Good morning. Welcome to the Exterran Holdings, Inc. and Exterran Partners, L.P. Second Quarter 2013 Earnings Conference Call. At this time, I'd like to inform you this conference is being recorded. [Operator Instructions] Earlier today, Exterran Holdings and Exterran Partners released their financial results for the second quarter of 2013. If you have not received a copy, you can find the information on the company's website at exterran.com. During today's call, Exterran Holdings may be referred to as Exterran, or EXH, and the Exterran Partners, as either Exterran Partners or EXLP. Because EXLP's financial results and position are consolidated into Exterran, the discussion of Exterran will include Exterran Partners unless otherwise noted. Also, the term international will be used to refer to Exterran's operations outside the U.S. and Canada, and the combination of U.S. and Canada will be referred to as North America. I want to remind listeners that the news release issued this morning by Exterran Holdings and Exterran Partners, the company's prepared remarks on this conference call and the related question-and-answer session include forward-looking statements. These forward-looking statements include projections and expectations of the company's performance and represent the company's current beliefs. Various factors could cause results to differ materially from those projected in the forward-looking statements. Information concerning the risk factors, challenges and uncertainties that could cause actual results to differ materially from those in the forward-looking statements can be found in the company's press release, as well in Exterran Holdings' Annual Report on Form 10-K for the year-ended December 31, 2012, Exterran Partners' Annual Report on Form 10-K for the year-ended December 31, 2012, and those set forth from time to time in Exterran Holdings' and Exterran Partners' filings with the Securities and Exchange Commission, which are currently available at exterran.com. Except as required by law, the company has expressly disclaimed any intention or obligation to revise or update any forward-looking statements. Your host for this morning's call is Brad Childers, President and CEO. I would now like to turn the call over to him. Mr. Childers, you may begin your conference.

Great. Thank you, operator. Good morning, everyone. With me on today's call is Bill Austin, CFO of Exterran Holdings; and David Miller, CFO of Exterran Partners. As in the past, in the call today, we're going to provide comments and review of both Exterran Holdings and Exterran Partners before opening it up for questions. I'll review financial results, operating highlights and our priorities moving ahead. Bill will provide a detailed summary of Exterran Holdings' financial performance and David will go through a detailed summary of Exterran Partners' financial performance. At Holdings, we achieved significant milestones in our performance improvement work this quarter. Let me highlight a few of our accomplishments. In the quarter, we generated our highest level of EBITDA in over 4 years at $177 million, which is 21% better than the prior quarter and 74% better than the year ago period. We continued to drive the overall positive profitability trend in our North America contract operations business as our gross margin has increased from the high-40% range to the mid-50% range over the last 7 quarters. And we generated our highest level of gross margin dollars from our fabrication business in over 3 years. As we noted in our press release and as we will discuss in more detail later, our results for the quarter included some one-off events. However, the overall results were driven by strong performance across all of our product lines and in all of our regions. This performance is the result of the hard work of our employees. Focusing on the right goals and working hard to achieve those goals, I'd like to thank our employees all over the world for their focus and work to deliver continuously improving results for our customers and for our investors. While we're excited and extremely pleased by…

Thanks, Brad. Before I go into our segment results, I would like to note that in addition to Brad's remarks about our EBITDA results, we also reported diluted net income from continuing operations attributable to the Exterran stockholders, excluding charges, of some $0.31 per share in the second quarter. That's up from $0.21 per share in the first quarter and a loss of $0.48 per share in the prior year period. Now moving on to the segment results. Our North American contract operations revenue was $164 million in the second quarter. Gross margin came in at 57%, that's up from 55% in the first quarter of '13 and up from the 52.6% in the year ago period. Profitability in the second quarter was positively impacted by ongoing efficiency initiatives and lower-than-expected demobilization costs in the quarter associated with the closing of the natural gas processing plant. And I referred to that in the last quarter's conference call. The exercise of purchase options on 2 processing plants, as discussed earlier, increased our revenue by some $6.5 million and increased our gross margin percentage by approximately 2%. In addition, the second quarter results included revenue of some $2.3 million from the operations of these plants. Now looking forward in the third quarter, we expect revenue to be in the mid-$150 million level and gross margin percentage to be in the low- to mid-50% range as some of the previously discussed plant demobilization activity will slip into the third and fourth quarter. Maintenance capital was $18 million in North America during the quarter as compared to $19 million in the first quarter and some $24 million in the prior year period. Maintenance capital spending in the third quarter is expected to be flat to slightly higher than the second quarter levels. Moving on…

