##### 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 JUNE 30, 2005
 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
(State or Other Jurisdiction of
Incorporation or Organization)
    
    76-0625124
(I.R.S. Employer
Identification No.)12001 North Houston Rosslyn, Houston, Texas
(Address of principal executive offices)
    
    77086
(Zip Code)
 (281) 447-8787
(Registrants telephone number, including area code)
 
 þ o
 þ o




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TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS
    
    
    3CONDENSED CONSOLIDATED BALANCE SHEET
    
    
    3CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
    
    
    4CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
    
    
    5CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
    
    
    6NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    
    7ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    19ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    34ITEM 4. CONTROLS AND PROCEDURES
    
    
    36PART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    36ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    36ITEM 5. OTHER INFORMATION
    
    
    37ITEM 6: EXHIBITS
    
    
    38SIGNATURES
    
    
    39EXHIBIT INDEX
    
    
    40Change of Control and Severance AgreementForm of Change of Control 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 SHEET
  June 30,
    
    December 31,2005
    
    2004(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    31,720
    
    
    $
    38,076Accounts receivable, net of allowance of $6,865 and $7,573, respectively
    
    
    212,291
    
    
    
    205,644Inventory, net
    
    
    202,916
    
    
    
    184,798Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    85,829
    
    
    
    70,103Prepaid taxes
    
    
    2,627
    
    
    
    6,988Current deferred income tax
    
    
    10,737
    
    
    
    12,386Assets held for sale
    
    
    4,643
    
    
    
    5,169Other current assets
    
    
    35,196
    
    
    
    25,674Total current assets
    
    
    585,959
    
    
    
    548,838Property, plant and equipment, net
    
    
    1,828,268
    
    
    
    1,876,348Goodwill, net
    
    
    184,757
    
    
    
    183,190Intangible and other assets
    
    
    53,914
    
    
    
    57,070Investments in non-consolidated affiliates
    
    
    86,682
    
    
    
    90,326Assets held for sale
    
    
    5,714
    
    
    
    6,391Total assets
    
    $
    2,745,294
    
    
    $
    2,762,163LIABILITIES AND COMMON STOCKHOLDERS EQUITYCurrent liabilities:Short-term debt
    
    $
    4,407
    
    
    $
    5,106Current maturities of long-term debt
    
    
    1,457
    
    
    
    1,430Accounts payable, trade
    
    
    61,689
    
    
    
    57,402Accrued liabilities
    
    
    111,125
    
    
    
    118,429Advance billings
    
    
    37,837
    
    
    
    42,588Liabilities related to assets held for sale
    
    
    472
    
    
    
    517Billings on uncompleted contracts in excess of costs and estimated earnings
    
    
    15,162
    
    
    
    20,256Total current liabilities
    
    
    232,149
    
    
    
    245,728Long-term debt
    
    
    1,663,184
    
    
    
    1,637,080Other liabilities
    
    
    36,739
    
    
    
    47,232Deferred income taxes
    
    
    52,728
    
    
    
    53,290Total liabilities
    
    
    1,984,800
    
    
    
    1,983,330Commitments and contingencies (Note 6)Minority interest
    
    
    17,050
    
    
    
    18,778Common stockholders equity:Common stock, $.001 par value; 200,000,000 shares authorized; 88,760,786
and 87,653,970 shares issued, respectively
    
    
    89
    
    
    
    88Additional paid-in capital
    
    
    915,616
    
    
    
    913,007Deferred employee compensation  restricted stock grants
    
    
    (11,681
    )
    
    
    (15,180
    )Accumulated other comprehensive income
    
    
    14,069
    
    
    
    17,518Retained deficit
    
    
    (166,951
    )
    
    
    (148,071
    )Treasury stock696,139 and 661,810 common shares, at cost
    
    
    (7,698
    )
    
    
    (7,307
    )Total common stockholders equity
    
    
    743,444
    
    
    
    760,055Total liabilities and common stockholders equity
    
    $
    2,745,294
    
    
    $
    2,762,163
  3




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##### Table of Contents



HANOVER COMPRESSOR COMPANY
 
 CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
 Three Months Ended June 30,
    
    Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004Revenues and other income:U.S. rentals
    
    $
    87,691
    
    
    $
    83,680
    
    
    $
    174,845
    
    
    $
    170,272International rentals
    
    
    55,521
    
    
    
    54,599
    
    
    
    109,436
    
    
    
    106,099Parts, service and used equipment
    
    
    50,531
    
    
    
    41,414
    
    
    
    83,968
    
    
    
    85,796Compressor and accessory fabrication
    
    
    41,092
    
    
    
    44,159
    
    
    
    73,616
    
    
    
    72,309Production and processing equipment fabrication
    
    
    104,297
    
    
    
    63,017
    
    
    
    193,868
    
    
    
    116,446Equity in income of non-consolidated affiliates
    
    
    5,158
    
    
    
    5,088
    
    
    
    9,732
    
    
    
    9,771Other
    
    
    492
    
    
    
    919
    
    
    
    943
    
    
    
    2,014344,782
    
    
    
    292,876
    
    
    
    646,408
    
    
    
    562,707Expenses:U.S. rentals
    
    
    32,984
    
    
    
    34,950
    
    
    
    67,060
    
    
    
    70,489International rentals
    
    
    17,144
    
    
    
    13,967
    
    
    
    34,646
    
    
    
