    )
    
    
    (698
    )Equity in income of non-consolidated affiliates, net of dividends received
    
    
    (767
    )
    
    
    (1,848
    )Loss on remeasurement of intercompany balances
    
    
    588
    
    
    
    524Net realized gain on trading securities
    
    
    (6,129
    )
    
    
    (534
    )Zero coupon subordinated notes accreted interest paid by refinancing
    
    
    
    
    
    
    (86,084
    )Gain on sale of business
    
    
    
    
    
    
    (28,368
    )Stock compensation expense
    
    
    2,866
    
    
    
    2,003Pay-in-kind interest on zero coupon subordinated notes
    
    
    
    
    
    
    6,282Sales of trading securities
    
    
    14,209
    
    
    
    3,384Purchases of trading securities
    
    
    (8,080
    )
    
    
    (2,850
    )Deferred income taxes
    
    
    5,900
    
    
    
    2,105Changes in assets and liabilities, excluding business combinations:Accounts receivable and notes
    
    
    (28,883
    )
    
    
    (31,155
    )Inventory
    
    
    9,828
    
    
    
    (20,188
    )Costs and estimated earnings versus billings on uncompleted contracts
    
    
    (1,895
    )
    
    
    (3,421
    )Prepaid and other current assets
    
    
    (5,409
    )
    
    
    (9,363
    )Accounts payable and other liabilities
    
    
    (14,518
    )
    
    
    (3,614
    )Advance billings
    
    
    (34,627
    )
    
    
    34,605Other
    
    
    (4,643
    )
    
    
    (2,832
    )Net cash provided by (used in) continuing operations
    
    
    5,234
    
    
    
    (77,416
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (92
    )Net cash provided by (used in) operating activities
    
    
    5,234
    
    
    
    (77,508
    )Cash flows from investing activities:Capital expenditures
    
    
    (72,746
    )
    
    
    (57,765
    )Proceeds from sale of property, plant and equipment
    
    
    11,798
    
    
    
    4,950Cash invested in non-consolidated affiliates
    
    
    (3,095
    )
    
    
    Proceeds from sale of business
    
    
    
    
    
    
    51,500Net cash used in continuing operations
    
    
    (64,043
    )
    
    
    (1,315
    )Net cash provided by discontinued operations
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (64,043
    )
    
    
    (1,315
    )Cash flows from financing activities:Borrowings on revolving credit facilities
    
    
    106,000
    
    
    
    110,500Repayments on revolving credit facilities
    
    
    (63,000
    )
    
    
    (29,000
    )Proceeds from issuance of senior notes
    
    
    
    
    
    
    150,000Payments for debt issue costs
    
    
    
    
    
    
    (3,906
    )Repayment of zero coupon subordinated notes principal
    
    
    
    
    
    
    (150,000
    )Proceeds from stock options exercised
    
    
    2,378
    
    
    
    1,775Stock-based compensation excess tax benefit
    
    
    478
    
    
    
    Borrowings (repayments) of other debt, net
    
    
    (3,531
    )
    
    
    398Net cash provided by continuing operations
    
    
    42,325
    
    
    
    79,767Net cash used in discontinued operations
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    42,325
    
    
    
    79,767Effect of exchange rate changes on cash and equivalents
    
    
    133
    
    
    
    (20
    )Net increase (decrease) in cash and cash equivalents
    
    
    (16,351
    )
    
    
    924Cash and cash equivalents at beginning of period
    
    
    73,286
    
    
    
    48,233Cash and cash equivalents at end of period
    
    $
    56,935
    
    
    $
    49,157Supplemental disclosure of non-cash transactions:Conversion of debt to common stock
    
    $
    46,089
    
    
    $
    
  6




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HANOVER COMPRESSOR COMPANY
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION
  Proposed Merger
      7




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##### Table of Contents



Earnings Per Common Share
   Three Months EndedMarch 31,2007
    
    2006Weighted average common shares outstandingused in basic income per common share
    
    
    103,405
    
    
    
    100,759Net dilutive potential common stock issuable:On exercise of options and vesting of restricted stock
    
    
    1,510
    
    
    
    1,086On conversion of convertible subordinated notes due 2029
    
    
    3,121
    
    
    
    *
    *On conversion of convertible senior notes due 2008
    
    
    *
    *
    
    
    *
    *On conversion of convertible senior notes due 2014
    
    
    9,583
    
    
    
    9,583Weighted average common shares and dilutive potential common shares used in
dilutive income per common share
    