Thanks, Bill. Exterran Partners had another solid quarter. In the second quarter, Exterran Partners' average operating horsepower increased by 254,000 to approximately 2.4 -- 2.24 million operating horsepower driven by the assets acquired in the drop-down transaction with Exterran Holdings, which was completed on March 31, 2013. For the quarter, Exterran Partners generated EBITDA as further adjusted of $71.1 million, as compared to the -- to $52.4 million in the first quarter of 2013. Distributable cash flow was $44.7 million in the second quarter of 2013, up from $37.1 million in the first quarter. The exercise of purchase options on 2 processing plants, as discussed earlier, increased our EBITDA as further adjusted by $13.3 million and our distributable cash flow by $6.5 million. Distributable cash flow coverage in the quarter was 1.6x. Excluding the benefit of the cost cap payments, our distributable cash flow coverage increased to 1.46x in the second quarter from 0.92x [ph] in the year-ago period. Net income per limited partner unit was $0.52 in the second quarter, compared to $0.31 in the first quarter of 2013 and a loss of $0.47 in the year-ago period. Revenue grew to $125.5 million in the second quarter, as compared to $106.1 million in the first quarter due in large part to increased average operating horsepower. Gross margin was 59% in the second quarter as compared to 56% in the first quarter and 53% in the prior year period. Cost of sales for average operating horsepower was $$22.72 in the second quarter, down 4% from the first quarter 2013 and prior year levels. The exercise of purchase options on the 2 processing plants increased our revenues by $6.5 million and increased our gross margin percentage by 2%. In addition, second quarter results included revenue of $2.3 million from the operation…

[Operator Instructions] And our first question comes from Mike Urban from Deutsche Bank.

So there's been a number of moving parts, well, really across the company, but specific to the U.S. contract business, good performance here. But kind of adjusting for the customer purchase option, I mean, it looks roughly like the reported margin would have been fairly flat over the last 3 quarters. So I'm just trying to get a sense for what's going on, on an underlying basis, from all the initiatives that you've been putting in place, and either what do you think that margin improvement has been or the dollar amount that you saved? Or however you want to quantify it, just want to try and get a sense for the progress you've made over the last handful of quarters here.

Yes, Mike, this is Brad. Let me speak to that. I think that the progress has actually been good and steady, but as you point out that with, actually, as a purchase options and then the one demob expense that has been pending that we pushed into Q3, Q4, as Bill discussed, it does create some moving parts. And when we pull that out, I'm very confident with and pleased that our progress has gone from that high-40s percentage target up to the solidly, solidly mid-50s range, is where I think we settled right now after noise. And that progress has been -- take out of the noise, fairly steady. We believe in it and we think we have more ahead of us.

Okay, that's helpful. And in the fabrication business, you were pretty clear on the expectations here in the near term, just given the decline in backlog and some of the timing of orders. How much of the improvement in the margin you saw here in the quarter was either the kind of the mix or just better underlying operating performance versus the volumes? I guess, same -- trying to get the same kind of thing. I mean, what was kind of the underlying performance improvement been in fabrications, so that we can kind of think about what is baseline and ongoing versus the impact of lower volumes that you're going to have here for the next quarter or 2.

This one is not as straightforward to answer on that margin target, because the mix issues do make such a big difference. What we did see in Q2 was: number one, really good execution, as I highlighted on cost; and a shift in the mix. We did have the pull through of more highly profitable product lines in Q2 than we've had in some prior quarters and that did impact that performance in that margin. And on the cost side, you're right, we also are benefiting from an overall level of higher volumes. But the execution side is delivering its contribution, no doubt. Looking forward, we tried to give you a picture of our mix, and while we see it balanced between North America and international, what we've seen in the marketplace, and we think others have, too, is a dip in the order activity in the processing and treating segments, which is one of our more profitable product lines. And so, while we believe we have improved the underlying profitability, I'm afraid that the fabrication margin, just like revenue, is going to remain lumpier than people are going to really want from a baseline perspective. So the improvement is definitely there on the cost side. We are definitely executing well, but we can't eliminate some of the lumpiness that we're going to get based on market activity and the mix of the products that come through the fab shops on any quarterly basis.

Okay, understood. Then -- and last one for me is that, and correct me if I'm wrong, I think there has been a more of an emphasis placed on recurring revenue-type business. So again, maybe take out some of the lumpiness that you have on fabrication side, maybe more of an emphasis on aftermarket, which I think is lower for you as a percentage of revenues or earnings relative to, maybe, similar-type companies. Is there a focus to improve that and to grow that business? And if so, what kind of progress are you making there?