    28,740Parts, service and used equipment
    
    
    36,215
    
    
    
    31,364
    
    
    
    61,275
    
    
    
    64,333Compressor and accessory fabrication
    
    
    36,587
    
    
    
    40,454
    
    
    
    66,204
    
    
    
    66,367Production and processing equipment fabrication
    
    
    92,429
    
    
    
    53,887
    
    
    
    171,554
    
    
    
    101,583Selling, general and administrative
    
    
    43,909
    
    
    
    41,882
    
    
    
    86,067
    
    
    
    82,256Foreign currency translation
    
    
    4,955
    
    
    
    (96
    )
    
    
    5,226
    
    
    
    (1,169
    )Other
    
    
    274
    
    
    
    544
    
    
    
    393
    
    
    
    444Depreciation and amortization
    
    
    45,469
    
    
    
    43,346
    
    
    
    90,922
    
    
    
    85,376Interest expense
    
    
    34,662
    
    
    
    35,731
    
    
    
    70,602
    
    
    
    70,981344,628
    
    
    
    296,029
    
    
    
    653,949
    
    
    
    569,400Income (loss) from continuing operations before income taxes
    
    
    154
    
    
    
    (3,153
    )
    
    
    (7,541
    )
    
    
    (6,693
    )Provision for income taxes
    
    
    6,102
    
    
    
    6,761
    
    
    
    10,643
    
    
    
    13,858Loss from continuing operations
    
    
    (5,948
    )
    
    
    (9,914
    )
    
    
    (18,184
    )
    
    
    (20,551
    )Income (loss) from discontinued operations, net of tax
    
    
    (221
    )
    
    
    481
    
    
    
    (492
    )
    
    
    1,664Income (loss) from sales or write-downs of discontinued
operations, net of tax
    
    
    (247
    )
    
    
    372
    
    
    
    (204
    )
    
    
    372Net loss
    
    $
    (6,416
    )
    
    $
    (9,061
    )
    
    $
    (18,880
    )
    
    $
    (18,515
    )Basic and diluted loss per common share:Loss from continuing operations
    
    $
    (0.07
    )
    
    $
    (0.12
    )
    
    $
    (0.21
    )
    
    $
    (0.24
    )Income (loss) from discontinued operations, net of tax
    
    
    
    
    
    
    0.01
    
    
    
    (0.01
    )
    
    
    0.02Net loss
    
    $
    (0.07
    )
    
    $
    (0.11
    )
    
    $
    (0.22
    )
    
    $
    (0.22
    )Weighted average common and equivalent shares outstanding:Basic
    
    
    85,797
    
    
    
    85,114
    
    
    
    85,744
    
    
    
    84,076Diluted
    
    
    85,797
    
    
    
    85,114
    
    
    
    85,744
    
    
    
    84,076
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##### Table of Contents



HANOVER COMPRESSOR COMPANY
 
 CONDENSED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net loss
    
    $
    (6,416
    )
    
    $
    (9,061
    )
    
    $
    (18,880
    )
    
    $
    (18,515
    )Other comprehensive income (loss):Change in fair value of derivative
financial instruments, net of tax
    
    
    
    
    
    
    4,700
    
    
    
    608
    
    
    
    5,748Foreign currency translation adjustment
    
    
    (1,095
    )
    
    
    (2,991
    )
    
    
    (4,057
    )
    
    
    (3,898
    )Comprehensive loss
    
    $
    (7,511
    )
    
    $
    (7,352
    )
    
    $
    (22,329
    )
    
    $
    (16,665
    )
  5




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##### Table of Contents



HANOVER COMPRESSOR COMPANY
 
 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
   Six Months EndedJune 30,2005
    
    2004Cash flows from operating activities:Net loss
    
    $
    (18,880
    )
    
    $
    (18,515
    )Adjustments:Depreciation and amortization
    
    
    90,922
    
    
    
    85,376Amortization of debt issuance costs and debt discount
    
    
    60
    
    
    
    60(Gain) loss from discontinued operations, net of tax
    
    
    696
    
    
    
    (2,036
    )Bad debt expense
    
    
    1,000
    
    
    
    918(Gain) loss on sale of property, plant and equipment
    
    
    (1,499
    )
    
    
    756Equity in income of non-consolidated affiliates, net of dividends received
    
    
    3,851
    
    
    
    (2,545
    )(Gain) loss on derivative instruments
    
    
    416
    
    
    
    (259
    )Gain on sale of non-consolidated affiliates
    
    
    
    
    
    
    (300
    )Restricted stock compensation expense
    
    
    2,223
    
    
    
    765Pay-in-kind interest on long-term notes payable
    
    
    11,356
    
    
    
    10,203Deferred income taxes
    
    
    3,267
    
    
    
    7,722Changes in assets and liabilities, excluding business combinations:Accounts receivable and notes
    
    
    (13,235
    )
    
    
    (24,522
    )Inventory
    
    
    (18,576
    )
    
    
    (30,188
    )Costs and estimated earnings versus billings on uncompleted contracts
    
    
    (26,882
    )
    
    
    4,204Accounts
payable and other liabilities
    
    
    (1,615
    )
    
    
    3,694Advance billings
    
    
    (3,992
    )
    
    
    (2,444
    )Prepaid, effects of exchange rate on accounts denominated in foreign
currencies and other
    
    
    (114
    )
    