    
    117,619
    
    
    
    111,428
 
 **
    
    Excluded from diluted income per common share as the effect would have been anti-dilutive.   Three Months EndedMarch 31,2007
    
    2006Net dilutive potential common shares issuable:On exercise of options-exercise price greater than average market value at end of period
    
    
    31
    
    
    
    134On conversion of convertible subordinated notes due 2029
    
    
    
    
    
    
    4,825On conversion of convertible senior notes due 2008
    
    
    4,370
    
    
    
    4,3704,401
    
    
    
    9,329
 8




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##### Table of Contents



Stock Options and Stock-based Compensation
   Stock Options
  Restricted Stock Awards
  Reclassifications
  2. INVENTORY
  March 31,
    
    
    December 31,2007
    
    
    2006Parts and supplies
    
    $
    133,452
    
    
    $
    135,632Work in progress
    
    
    149,412
    
    
    
    162,096Finished goods
    
    
    15,414
    
    
    
    10,365$
    298,278
    
    
    $
    308,093
  3. PROPERTY, PLANT AND EQUIPMENT
  March 31,
    
    
    December 31,2007
    
    
    2006Compression equipment, facilities and other rental assets
    
    $
    2,622,476
    
    
    $
    2,587,377Land and buildings
    
    
    111,135
    
    
    
    107,444Transportation and shop equipment
    
    
    91,777
    
    
    
    89,673Other
    
    
    59,503
    
    
    
    58,7882,884,891
    
    
    
    2,843,282Accumulated depreciation
    
    
    (1,010,026
    )
    
    
    (979,830
    )$
    1,874,865
    
    
    $
    1,863,452
 9




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##### Table of Contents



4. DEBT
  March 31,
    
    
    December 31,2007
    
    
    2006Bank credit facility due November 2010
    
    $
    63,000
    
    
    $
    20,0004.75% 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
    
    
    
    150,0009.0% 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
    
    
    
    250,0007.25% convertible subordinated notes due 2029*
    
    
    36,899
    
    
    
    84,803Fair value adjustment  fixed to floating interest rate swaps
    
    
    (7,316
    )
    
    
    (8,732
    )Other, interest at various rates, collateralized by equipment and other assets
    
    
    264
    
    
    
    6771,361,597
    
    
    
    1,365,498Lesscurrent maturities
    
    
    (192,041
    )
    
    
    (455
    )Long-term debt
    
    $
    1,169,556
    
    
    $
    1,365,043
 
 *
    
    Securities issued by Hanover (parent company).**
    
    Securities issued by Hanover (parent company) and guaranteed by Hanover Compression Limited
Partnership (HCLP).     10




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7.5% Senior Notes due 2013
   7.25% Convertible Junior Subordinated Notes due 2029
   5. ACCOUNTING FOR DERIVATIVES
   11




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Fair Value ofSwap atFixed Rate to be
    
    Notional
    
    March 31,Floating Rate to be Paid
    
    Maturity Date
    
    Received
    
    Amount
    
    2007Six Month LIBOR +4.72%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (3,781
    )Six Month LIBOR +4.64%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (3,535
    )
   6. COMMITMENTS AND CONTINGENCIES
  MaximumPotentialUndiscountedPayments as ofTerm
    
    
    March 31, 2007Indebtedness of non-consolidated affiliates:Simco/Harwat Consortium (1)
    
    
    2009
    
    
    $
    2,359El Furrial (1)
    
    
    2013
    
    
    
    27,000Other:Performance guarantees through letters of credit (2)
    
    
    2007-2010
    
    
    
    208,162Standby letters of credit
    
    
    2007-2008
    
    
    
    14,378Commercial letters of credit
    
    
    2007
    
    
    
    9,586Bid bonds and performance bonds (2)
    
    
    2007-2012
    
    
    
    113,242$
    374,727
 
 (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.    12




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7. RELATED PARTY TRANSACTIONS
   8. NEW ACCOUNTING PRONOUNCEMENTS
  13




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Accounting for Income
Taxes
    14




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9. REPORTABLE SEGMENTS
    Compressor
    
    Production andParts, Service
    
    and
    
    Processing Fabrication
    
    ReportableInternational
    
    and Used
    
    Accessory
    
    Surface
    
    
    
    
    
    SegmentsU.S. Rentals
    
    Rentals
    
    Equipment
    
    Fabrication
    
    Equipment
    
    Belleli
    
    Total
    
    Consolidated(In thousands of dollars)March 31, 2007Revenues from external customers
    