Well, on -- the answer is correct, that we do focus and are focusing on the recurring revenue business to maximize our performance and profit in those segments. We think of it is as focusing on our core operations and trying to go through and find those areas where we are not generating, either because of the scale in that particular market or that product line, the level of profitability that we've targeted, so you're right about that focus. On the AMS question in particular, while we are focusing and have seen some good growth and restoration of that business over the last several quarters, it's not grown as substantially or as significantly as we would like to have seen, especially in some of our stronger markets. So I don't -- I wouldn't expect to see anything but incremental growth in the revenue and margins from that line going forward.

Our next question comes from Jim Rollyson from Raymond James. James M. Rollyson - Raymond James & Associates, Inc., Research Division: Brad, you mentioned on the contract operations side the kind of during the quarter, you've picked up 39,000 horsepower from some of the newer shale plays and lost, I think the number was 74,000 from conventional plays. Can you maybe speak to how you see that proceeding going forward, maybe the opportunity for equipment, new equipment into the newer plays? And if you contrast that with just how much you can lose out of the conventional from what you see today?

Sure. The best guidance I can give you, Jim, is if you look back over the same breakout and my comments for the last 3 quarters, we've tried to give you this on a quarterly basis. And I think if you -- adding up the last 3 quarters' look would give you a fair indication of what's happening in the marketplace. This quarter was surprising. It was larger than expected by a fairly significant percentage basis, and I can share with you just to give you that idea. Compared to Q2 of '13, our stops were up 18% in this quarter in Q2 versus the prior quarter and it was up 42% over Q1 of '13. So we've seen -- this is an aberrationally high stop quarter for us. We did not expect this level of stop activity. The sales in the start activity, on the other hand, has actually been fairly consistent with our expectations and our plan. So I think this quarter's a little bit aberrational. Go back to the prior quarters, they would give you a better picture. James M. Rollyson - Raymond James & Associates, Inc., Research Division: Okay, that's helpful. And then one maybe on Partners specifically. The revenue per active horsepower was up like 5% sequentially. Just trying to understand it, was that influenced at all by the processing sale? And if not, is this sequential increase basically a benefit from the pricing increase you put forth and something we can expect maybe to repeat going forward?

There's probably a little bit from the pricing increase, but there was a $6.5 million in the revenue line from the sale of the processing plant that would've driven that up a little bit. James M. Rollyson - Raymond James & Associates, Inc., Research Division: Okay, that's helpful. Last one also on Partners. Is the bump in SG&A sequentially mainly related to drop down?

Yes. James M. Rollyson - Raymond James & Associates, Inc., Research Division: And probably a good number for going forward?

Yes. Yes, good number going forward.

Our next question comes from Blake Hutchinson from Howard Weil.

First off, for Brad, I mean, I think you guys, again, were very clear with regard to the trajectory of fabrication top line for the back half. Is it your sense when you call out the kind of processing and treating install, I guess, inventory held by customers, I guess, for lack of a better term, is this an issue that kind of takes care of itself in a couple of quarters? Or do we need to be thinking more towards maybe mid-'14 or late '14 before that kind of bottleneck works itself out? Just I won't tie you down, but just kind of general sense, a sentence on that might be helpful.

Sure. Timing is elusive. So we don't have the crystal ball and I wish we did, but we don't. But I can characterize that what we expect, and I think the industry is looking at this similarly, is this is a slowdown and a deferral of work that will resume once the infrastructure build-out picks back up. And we have heard from a number of customers and do believe that the buying activity, everybody needed to get in line and get their equipment, the buying activity over the prior 3 and 4 quarters was very significant. And our customers are now just working through that and getting those projects installed. The other thing I'd point out is there is somewhat of a bottleneck in some of the NGLs that needs to abate over time to really support continuation on a lot of -- of some of the midstream project. But we think that this is a temporary slowdown and it will resume. We can't really foresee the timing any better than anybody else in the marketplace. So I don't really have that crystal ball. One other thing that I would point out in the quarter, we had a significant amount and we have had significant amount of installation activity that's pulled through our backlog. But a lot of that came in, as I highlighted in my call, as very low margin. We used that primarily to pull through our processing, treating and production equipment and compression equipment. So some of the revenue that you're seeing in the revenue decline is not going to translate as directly into gross margin decline with that installation component of the business.

Good. That's helpful. And then in your remarks, you also mentioned that you saw some growth in the international opportunity, maybe offsetting that at the same time. I guess, I just wanted to clarify that, that's -- you're speaking to the international fabrication opportunity set? Or is that the international contract compression opportunity set or Belleli or all the above, maybe compartmentalize that kind of international outlook for us.