    
    10,876Net cash provided by continuing operations
    
    
    28,998
    
    
    
    43,765Net cash provided by (used in) discontinued operations
    
    
    (239
    )
    
    
    4,298Net cash provided by operating activities
    
    
    28,759
    
    
    
    48,063Cash flows from investing activities:Capital expenditures
    
    
    (54,104
    )
    
    
    (36,911
    )Proceeds from sale of property, plant and equipment
    
    
    8,973
    
    
    
    7,247Proceeds from sale of non-consolidated affiliates
    
    
    
    
    
    
    4,663Cash used for business acquisitions
    
    
    (3,426
    )
    
    
    Cash used to acquire investments in and advances to non-consolidated affiliates
    
    
    (500
    )
    
    
    (250
    )Net cash used in continuing operations
    
    
    (49,057
    )
    
    
    (25,251
    )Net cash provided by discontinued operations
    
    
    50
    
    
    
    6,177Net cash used in investing activities
    
    
    (49,007
    )
    
    
    (19,074
    )Cash flows from financing activities:Borrowings on revolving credit facilities
    
    
    102,500
    
    
    
    18,000Repayments on revolving credit facilities
    
    
    (32,500
    )
    
    
    (45,000
    )Payments for debt issue costs
    
    
    
    
    
    
    (193
    )Proceeds from warrant conversions and stock options exercised
    
    
    3,241
    
    
    
    7,088Net repayments of other debt
    
    
    (808
    )
    
    
    (7,381
    )Issuance of senior notes, net
    
    
    
    
    
    
    194,242Payments of 2000A equipment lease obligations
    
    
    
    
    
    
    (200,000
    )Payments of 2000B equipment lease obligations
    
    
    (57,589
    )
    
    
    Net cash provided by (used in) continuing operations
    
    
    14,844
    
    
    
    (33,244
    )Net cash used in discontinued operations
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    14,844
    
    
    
    (33,244
    )Effect of exchange rate changes on cash and equivalents
    
    
    (952
    )
    
    
    (490
    )Net decrease in cash and cash equivalents
    
    
    (6,356
    )
    
    
    (4,745
    )Cash and cash equivalents at beginning of period
    
    
    38,076
    
    
    
    56,619Cash and cash equivalents at end of period
    
    $
    31,720
    
    
    $
    51,874
  6




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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
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Weighted average common shares outstandingused in
basic loss per common share
    
    
    85,797
    
    
    
    85,114
    
    
    
    85,744
    
    
    
    84,076Net dilutive potential common stock issuable:On exercise of options and vesting of restricted stock
    
    
    **
    
    
    
    **
    
    
    
    **
    
    
    
    **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 loss per common share
    
    
    85,797
    
    
    
    85,114
    
    
    
    85,744
    
    
    
    84,076
 
 **
    
    Excluded from diluted loss per common share as the effect would have been anti-dilutive. 7




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net dilutive potential common shares issuable:On exercise of options and vesting of restricted stock
    
    
    2,566
    
    
    
    1,928
    
    
    
    2,770
    
    
    
    2,044On exercise of options-exercise price greater than
average market value at end of period
    
    
    1,326
    
    
    
    1,599
    
    
    
    911
    
    
    
    1,127On exercise of warrants
    
    
    4
    
    
    
    4
    
    
    
    4
    
    
    
    4On 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
    
    
    
    9,58322,674
    
    
    
    22,309
    
    
    
    22,463
    
    
    
    21,953
 Stock Options and Stock-Based Compensation
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Net loss as reported
    
    $
    (6,416
    )
    
    $
    (9,061
    )
    
    $
    (18,880
    )
    
    $
    (18,515
    )Add back: Restricted stock grant expense
    
    
    1,168
    
    
    
    374
    
    
    
    2,223
    
    
    
    765Deduct: Stock-based employee
compensation expense determined under
the fair value method
    
    
    (1,853
    )
    
    
    (714
    )
    
    
    (3,549
    )
    
    
    (1,692
    )Pro forma net loss
    
    $
    (7,101
    )
    
    $
    (9,401
    )
    
    $
    (20,206
    )
    
    $
    (19,442
    )Loss per share:Basic, as reported
    
    $
    (0.07
    )
    
    $
    (0.11
    )
    
    $
    (0.22
    )
    
    $
    (0.22
    )Basic, pro forma
    
    $
    (0.08
    )
    
    $
    (0.11
    )
    
    $
    (0.24
    )
    
    $
    (0.23
    )Diluted, as reported
    
    $
    (0.07
    )
    
    $
    (0.11
    )
    
    $
    (0.22
    )
    
    $
    (0.22
    )Diluted, pro forma
    
    $
    (0.08
    )
    
    $
    (0.11
    )
    
    $
    (0.24
    )
    
    $
    (0.23
    )
 8




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##### Table of Contents



Reclassifications
  2. INVENTORY
  June 30,
    
    December 31,2005
    
    2004Parts and supplies
    
    $
    132,222
    
    
    $
    135,751Work in progress
    
    
    59,162
    
    
    
    42,708Finished goods
    
    
    11,532
    
    
    
    6,339$
    202,916
    
    
    $
    184,798
  3. PROPERTY, PLANT AND EQUIPMENT
  June 30,
    
    December 31,2005
    
    2004Compression equipment, facilities and other rental assets
    
    $
    2,392,061
    
    
    $
    2,360,799Land and buildings
    
    
    85,235
    
    
    