    $
    99,636
    
    
    $
    67,291
    
    
    $
    81,340
    
    
    $
    78,708
    
    
    $
    35,603
    
    
    $
    97,635
    
    
    $
    460,213
    
    
    $
    460,213Gross profit
    
    
    60,759
    
    
    
    43,986
    
    
    
    14,495
    
    
    
    15,463
    
    
    
    9,303
    
    
    
    12,397
    
    
    
    156,403
    
    
    
    156,403March 31, 2006Revenues from external customers
    
    $
    91,643
    
    
    $
    62,506
    
    
    $
    49,271
    
    
    $
    54,691
    
    
    $
    36,348
    
    
    $
    42,271
    
    
    $
    336,730
    
    
    $
    336,730Gross profit
    
    
    53,552
    
    
    
    41,174
    
    
    
    8,209
    
    
    
    7,998
    
    
    
    5,884
    
    
    
    3,772
    
    
    
    120,589
    
    
    
    120,589
 Three Months EndedMarch 31,2007
    
    
    2006(In thousands)Total revenue for reportable segments
    
    $
    460,213
    
    
    $
    336,730Gain on sale of business and other income (1)
    
    
    13,015
    
    
    
    36,067Total consolidated revenues and other income
    
    $
    473,228
    
    
    $
    372,797
 
 (1)
    
    Includes equity in income of non-consolidated affiliates and gain on sale of
business and other income. 10. DISPOSITIONS
   15




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11. GUARANTOR SUBSIDIARY
  16




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Condensed Consolidating Balance Sheet
March 31, 2007
(unaudited)
 Guarantor
    
    
    OtherParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidation(In thousands)ASSETSTotal current assets
    
    $
    
    
    
    $
    433,304
    
    
    $
    468,254
    
    
    $
    (18,238
    )
    
    $
    883,320Property, plant and equipment, net
    
    
    
    
    
    
    1,039,545
    
    
    
    835,320
    
    
    
    
    
    
    
    1,874,865Investments in non-consolidated affiliates
    
    
    
    
    
    
    
    
    
    
    93,836
    
    
    
    
    
    
    
    93,836Investments in affiliates
    
    
    1,251,585
    
    
    
    233,605
    
    
    
    1,251,585
    
    
    
    (2,736,775
    )
    
    
    Intercompany receivables
    
    
    781,455
    
    
    
    400,099
    
    
    
    700,058
    
    
    
    (1,881,612
    )
    
    
    Other assets
    
    
    53,061
    
    
    
    223,172
    
    
    
    12,038
    
    
    
    (51,040
    )
    
    
    237,231Total Long-term Assets
    
    
    2,086,101
    
    
    
    1,896,421
    
    
    
    2,892,837
    
    
    
    (4,669,427
    )
    
    
    2,205,932Total Assets
    
    $
    2,086,101
    
    
    $
    2,329,725
    
    
    $
    3,361,091
    
    
    $
    (4,687,665
    )
    
    $
    3,089,252LIABILITIES AND STOCKHOLDERS EQUITYTotal current liabilities
    
    $
    211,073
    
    
    $
    224,296
    
    
    $
    264,269
    
    
    $
    (18,410
    )
    
    $
    681,228Long-term debt
    
    
    786,333
    
    
    
    63,223
    
    
    
    383,000
    
    
    
    (63,000
    )
    
    
    1,169,556Intercompany payables
    
    
    
    
    
    
    679,152
    
    
    
    1,139,460
    
    
    
    (1,818,612
    )
    
    
    Other long-term liabilities
    
    
    
    
    
    
    111,469
    
    
    
    77,181
    
    
    
    (50,868
    )
    
    
    137,782Total liabilities
    
    
    997,406
    
    
    
    1,078,140
    
    
    
    1,863,910
    
    
    
    (1,950,890
    )
    
    
    1,988,566Minority interest
    
    
    
    
    
    
    
    
    
    
    11,991
    
    
    
    
    
    
    
    11,991Stockholders equity
    
    
    1,088,695
    
    
    
    1,251,585
    
    
    
    1,485,190
    
    
    
    (2,736,775
    )
    
    
    1,088,695Total Liabilities and Stockholders Equity
    
    $
    2,086,101
    
    
    $
    2,329,725
    
    
    $
    3,361,091
    
    
    $
    (4,687,665
    )
    