Sure, let me make that clear. Sorry if it wasn't as clear coming out in the call. The comment really in the call was directed at fabrication. So in international and, in particular, in Eastern Hemisphere, we see a significant opportunity set ahead of us. There are large projects. They're difficult to land, but there is a very significant backlog of opportunities that we're working through and that we expect to positively impact our fabrication segment in the future. But on the other hand, I'd tell you that -- in the contract ops part of the discussion, I did also make the comment that we see a significant number of large contract compression opportunities. For those, it's more focused in Latin America. And so the backlog in our international businesses are -- of opportunities. The opportunity set is robust, both in fabrication, primarily Eastern Hemisphere, and in contract ops, primarily Latin America.

Okay. That's great. And then just, again, point of clarification from Bill. When you talk about the wind down and demobilization of the west Texas plant, should we just kind of take the numbers you gave us last quarter and just assume you were -- it's been pushed back and everything is going to unfold over 3Q and 4Q, rather than 2Q and 3Q? Is that kind of the thinking?

Yes. I think I indicated last time, it was around $4 million. We spent maybe 20% of that and the other amount, it's become harder to predict that. But I'd split half and half the third quarter, fourth quarter on the remaining part.

Our next question comes from Joe Gibney from Capital One.

My question's already asked and answered. I appreciate it.

Our next question comes from Daniel Burke from Johnson Rice. Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division: Bill, maybe one question or clarification. The $18 million of EBITDA, was that figure entirely included in the gross margin of the domestic and in international businesses? And was there -- been a separate gain component on the other income line? I didn't quite understand the apportionment.

Good question, Daniel. I tried to break out what was included in the revenue line, both North America and international. I think it was $6.5 million in North America and about $4 million in international. And the other amount, the gain came in other income. So that there was like a little over 7 -- almost $7.7 million in the other income. So while it did come in as EBITDA only, what did I say, $6.5 million and $4 million came in the revenue stream in the contract ops. I know that's confusing but I -- and you do have to unload it, but that's the way you unload it. Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division: Okay, that's helpful clarification. Maybe a question then on the fabrication business, again, focused on North America and production and processing. I guess, I understand that as the install backlog declines, it produces a favorable mix impact. But I guess, one other corollary I thought of was the higher install backlogs or higher install inbound suggested that your large project volume was on the rise last year. In terms of looking forward at production processing and the thought that there are delays, can you differentiate the outlook for the large projects that might involve an install component versus the more bread-and-butter side of production processing and production?

I'm just thinking about how to address that. In some ways, yes. There is a correlation of what happened in the prior -- for the prior 4 quarters. In that we saw -- was such a spike in production equipment and processing and treating, we did have a number of customers who then also wanted more assistance on the installation side. In other words, the market is trying to absorb so much equipment that it's not just the equipment that gets tough to find, it's also the project management, engineering and construction side that also needs more resources. And so they tap into us, among others, to help them put a lot of that equipment to work. And so as we see a decline in some of the processing and treating, it should also mean there's enough resource that we won't be doing as much of that work. But the other part of it is our internal drive to improve the selectivity of when we're willing to deploy our resources to support that. We're very focused on deploying those resources only when we have good pull through and can execute well and generate better returns. And so you're seeing the combination of those 3 factors, really, market down a bit. Correlation is there's not as much assistance needed in the marketplace for the installation. And finally, our focus on driving the pull-through and the profitability of that segment, all of those are impacting that mix a bit going forward. And I think that does hit the point you're trying to ask. Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division: Okay. And then maybe then to bring it into focus with regard to Q4 and the thought that the top line would come down. Mix is trending favorably for revenue in fab in Q4, but presumably absorption does suffer somewhat. Is it -- is the gross margin expectation outlined for Q3 still a reasonable expectation for Q4?

Dan, this is Bill. We really haven't given guidance on that. But as I say, the mix in what Brad said about the installation, look, we're improving the profitability across the board. I'm not here to give you guidance on that. But quarter 3, I think, is a, well, we just gave you guidance on quarter 3. Let's leave it at that.

Our next question comes from Sunil Sibal from Citigroup.

A couple of questions related to the partnership. First of all, of the $32 million CapEx spend on the organic growth side, how much capacity did you guys add at the partnership level? And if you can break it between gathering versus the lifting services?

Sunil, can I ask -- I'm just going to ask for some help in -- when you think about capacity, can you...

I mean, the horsepower, yes.

How much horsepower was added and then how is the mix between what went into gas lift versus what went into gathering?

Yes.

We don't typically provide that level of detail in our capital spend guidance or...