    89,573Transportation and shop equipment
    
    
    77,098
    
    
    
    78,577Other
    
    
    52,570
    
    
    
    51,0542,606,964
    
    
    
    2,580,003Accumulated depreciation
    
    
    (778,696
    )
    
    
    (703,655
    )$
    1,828,268
    
    
    $
    1,876,348
  4. DEBT
  June 30,
    
    December 31,2005
    
    2004Belleli-factored receivables
    
    $
    1,158
    
    
    $
    1,011Belleli-revolving credit facility
    
    
    3,249
    
    
    
    4,095Short-term debt
    
    $
    4,407
    
    
    $
    5,106
  9




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##### Table of Contents



June 30,
    
    December 31,2005
    
    2004Bank credit facility due December 2006
    
    $
    77,000
    
    
    $
    7,0004.75% 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
    
    
    
    200,0009.0% senior notes due 2014**
    
    
    200,000
    
    
    
    200,0002000B equipment lease notes, interest at 5.2%, due October 2005
    
    
    
    
    
    
    55,8612001A equipment lease notes, interest at 8.5%, due September 2008
    
    
    300,000
    
    
    
    300,0002001B equipment lease notes, interest at 8.8%, due September 2011
    
    
    250,000
    
    
    
    250,000Zero coupon subordinated notes, interest at 11.0%, due March 2007*
    
    
    217,823
    
    
    
    206,4677.25% convertible subordinated notes due 2029*
    
    
    86,250
    
    
    
    86,250Fair value adjustment  fixed to floating interest rate swaps
    
    
    (4,667
    )
    
    
    (5,996
    )Other, interest at various rates, collateralized by equipment and
other assets, net of unamortized discount
    
    
    2,485
    
    
    
    3,1781,664,641
    
    
    
    1,638,510Less-current maturities
    
    
    (1,457
    )
    
    
    (1,430
    )Long-term debt
    
    $
    1,663,184
    
    
    $
    1,637,080
 
 *
    
    Securities issued by Hanover (parent company).**
    
    Securities issued by Hanover (parent company) and guaranteed by Hanover Compression Limited Partnership.     10




---



##### Table of Contents



5. ACCOUNTING FOR DERIVATIVES
    Fair Value ofFixed Rate to be
    
    
    Notional
    
    
    Swap atFloating Rate to be Paid
    
    Maturity Date

    
    Received
    
    
    Amount
    
    
    June 30, 2005Six Month LIBOR +4.72%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (2,435
    )Six Month LIBOR +4.64%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (2,232
    )
   Fair Value ofFixed Rate to be
    
    
    Notional
    
    
    Swap atLease
    
    Maturity Date
    
    Paid
    
    
    Amount
    
    
    June 30, 2005March 2000
    
    March 11, 2005
    
    
    5.2550
    %
    
    $
    100,000
    
    
    $
    August 2000
    
    March 11, 2005
    
    
    5.2725
    %
    
    $
    100,000
    
    
    $
    
   11




---



##### Table of Contents



6. COMMITMENTS AND CONTINGENCIES
  Maximum PotentialUndiscountedPayments as ofTerm
    
    June 30, 2005Indebtedness of non-consolidated affiliates:Simco/Harwat Consortium (1)
    
    
    2005
    
    
    $
    10,364El Furrial (1)
    
    
    2013
    
    
    
    34,022Other:Performance guarantees through letters of credit (2)
    
    
    2005-2006
    
    
    
    89,225Standby letters of credit
    
    
    2005-2006
    
    
    
    17,958Commercial letters of credit
    
    
    2005
    
    
    
    1,899Bid bonds and performance bonds (2)
    
    
    2005-2011
    
    
    
    104,242$
    257,710
 
 (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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##### Table of Contents



7. RELATED-PARTY TRANSACTIONS
    8. RECENT ACCOUNTING PRONOUNCEMENTS
  13




---



##### Table of Contents



Accounting for Stock Issued to Employees, 123(R)
    9. REPORTABLE SEGMENTS
  14




---



##### Table of Contents



SegmentsProductionParts,
    
    Compressor
    
    andservice
    
    and
    
    processingU.S.
    
    International
    
    and used
    
    accessory
    
    equipment
    
    Otherrentals
    
    rentals
    
    equipment
    
    fabrication
    
    fabrication
    
    income
    
    Total(in thousands)June 30, 2005:Revenues from external customers
    
    $
    87,691
    
    
    $
    55,521
    
    
    $
    50,531
    
    
    $
    41,092
    
    
    $
    104,297
    
    
    $
    5,650
    
    
    $
    344,782Gross profit
    
    
    54,707
    
    
    
    38,377
    
    
    
    14,316
    
    
    
    4,505
    
    
    
    11,868
    
    
    
    5,650
    
    
    
    129,423June 30, 2004:Revenues from external customers
    
    $
    83,680
    
    
    $
    54,599
    
    
    $
    41,414
    
    
    $
    44,159
    
    
    $
    63,017
    
    
    $
    6,007
    
    
    $
    292,876Gross profit
    
    
    48,730
    
    
    
    40,632
    
    
    
    10,050
    
    
    
    3,705
    
    
    
    9,130
    
    
    
    6,007
    
    
    
    118,254
  SegmentsProductionParts,
    
    Compressor
    
    andservice
    
    and
    
    processingU.S.
    