    $
    3,089,252
 Condensed Consolidating Balance Sheet
December 31, 2006
 Guarantor
    
    
    OtherParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidation(In thousands)ASSETSTotal current assets
    
    $
    
    
    
    $
    443,759
    
    
    $
    444,561
    
    
    $
    (7,657
    )
    
    $
    880,663Property, plant and equipment, net
    
    
    
    
    
    
    1,027,123
    
    
    
    836,329
    
    
    
    
    
    
    
    1,863,452Investments in non-consolidated affiliates
    
    
    
    
    
    
    
    
    
    
    89,974
    
    
    
    
    
    
    
    89,974Investments in affiliates
    
    
    1,227,369
    
    
    
    216,536
    
    
    
    1,227,369
    
    
    
    (2,671,274
    )
    
    
    Intercompany receivables
    
    
    725,804
    
    
    
    378,344
    
    
    
    698,891
    
    
    
    (1,803,039
    )
    
    
    Other assets
    
    
    53,649
    
    
    
    220,921
    
    
    
    12,038
    
    
    
    (49,808
    )
    
    
    236,800Total Long-term Assets
    
    
    2,006,822
    
    
    
    1,842,924
    
    
    
    2,864,601
    
    
    
    (4,524,121
    )
    
    
    2,190,226Total Assets
    
    $
    2,006,822
    
    
    $
    2,286,683
    
    
    $
    3,309,162
    
    
    $
    (4,531,778
    )
    
    $
    3,070,889LIABILITIES AND STOCKHOLDERS EQUITYTotal current liabilities
    
    $
    10,719
    
    
    $
    270,413
    
    
    $
    280,769
    
    
    $
    (7,803
    )
    
    $
    554,098Long-term debt
    
    
    981,821
    
    
    
    20,222
    
    
    
    383,000
    
    
    
    (20,000
    )
    
    
    1,365,043Intercompany payables
    
    
    
    
    
    
    666,250
    
    
    
    1,116,789
    
    
    
    (1,783,039
    )
    
    
    Other long-term liabilities
    
    
    
    
    
    
    102,429
    
    
    
    72,708
    
    
    
    (49,662
    )
    
    
    125,475Total liabilities
    
    
    992,540
    
    
    
    1,059,314
    
    
    
    1,853,266
    
    
    
    (1,860,504
    )
    
    
    2,044,616Minority interest
    
    
    
    
    
    
    
    
    
    
    11,991
    
    
    
    
    
    
    
    11,991Stockholders equity
    
    
    1,014,282
    
    
    
    1,227,369
    
    
    
    1,443,905
    
    
    
    (2,671,274
    )
    
    
    1,014,282Total Liabilities and Stockholders Equity
    
    $
    2,006,822
    
    
    $
    2,286,683
    
    
    $
    3,309,162
    
    
    $
    (4,531,778
    )
    
    $
    3,070,889
 17




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##### Table of Contents



Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2007
(unaudited)
 Guarantor
    
    
    OtherParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidation(In thousands)Revenues
    
    $
    
    
    
    $
    275,430
    
    
    $
    184,783
    
    
    $
    
    
    
    $
    460,213Equity in income of non-consolidating affiliates
    
    
    
    
    
    
    
    
    
    
    5,683
    
    
    
    
    
    
    
    5,683Gain on sale of business and other income
    
    
    
    
    
    
    (232
    )
    
    
    7,564
    
    
    
    
    
    
    
    7,332Revenues and other income
    
    
    
    
    
    
    275,198
    
    
    
    198,030
    
    
    
    
    
    
    
    473,228Costs and expenses
    
    
    233
    
    
    
    227,299
    
    
    
    178,968
    
    
    
    
    
    
    
    406,500Other (income) expense:Interest expense, net
    
    
    16,818
    
    
    
    1,255
    
    
    
    8,792
    
    
    
    
    
    
    
    26,865Intercompany charges, net
    
    
    (13,980
    )
    
    
    26,636
    
    
    
    (12,656
    )
    
    
    
    
    
    
    Equity in (income) loss of affiliates
    
    
    (27,413
    )
    
    
    (19,064
    )
    
    
    (27,413
    )
    
    
    73,890
    
    
    
    Other, net
    
    
    
    
    
    
    146
    
    
    
    (130
    )
    
    
    
    
    
    
    16Income from continuing operations before income taxes
    
    
    24,342
    
    
    
    38,926
    
    
    
    50,469
    
    
    