    International
    
    and used
    
    accessory
    
    equipment
    
    Otherrentals
    
    rentals
    
    equipment
    
    fabrication
    
    fabrication
    
    income
    
    Total(in thousands)June 30, 2005:Revenues from external customers
    
    $
    174,845
    
    
    $
    109,436
    
    
    $
    83,968
    
    
    $
    73,616
    
    
    $
    193,868
    
    
    $
    10,675
    
    
    $
    646,408Gross profit
    
    
    107,785
    
    
    
    74,790
    
    
    
    22,693
    
    
    
    7,412
    
    
    
    22,314
    
    
    
    10,675
    
    
    
    245,669June 30, 2004:Revenues from external customers
    
    $
    170,272
    
    
    $
    106,099
    
    
    $
    85,796
    
    
    $
    72,309
    
    
    $
    116,446
    
    
    $
    11,785
    
    
    $
    562,707Gross profit
    
    
    99,783
    
    
    
    77,359
    
    
    
    21,463
    
    
    
    5,942
    
    
    
    14,863
    
    
    
    11,785
    
    
    
    231,195
 10. DISCONTINUED OPERATIONS AND OTHER ASSETS HELD FOR SALE
  15




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Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Revenues and other:U.S. rentals
    
    $
    67
    
    
    $
    10
    
    
    $
    70
    
    
    $
    15International rentals
    
    
    
    
    
    
    3,760
    
    
    
    
    
    
    
    7,829Parts, service and used equipment
    
    
    
    
    
    
    3,270
    
    
    
    
    
    
    
    6,742Equity in income (loss) of
non-consolidated affiliates
    
    
    
    
    
    
    (181
    )
    
    
    
    
    
    
    (12
    )Other
    
    
    5
    
    
    
    (273
    )
    
    
    5
    
    
    
    (279
    )72
    
    
    
    6,586
    
    
    
    75
    
    
    
    14,295Expenses:U.S. rentals
    
    
    219
    
    
    
    231
    
    
    
    383
    
    
    
    391International rentals
    
    
    
    
    
    
    1,229
    
    
    
    
    
    
    
    3,582Parts, service and used equipment
    
    
    
    
    
    
    2,141
    
    
    
    
    
    
    
    4,591Compressor and accessory fabrication
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Selling, general and administrative
    
    
    75
    
    
    
    490
    
    
    
    179
    
    
    
    975Foreign currency translation
    
    
    
    
    
    
    723
    
    
    
    5
    
    
    
    294Depreciation and amortization
    
    
    
    
    
    
    1,114
    
    
    
    
    
    
    
    2,068Other
    
    
    (1
    )
    
    
    98
    
    
    
    
    
    
    
    134293
    
    
    
    6,026
    
    
    
    567
    
    
    
    12,038Income (loss) from discontinued
operations before income taxes
    
    
    (221
    )
    
    
    560
    
    
    
    (492
    )
    
    
    2,257Provision for income taxes
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    593Income (loss) from discontinued operations
    
    $
    (221
    )
    
    $
    481
    
    
    $
    (492
    )
    
    $
    1,664
  16




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Non-OilfieldUsed
    
    PowerEquipment
    
    Generation
    
    Facilities
    
    TotalCurrent assets
    
    $
    2,455
    
    
    $
    2,188
    
    
    $
    
    
    
    $
    4,643Property, plant and equipment
    
    
    
    
    
    
    766
    
    
    
    4,948
    
    
    
    5,714Assets held for sale
    
    
    2,455
    
    
    
    2,954
    
    
    
    4,948
    
    
    
    10,357Current liabilities
    
    
    
    
    
    
    472
    
    
    
    
    
    
    
    472Liabilities held for sale
    
    
    
    
    
    
    472
    
    
    
    
    
    
    
    472Net assets held for sale
    
    $
    2,455
    
    
    $
    2,482
    
    
    $
    4,948
    
    
    $
    9,885
  Non-OilfieldUsed
    
    PowerEquipment
    
    Generation
    
    Facilities
    
    TotalCurrent assets
    
    $
    2,455
    
    
    $
    2,714
    
    
    $
    
    
    
    $
    5,169Property, plant and equipment
    
    
    
    
    
    
    1,077
    
    
    
    5,314
    
    
    
    6,391Assets held for sale
    
    
    2,455
    
    
    
    3,791
    
    
    
    5,314
    
    
    
    11,560Current liabilities
    
    
    
    
    
    
    517
    
    
    
    
    
    
    
    517Liabilities held for sale
    
    
    
    
    
    
    517
    
    
    
    
    
    
    
    517Net assets held for sale
    
    $
    2,455
    
    
    $
    3,274
    
    
    $
    5,314
    
    
    $
    11,043
 11. INCOME TAXES
   12. SUBSEQUENT EVENTS
  17




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18




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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, 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,
    
    integrating acquired businesses,
    
    generating sufficient cash,
    
    accessing the capital markets,
    
    refinancing existing or incurring additional indebtedness to fund our business, and
    
    executing our exit and sale strategy with respect to assets classified on our balance sheet as held for sale;
 
    
    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.
  19




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GENERAL
   OVERVIEW
     Industry Conditions
  U.S. Tax Position
  20