    (73,890
    )
    
    
    39,847Provision for (benefit from) income taxes
    
    
    (1,060
    )
    
    
    11,513
    
    
    
    3,992
    
    
    
    
    
    
    
    14,445Income from continuing operations
    
    
    25,402
    
    
    
    27,413
    
    
    
    46,477
    
    
    
    (73,890
    )
    
    
    25,402Income (loss) from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    25,402
    
    
    $
    27,413
    
    
    $
    46,477
    
    
    $
    (73,890
    )
    
    $
    25,402
 Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2006
(unaudited)
 Guarantor
    
    
    OtherParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidation(In thousands)Revenues
    
    $
    
    
    
    $
    227,190
    
    
    $
    109,540
    
    
    $
    
    
    
    $
    336,730Equity in income of non-consolidating affiliates
    
    
    
    
    
    
    
    
    
    
    5,848
    
    
    
    
    
    
    
    5,848Gain on sale of business and other income
    
    
    
    
    
    
    29,251
    
    
    
    968
    
    
    
    
    
    
    
    30,219Revenues and other income
    
    
    
    
    
    
    256,441
    
    
    
    116,356
    
    
    
    
    
    
    
    372,797Costs and expenses
    
    
    233
    
    
    
    199,990
    
    
    
    105,941
    
    
    
    
    
    
    
    306,164Other (income) expense:Interest expense, net
    
    
    21,462
    
    
    
    1,410
    
    
    
    8,768
    
    
    
    
    
    
    
    31,640Debt extinguishment costs
    
    
    
    
    
    
    5,902
    
    
    
    
    
    
    
    
    
    
    
    5,902Intercompany charges, net
    
    
    (17,579
    )
    
    
    24,480
    
    
    
    (6,901
    )
    
    
    
    
    
    
    Equity in (income) loss of affiliates
    
    
    (22,327
    )
    
    
    (800
    )
    
    
    (22,327
    )
    
    
    45,454
    
    
    
    Other, net
    
    
    
    
    
    
    (666
    )
    
    
    (831
    )
    
    
    
    
    
    
    (1,497
    )Income from continuing operations before income taxes
    
    
    18,211
    
    
    
    26,125
    
    
    
    31,706
    
    
    
    (45,454
    )
    
    
    30,588Provision for (benefit from) income taxes
    
    
    (4,208
    )
    
    
    4,155
    
    
    
    8,500
    
    
    
    
    
    
    
    8,447Income from continuing operations
    
    
    22,419
    
    
    
    21,970
    
    
    
    23,206
    
    
    
    (45,454
    )
    
    
    22,141Loss from discontinued operations
    
    
    
    
    
    
    (13
    )
    
    
    (79
    )
    
    
    
    
    
    
    (92
    )Cumulative effect of accounting change
    
    
    
    
    
    
    370
    
    
    
    
    
    
    
    
    
    
    
    370Net income
    
    $
    22,419
    
    
    $
    22,327
    
    
    $
    23,127
    
    
    $
    (45,454
    )
    
    $
    22,419
 18




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2007
(Unaudited)
 Guarantor
    
    
    OtherParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidation(In thousands)Cash flows from operating activities:Net cash provided by (used in) continuing operations
    
    $
    (5,096
    )
    
    $
    25,857
    
    
    $
    (15,527
    )
    
    $
    
    
    
    $
    5,234Net cash used in discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) operating activities
    
    
    (5,096
    )
    
    
    25,857
    
    
    
    (15,527
    )
    
    
    
    
    
    
    5,234Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (46,770
    )
    
    
    (25,976
    )
    
    
    
    
    
    
    (72,746
    )Proceeds from sale of property, plant and equipment
    
    
    
    
    
    
    11,789
    
    
    
    9
    
    
    
    
    
    
    
    11,798Cash invested in non-consolidated affiliates
    
    
    
    
    
    
    
    
    
    
    (3,095
    )
    
    
    
    
    
    
    (3,095
    )Net cash used in investing activities
    
    
    
    
    
    
    (34,981
    )
    
    
    (29,062
    )
    
    
    
    
    
    
    (64,043
    )Cash flows from financing activities:Borrowings
(repayments) on revolving credit facilities, net
    
    
    
    
    
    
    43,000
    
    
    
    
    
    
    
    
    
    
    
    43,000Proceeds from stock options exercised
    
    
    2,378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,378Stock-based compensation excess tax benefit
    
    
    
    
    