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RESULTS OF OPERATIONS
 THREE MONTHS ENDED JUNE 30, 2005 COMPARED TO THREE MONTHS ENDED JUNE 30, 2004
 Summary of Business Segment Results
 U.S. Rentals
 Three months endedJune 30,
    
    Increase2005
    
    2004
    
    (Decrease)Revenue
    
    $
    87,691
    
    
    $
    83,680
    
    
    
    5
    %Operating expense
    
    
    32,984
    
    
    
    34,950
    
    
    
    (6
    )%Gross profit
    
    $
    54,707
    
    
    $
    48,730
    
    
    
    12
    %Gross margin
    
    
    62
    %
    
    
    58
    %
    
    
    4
    %
  International Rentals
 Three months endedJune 30,
    
    Increase2005
    
    2004
    
    (Decrease)Revenue
    
    $
    55,521
    
    
    $
    54,599
    
    
    
    2
    %Operating expense
    
    
    17,144
    
    
    
    13,967
    
    
    
    23
    %Gross profit
    
    $
    38,377
    
    
    $
    40,632
    
    
    
    (6
    )%Gross margin
    
    
    69
    %
    
    
    74
    %
    
    
    (5
    )%
  21




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Parts, Service and Used Equipment
 Three months endedJune 30,
    
    Increase2005
    
    2004
    
    (Decrease)Revenue
    
    $
    50,531
    
    
    $
    41,414
    
    
    
    22
    %Operating expense
    
    
    36,215
    
    
    
    31,364
    
    
    
    15
    %Gross profit
    
    $
    14,316
    
    
    $
    10,050
    
    
    
    42
    %Gross margin
    
    
    28
    %
    
    
    24
    %
    
    
    4
    %
  Compression and Accessory Fabrication
 Three months endedJune 30,
    
    Increase2005
    
    2004
    
    (Decrease)Revenue
    
    $
    41,092
    
    
    $
    44,159
    
    
    
    (7
    )%Operating expense
    
    
    36,587
    
    
    
    40,454
    
    
    
    (10
    )%Gross profit
    
    $
    4,505
    
    
    $
    3,705
    
    
    
    22
    %Gross margin
    
    
    11
    %
    
    
    8
    %
    
    
    3
    %
  22




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Production and Processing Equipment Fabrication
 Three months endedJune 30,
    
    Increase2005
    
    2004
    
    (Decrease)Revenue
    
    $
    104,297
    
    
    $
    63,017
    
    
    
    66
    %Operating expense
    
    
    92,429
    
    
    
    53,887
    
    
    
    72
    %Gross profit
    
    $
    11,868
    
    
    $
    9,130
    
    
    
    30
    %Gross margin
    
    
    11
    %
    
    
    14
    %
    
    
    (3
    )%
  Expenses
     23




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Three Months EndedJune 30,2005
    
    2004Canada
    
    $
    422
    
    
    $
    179Argentina
    
    
    78
    
    
    
    (227
    )Venezuela
    
    
    140
    
    
    
    477Italy
    
    
    (5,698
    )
    
    
    51All other countries
    
    
    103
    
    
    
    (384
    )Exchange gain (loss)
    
    $
    (4,955
    )
    
    $
    96
  Income Taxes
   Discontinued Operations
  24




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SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO SIX MONTHS ENDED JUNE 30, 2004
 Summary of Business Segment Results
 U.S. Rentals
 Six months endedJune 30,
    
    Increase2005
    
    2004
    
    (Decrease)Revenue
    
    $
    174,845
    
    
    $
    170,272
    
    
    
    3
    %Operating expense
    
    
    67,060
    
    
    
    70,489
    
    
    
    (5
    )%Gross profit
    
    $
    107,785
    
    
    $
    99,783
    
    
    
    8
    %Gross margin
    
    
    62
    %
    
    
    59
    %
    
    
    3
    %
  International Rentals
 Six months endedJune 30,
    
    Increase2005
    
    2004
    
    (Decrease)Revenue
    
    $
    109,436
    
    
    $
    106,099
    
    
    
    3
    %Operating expense
    
    
    34,646
    
    
    
    28,740
    
    
    
    21
    %Gross profit
    
    $
    74,790
    
    
    $
    77,359
    
    
    
    (3
    )%Gross margin
    
    
    68
    %
    
    
    73
    %
    
    
    (5
    )%
  25




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##### Table of Contents



Parts, Service and Used Equipment
 Six months endedJune 30,Increase2005
    
    2004
    
    (Decrease)Revenue
    
    $
    83,968
    
    
    $
    85,796
    
    
    
    (2
    )%Operating expense
    
    
    61,275
    
    
    
    64,333
    
    
    
    (5
    )%Gross profit
    
    $
    22,693
    
    
    $
    21,463
    
    
    
    6
    %Gross margin
    
    
    27
    %
    
    
    25
    %
    
    
    2
    %
  Compression and Accessory Fabrication
 Six months endedJune 30,Increase2005
    
    2004
    
    (Decrease)Revenue
    
    $
    73,616
    
    
    $
    72,309
    
    
    
    2
    %Operating expense
    
    
    66,204
    
    
    
    66,367
    
    
    
    0
    %Gross profit
    
    $
    7,412
    
    
    $
    5,942
    
    
    
    25
    %Gross margin
    
    
    10
    %
    
    
    8
    %
    
    
    2
    %
  26




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##### Table of Contents



Production and Processing Equipment Fabrication
 Six months endedJune 30,Increase2005
    