    
    478
    
    
    
    
    
    
    
    
    
    
    
    478Capital contribution (distribution), net
    
    
    2,718
    
    
    
    (2,718
    )
    
    
    
    
    
    
    
    
    
    
    Borrowings (repayments) between subsidiaries, net
    
    
    
    
    
    
    (37,256
    )
    
    
    37,256
    
    
    
    
    
    
    
    Borrowings (repayments) on other debt, net
    
    
    
    
    
    
    (2,655
    )
    
    
    (876
    )
    
    
    
    
    
    
    (3,531
    )Net cash provided by financing activities
    
    
    5,096
    
    
    
    849
    
    
    
    36,380
    
    
    
    
    
    
    
    42,325Effect of exchange rate changes on in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    133
    
    
    
    
    
    
    
    133Net decrease in cash and cash equivalents
    
    
    
    
    
    
    (8,275
    )
    
    
    (8,076
    )
    
    
    
    
    
    
    (16,351
    )Cash and cash equivalents at beginning of year
    
    
    
    
    
    
    13,353
    
    
    
    59,933
    
    
    
    
    
    
    
    73,286Cash and cash equivalents at end of year
    
    $
    
    
    
    $
    5,078
    
    
    $
    51,857
    
    
    $
    
    
    
    $
    56,935
 19




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##### Table of Contents



Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2006
(Unaudited)
 Guarantor
    
    
    OtherParent
    
    
    Subsidiary
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidation(In thousands)Cash flows from operating activities:Net cash provided by (used in) continuing operations
    
    $
    (5,412
    )
    
    $
    (82,312
    )
    
    $
    10,308
    
    
    $
    
    
    
    $
    (77,416
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (92
    )
    
    
    
    
    
    
    
    
    
    
    (92
    )Net cash provided by (used in) operating activities
    
    
    (5,412
    )
    
    
    (82,404
    )
    
    
    10,308
    
    
    
    
    
    
    
    (77,508
    )Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (29,486
    )
    
    
    (28,279
    )
    
    
    
    
    
    
    (57,765
    )Proceeds from sale of property, plant and equipment
    
    
    
    
    
    
    4,845
    
    
    
    105
    
    
    
    
    
    
    
    4,950Proceeds from sale of business
    
    
    
    
    
    
    51,500
    
    
    
    
    
    
    
    
    
    
    
    51,500Net cash provided by (used in) investing activities
    
    
    
    
    
    
    26,859
    
    
    
    (28,174
    )
    
    
    
    
    
    
    (1,315
    )Cash flows from financing activities:Borrowings
(repayments) on revolving credit facilities, net
    
    
    
    
    
    
    81,500
    
    
    
    
    
    
    
    
    
    
    
    81,500Proceeds from the issuance of senior notes
    
    
    
    
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    150,000Payments for debt issue costs
    
    
    
    
    
    
    (3,906
    )
    
    
    
    
    
    
    
    
    
    
    (3,906
    )Proceeds from stock options exercised
    
    
    1,775
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,775Repayment of zero coupon subordinated notes principal
    
    
    
    
    
    
    (150,000
    )
    
    
    
    
    
    
    
    
    
    
    (150,000
    )Stock-based compensation excess tax benefit
    
    
    
    
    
    
    721
    
    
    
    
    
    
    
    (721
    )
    
    
    Capital contribution (distribution), net
    
    
    3,637
    
    
    
    (4,358
    )
    
    
    
    
    
    
    721
    
    
    
    Borrowings (repayments) between subsidiaries, net
    
    
    
    
    
    
    (22,563
    )
    
    
    22,563
    
    
    
    
    
    
    
    Borrowings (repayments) on other debt, net
    
    
    
    
    
    
    249
    
    
    
    149
    
    
    
    
    
    
    
    398Net cash provided by financing activities
    
    
    5,412
    
    
    
    51,643
    
    
    
    22,712
    
    
    
    
    
    
    
    79,767Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    (20
    )Net increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    (3,902
    )
    
    
    4,826
    
    
    
    
    
    
    
    924Cash and cash equivalents at beginning of year
    
    
    
    
    
    
    10,724
    
    
    
    37,509
    
    
    
    
    
    
    
    48,233Cash and cash equivalents at end of year
    
    $
    
    
    
    $
    6,822
    
    
    $
    42,335
    
    
    $
    
    
    
    $
    49,157
 20




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##### Table of Contents



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;
    
    ability to obtain components used to fabricate our products;
    
    our inability to implement certain business objectives, such as:
 
    
    international expansion,
    
    ability to timely and cost-effectively execute integrated projects,
    
    integrating acquired businesses,
    
    generating sufficient cash,
    
    accessing the capital markets, and
    
    refinancing existing or incurring additional indebtedness to fund our business;
 
    
    our inability to consummate the proposed merger with Universal Compression Holdings, Inc;
    
    changes in 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.
   21




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##### Table of Contents



GENERAL
   Proposed Merger
  RESULTS OF OPERATIONS
 THREE MONTHS ENDED MARCH 31, 2007 COMPARED TO THREE MONTHS ENDED MARCH 31, 2006
 Overview
     22




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##### Table of Contents



Industry Conditions
  Summary of Business Line Results
 U.S. Rentals
 Three Months EndedMarch 31,
    
    
    Increase2007
    
    
    2006
    
    
    (Decrease)Revenue
    
    $
    99,636
    
    
    $
    91,643
    
    
    
    9
    %Operating expense
    
    
    38,877
    
    
    
    38,091
    
    
    
    2
    %Gross profit
    
    $
    60,759
    
    
    $
    53,552
    
    
    
    13
    %Gross margin
    
    
    61
    %
    
    
    58
    %
    
    
    3
    %
  International Rentals
 Three Months EndedMarch 31,
    
    
    Increase2007
    
    
    2006
    
    
    (Decrease)Revenue
    
    $
    67,291
    
    
    $
    62,506
    
    
    
    8
    %Operating expense
    
    
    23,305
    
    
    
    21,332
    
    
    
    9
    %Gross profit
    
    $
    43,986
    
    
    $
    41,174
    
    
    
    7
    %Gross margin
    
    
    65
    %
    
    
    66
    %
    
    
    (1
    )%
  Parts, Service and Used Equipment
 Three Months EndedMarch 31,
    
    
    Increase2007
    
    
    2006
    
    
    (Decrease)Revenue
    
    $
    81,340
    
    
    $
    49,271
    
    
    
    65
    %Operating expense
    
    
    66,845
    
    
    
    41,062
    
    
    
    63
    %Gross profit
    
    $
    14,495
    
    
    $
    8,209
    
    
    
    77
    %Gross margin
    
    
    18
    %
    
    
    17
    %
    
    
    1
    %
  23




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##### Table of Contents



Compression and Accessory Fabrication
 Three Months EndedMarch 31,
    
    
    Increase2007
    
    
    2006
    
    
    (Decrease)Revenue
    
    $
    78,708
    
    
    $
    54,691
    
    
    
    44
    %Operating expense
    
    
    63,245
    
    
    
    46,693
    
    
    
    35
    %Gross profit
    
    $
    15,463
    
    
    $
    7,998
    
    
    
    93
    %Gross margin
    
    
    20
    %
    
    
    15
    %
    
    
    5
    %
  Production and Processing Equipment Fabrication
 Three Months EndedMarch 31,
    
    
    Increase2007
    
    
    2006
    
    
    (Decrease)Revenue
    
    $
    133,238
    
    
    $
    78,619
    
    
    
    69
    %Operating expense
    
    
    111,538
    
    
    
    68,963
    
    
    
    62
    %Gross profit
    
    $
    21,700
    
    
    $
    9,656
    
    
    
    125
    %Gross margin
    
    
    16
    %
    
    
    12
    %
    
    
    4
    %
   Gain on Sale of business and other income
  Expenses
  24




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##### Table of Contents



Three Months EndedMarch 31,2007
    
    
    2006Argentina
    
    $
    (23
    )
    
    $
    103Italy
    
    
    (634
    )
    
    
    (1,118
    )Venezuela
    
    
    29
    
    
    
    (280
    )All other countries
    
    
    320
    
    
    
    (202
    )Exchange gain
    
    $
    (308
    )
    
    $
    (1,497
    )
   Income Taxes
   Cumulative Effect of Accounting Change, Net of Tax
  25




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
   Three Months EndedMarch 31,2007
    
    
    2006Net cash provided by (used in) continuing operations:Operating activities
    
    $
    5,234
    
    
    $
    (77,416
    )Investing activities
    
    
    (64,043
    )
    
    
    (1,315
    )Financing activities
    
    
    42,325
    
    
    
    79,767Effect of exchange rate changes on cash and cash equivalents
    
    
    133
    
    
    