    2004
    
    (Decrease)Revenue
    
    $
    193,868
    
    
    $
    116,446
    
    
    
    66
    %Operating expense
    
    
    171,554
    
    
    
    101,583
    
    
    
    69
    %Gross profit
    
    $
    22,314
    
    
    $
    14,863
    
    
    
    50
    %Gross margin
    
    
    12
    %
    
    
    13
    %
    
    
    (1
    )%
  Expenses
      Six Months EndedJune 30,2005
    
    2004Canada
    
    $
    195
    
    
    $
    233Argentina
    
    
    474
    
    
    
    (448
    )Venezuela
    
    
    3,149
    
    
    
    1,433Italy
    
    
    (8,892
    )
    
    
    92All other countries
    
    
    (152
    )
    
    
    (141
    )Exchange gain/(loss)
    
    $
    (5,226
    )
    
    $
    1,169
 27




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Income Taxes
   Discontinued Operations
  LIQUIDITY AND CAPITAL RESOURCES
   Six Months EndedJune 30,2005
    
    2004Net cash provided by (used in) continuing operations:Operating activities
    
    $
    28,998
    
    
    $
    43,765Investing activities
    
    
    (49,057
    )
    
    
    (25,251
    )Financing activities
    
    
    14,844
    
    
    
    (33,244
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (952
    )
    
    
    (490
    )Net cash provided by (used in) discontinued operations
    
    
    (189
    )
    
    
    10,475Net change in cash and cash equivalents
    
    $
    (6,356
    )
    
    $
    (4,745
    )
 28




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29




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StandardMoody's
    
    & Poor'sOutlook
    
    Stable
    
    StableSenior implied rating
    
    B1
    
    BB-Liquidity rating
    
    SGL-3
    
    Bank credit facility due December 2006
    
    Ba3
    
    2001A equipment lease notes, interest at 8.5%, due September 2008
    
    B2
    
    B+2001B equipment lease notes, interest at 8.8%, due September 2011
    
    B2
    
    B+4.75% convertible senior notes due 2008
    
    B3
    
    B4.75% convertible senior notes due 2014
    
    B3
    
    B8.625% senior notes due 2010
    
    B3
    
    B9.0% senior notes due 2014
    
    B3
    
    BZero coupon subordinated notes, interest at 11%, due March 31, 2007
    
    Caa1
    
    B-7.25% convertible subordinated notes due 2029*
    
    Caa1
    
    B-
 
 *
    
    Rating is on the Mandatorily Redeemable Convertible Preferred
Securities issued by Hanover Compressor Capital Trust, our
wholly-owned subsidiary. 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 variable interest
entity 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 have previously been eliminated in
our consolidated financial statements. The changes related to our
Mandatorily Redeemable Convertible Preferred Securities for our
balance sheet are reclassifications and had no impact on our
consolidated results of operations or cash flow.  30




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Derivative Financial Instruments.
   Fair Value ofFixed Rate to be
    
    
    
    
    
    Swap atFloating Rate to be Paid
    
    Maturity Date
    
    Received
    
    Notional Amount
    
    June 30, 2005Six Month LIBOR +4.72%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (2,435
    )Six Month LIBOR +4.64%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (2,232
    )
   Fair Value ofSwap atLease
    
    Maturity Date
    
    Fixed Rate to be Paid
    
    Notional Amount
    
    June 30, 2005March 2000
    
    March 11, 2005
    
    
    5.2550
    %
    
    $
    100,000
    
    
    $
    August 2000
    
    March 11, 2005
    
    
    5.2725
    %
    
    $
    100,000
    
    
    $
    
    International Operations
 31




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Six Months EndedJune 30,2005
    
    2004Canada
    
    $
    195
    
    
    $
    233Argentina
    
    
    474
    
    
    
    (448
    )Venezuela
    
    
    3,149
    
    
    
    1,433Italy
    
    
    (8,892
    )
    
    
    92All other countries
    
    
    (152
    )
    
    
    (141
    )Exchange gain/(loss)
    
    $
    (5,226
    )
    
    $
    1,169
    32




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NEW ACCOUNTING PRONOUNCEMENTS
    Accounting for Stock Issued to Employees, 123(R)
  33




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    Fair Value ofFixed Rate
    
    
    
    
    
    Swap atto be
    
    Notional
    
    June 30,Floating Rate to be Paid
    
    Maturity Date
    
    Received
    
    Amount
    
    2005Six Month LIBOR +4.72%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (2,435
    )Six Month LIBOR +4.64%
    
    December 15, 2010
    
    
    8.625
    %
    
    $
    100,000
    
    
    $
    (2,232
    )
     34




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##### Table of Contents



Six Months EndedJune 30,2005
    
    2004Canada
    
    $
    195
    
    
    $
    233Argentina
    
    
    474
    
    
    
    (448
    )Venezuela
    
    
    3,149
    
    
    
    1,433Italy
    
    
    (8,892
    )
    
    
    92All other countries
    
    
    (152
    )
    
    
    (141
    )Exchange gain/(loss)
    
    $
    (5,226
    )
    
    $
    1,169
  35




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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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Term Ending 2006
    
    For
    
    
    WithheldI. Jon Brumley
    
    
    64,434,354
    
    
    
    2,307,704Ted Collins, Jr.
    