    (20
    )Net cash (used in) provided by discontinued operations
    
    
    
    
    
    
    (92
    )Net change in cash and cash equivalents
    
    $
    (16,351
    )
    
    $
    924
        26




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##### Table of Contents



27




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##### Table of Contents



StandardMoodys
    
    & PoorsOutlook
    
    Positive
    
    PositiveSenior 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 8.8%, 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
    
    B7.5% senior notes due 2013
    
    B2, LGD 4
    
    B7.25% convertible subordinated notes due 2029*
    
    B3, LGD 6
    
    B-
 
 *
    
    Rating is on the TIDES  Preferred Securities issued by Hanover
Compressor Capital Trust, a trust that we sponsored.  Derivative Financial Instruments.
  Fair Value ofSwap atFixed Rate to be
    
    Notional
    
    March 31,Floating Rate to be Paid
    
    Maturity Date
    
    Received
    
    Amount
    
    2007Six Month LIBOR +4.72%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (3,781
    )Six Month LIBOR +4.64%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (3,535
    )
  28




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##### Table of Contents



International Operations
       Three Months EndedMarch 31,2007
    
    
    2006Argentina
    
    $
    (23
    )
    
    $
    103Italy
    
    
    (634
    )
    
    
    (1,118
    )Venezuela
    
    
    29
    
    
    
    (280
    )All other countries
    
    
    320
    
    
    
    (202
    )Exchange gain
    
    $
    (308
    )
    
    $
    (1,497
    )
  29




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##### Table of Contents



NEW ACCOUNTING PRONOUNCEMENTS
  30




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##### Table of Contents



Accounting for Income
Taxes
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  31




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##### Table of Contents



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
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 6: Exhibits
  2.1
    
    Agreement and Plan of Merger, dated February 5, 2007, by and among Hanover Compressor Company,
Universal Compression Holdings, Inc., Iliad Holdings, Inc., Hector Sub, Inc., and Ulysses Sub, Inc.
(incorporated by reference to Exhibit 2.1 to the Form 8-K filed by Hanover Compressor Company on
February 5, 2007).10.1
    
    Second Amendment, dated as of March 29, 2007, to the Credit Agreement among the Company, Hanover
Compression Limited Partnership, The Royal Bank of Scotland plc as Syndication Agent, JP Morgan Chase
Bank, N.A. as Administrative Agent, and the several lenders parties thereto. *10.2
    
    Retention Bonus Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by Hanover
Compressor Company on March 21, 2007).10.3
    
    Form of Retention Bonus Award Letter (incorporated by reference to Exhibit 10.2 to the Form 8-K filed
by Hanover Compressor Company on March 21, 2007).10.4
    
    First Amendment to Hanover Compressor Company 2006 Stock Incentive Plan. (incorporated by reference to
Exhibit 10.1 to the Form 8-K filed by Hanover Compressor Company on February 5, 2007).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




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##### Table of Contents



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. 33




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##### Table of Contents



SIGNATURES
    By:
    
    /s/ JOHN E. JACKSON

John E. Jackson
President and Chief Executive OfficerDate: May 2, 2007By:
    
    /s/ LEE E. BECKELMAN

Lee E. Beckelman
Senior Vice President and Chief Financial Officer
 34




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##### Table of Contents



EXHIBIT INDEX
 2.1
    
    Agreement and Plan of Merger, dated February 5, 2007, by and among Hanover Compressor Company,
Universal Compression Holdings, Inc., Iliad Holdings, Inc., Hector Sub, Inc., and Ulysses Sub, Inc.
(incorporated by reference to Exhibit 2.1 to the Form 8-K filed by Hanover Compressor Company on
February 5, 2007).10.1
    
    Second Amendment, dated as of March 29, 2007, to the Credit Agreement among the Company, Hanover
Compression Limited Partnership, The Royal Bank of Scotland plc as Syndication Agent, JP Morgan Chase
Bank, N.A. as Administrative Agent, and the several lenders parties thereto. *10.2
    
    Retention Bonus Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K filed by Hanover
Compressor Company on March 21, 2007).10.3
    
    Form of Retention Bonus Award Letter (incorporated by reference to Exhibit 10.2 to the Form 8-K filed
by Hanover Compressor Company on March 21, 2007).10.4
    
    First Amendment to Hanover Compressor Company 2006 Stock Incentive Plan. (incorporated by reference to
Exhibit 10.1 to the Form 8-K filed by Hanover Compressor Company on February 5, 2007).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. 35