    
    64,238,251
    
    
    
    2,503,807Margaret K. Dorman
    
    
    64,432,498
    
    
    
    2,309,560Robert R. Furgason
    
    
    64,400,200
    
    
    
    2,341,858Victor E. Grijalva
    
    
    64,319,154
    
    
    
    2,422,904Gordon T. Hall
    
    
    64,432,474
    
    
    
    2,309,584John E. Jackson
    
    
    64,436,398
    
    
    
    2,305,660Stephen M. Pazuk
    
    
    64,404,054
    
    
    
    2,338,004Alvin V. Shoemaker
    
    
    64,329,247
    
    
    
    2,412,811
  For
    
    Against
    
    
    Abstaining64,671,793
    
    
    62,599
    
    
    
    2,007,666
 36




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##### Table of Contents



ITEM 5. OTHER INFORMATION
     37




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##### Table of Contents



ITEM 6: EXHIBITS
 (a) Exhibits10.1
    
    Change of Control and Severance
Agreement dated July 29, 2005 between John E. Jackson and the Company. (1)10.2
    
    Form of Change of Control Agreement dated July 29, 2005 between the Company and each of Messrs. Lee E.
Beckelman, Brian A. Matusek, Gary M. Wilson, Steven W. Muck, Norman A. Mckay, Stephen P. York and Peter
G. Schreck and Ms. Anita H. Colglazier and Ms. Hilary S.
Ware. (1)10.3
    
    Letter to Brian Matusek regarding employment terms (incorporated by reference to Exhibit 10.1 to Hanover
Compressor Companys Current Report on Form 8-K filed with the SEC on April 18, 2005).10.4
    
    Amendment No. 2 dated as of July 8, 2005, to Purchase Agreement by and among the Company, Hanover
Compression Limited Partnership and Schlumberger Technology Corporation, for itself and as successor in
interest to Camco International Inc., Schlumberger Surenco S.A., and Schlumberger Oilfield Holdings Ltd.
(incorporated by reference to Exhibit 10.1 to Hanover Compressor Companys Current Report on Form 8-K
filed with the SEC on July 13, 2005).10.5
    
    First Amendment to the Hanover Compressor Company 1998 Stock Option Plan (incorporated by reference to
Exhibit 10.2 to Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 13,
2005).10.6
    
    First Amendment to the Hanover Compressor Company 1999 Stock Option Plan (incorporated by reference to
Exhibit 10.3 to Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 13,
2005).10.7
    
    First Amendment to the Hanover Compressor Company 2001 Equity Incentive Plan (incorporated by reference
to Exhibit 10.4 to Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 13,
2005).10.8
    
    First Amendment to the Hanover Compressor Company 2003 Stock Incentive Plan (incorporated by reference to
Exhibit 10.5 to Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 13,
2005).31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)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 (2)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 (2)
 
 (1)
    
    Filed herewith.(2)
    
    Furnished herewith. 38




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##### Table of Contents



SIGNATURES
   Date:
    
    August 2, 2005By:
    
    /s/ JOHN E. JACKSONJohn E. JacksonPresident and Chief Executive OfficerDate:
    
    August 2, 2005By:
    
    /s/ LEE E. BECKELMANLee E. BeckelmanVice President and Chief Financial Officer
 39




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##### Table of Contents



EXHIBIT INDEX
 10.1
    
    Change of Control and Severance
Agreement dated July 29, 2005 between John E. Jackson and the Company. (1)10.2
    
    Form of Change of Control Agreement dated July 29, 2005 between the Company and each of Messrs. Lee E.
Beckelman, Brian A. Matusek, Gary M. Wilson, Steven W. Muck, Norman A. Mckay, Stephen P. York and Peter
G. Schreck and Ms. Anita H. Colglazier and Ms. Hilary S.
Ware. (1)10.3
    
    Letter to Brian Matusek regarding employment terms (incorporated by reference to Exhibit 10.1 to Hanover
Compressor Companys Current Report on Form 8-K filed with the SEC on April 18, 2005).10.4
    
    Amendment No. 2 dated as of July 8, 2005, to Purchase Agreement by and among the Company, Hanover
Compression Limited Partnership and Schlumberger Technology Corporation, for itself and as successor in
interest to Camco International Inc., Schlumberger Surenco S.A., and Schlumberger Oilfield Holdings Ltd.
(incorporated by reference to Exhibit 10.1 to Hanover Compressor Companys Current Report on Form 8-K
filed with the SEC on July 13, 2005).10.5
    
    First Amendment to the Hanover Compressor Company 1998 Stock Option Plan (incorporated by reference to
Exhibit 10.2 to Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 13,
2005).10.6
    
    First Amendment to the Hanover Compressor Company 1999 Stock Option Plan (incorporated by reference to
Exhibit 10.3 to Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 13,
2005).10.7
    
    First Amendment to the Hanover Compressor Company 2001 Equity Incentive Plan (incorporated by reference
to Exhibit 10.4 to Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 13,
2005).10.8
    
    First Amendment to the Hanover Compressor Company 2003 Stock Incentive Plan (incorporated by reference to
Exhibit 10.5 to Hanover Compressor Companys Current Report on Form 8-K filed with the SEC on July 13,
2005).31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)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 (2)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 (2)
 
 (1)
    
    Filed herewith.(2)
    
    Furnished herewith. 40