We have a fair -- I think this may go back to the question of the gas lift application as such. And we do see really good demand for the gas lift application. But we don't break that out between partnership and [indiscernible].

The one thing that we would share with you is that, rather than thinking about that increment, because the increment is not something we typically talk about, if we look at the fleet overall, including just all of NACO and the EXLP now being very representative of what's going on with NACO but with higher utilization overall, the amount of gas lift applications that we have with our units right now is running at somewhere between 15% to 18% of our fleet and the remainder is in more traditional gathering applications. And I think that's fairly indicative of how the fleet is moving overall. And that's for both NACO, as well as at Exterran Partners.

Okay. That's helpful. And any impact of the sale on your cost number for the second quarter?

Can you repeat that? I didn't understand the question.

Was there any impact of the sale on your cost -- on your cost number and -- or what you have for the cost number is a good run rate going forward, yes?

No. The cost number is a good number going forward. I guess, the sale impacted revenue by $6.5 million, but there's no impact to cost.

Our next question comes from Bhavesh Lodaya from Crédit Suisse. Bhavesh Lodaya - Crédit Suisse AG, Research Division: Quick question on EXLP. How do you guys see the third-party acquisition landscape? And like what is the size or scale of acquisitions that you're looking at?

Well, a couple of things. One, we don't really comment on acquisition activity going forward. We're public. Other entities that are in our space are public also. So commenting specifically on anything that we're working on is not fair game. So we can't really do that. But what I can share with you is that the market is relatively dispersed. And there are a number of good fleets and well-run operators out there managing fleets of all sizes from the 50,000 category of players to the 50,000 horsepower in their fleet range. There are several at the 100,000-horsepower range and then there are a handful that have fleets that are in the 500,000-horsepower range and up. And we consider any accretive -- any opportunity that could be accretive that would bring in good quality equipment and that makes sense for our operation to be something that we can work on and will. So that's the way I'd characterize the market today.

And let me just add that we have a fairly low leverage in the MLP now and we have lots of capacity. So we would welcome opportunities in our -- in the MLP. Bhavesh Lodaya - Crédit Suisse AG, Research Division: Okay, and then just maybe a question on distribution. So the last 3 quarters, the distribution coverage has been fairly strong even after the impact of cost caps. So is there any visibility or thoughts around increasing the growth of distributions going forward?

I'll go first. Look, we don't look ahead to guide what's going to happen to the distribution growth. But if you look at our history, we've been pleased that in the past, we've been able to have a very steady, very reliable up til today, very reliable, steady increase in our distribution over time. And that has been a way that we thought would be a great way for our investors to see the continuing value and growth up to this point. We don't really comment on the distribution growth going forward.

And I will just add to that, that we look at both the distribution coverage, including the cost caps, and then distribution coverage, excluding the cost caps, as we're trying to wean ourselves off of the cost caps.

Our next question comes from James Bardowski from Sidoti & Company. James A. Bardowski - Sidoti & Company, LLC: So the bulk of my questions were answered, but there is a lone straggler remaining. I think it was Bill that mentioned regarding the debt slight increase at the holding level, was the result of a mismatch of billing cycles. Is that correct?

Yes. We -- that's part of it and we did build up some inventory as we executed on a robust fabrication revenue number. James A. Bardowski - Sidoti & Company, LLC: Okay. So this $31 million increase is a slight bump in the road, then can we expect the number to head back south?

We do think we're going to generate, at Holdings, a good amount of cash in the second half of the year.

Our next question comes from Matt Niblack from HITE.

I just wanted to make sure that I was correctly following how this -- kind of at the Partners level, how the $13 million EBITDA impact of the processing plant sales flowed through the income statement. So does that hit the other income in the expense line? Is that correct?

The $6.5 million hit revenue and $6.8 million hit the other expense line.

Right. In the release, what is the $13.3 million in EBITDA?

That's -- the EBITDA as adjusted adds back other income, which is the 6. -- so then you have the $6.5 million in revenue that hits EBITDA, and then the $6.8 million in other income that gets added back in to get your EBITDA as adjusted.

And the other plant on the impact to the Holdings level, is that right?

I'm sorry, say that again?

The 2 plants...

Both plants -- it's the same plants that we consolidate, so the same impact to Holdings as to Partners.

So I'm just reading the release and it says customers exercised a purchase option on 2 natural gas process plants increased our EBITDA as further adjusted by $13.3 million. I guess, that $13.3 million number I'm trying to understand.

Yes, I think there is a difference between the 2 releases. It's $18 million at Holdings because we also had the Latin America purchase option exercises. And its $13 million at the Partners level because it's just the North America 2 processing plants split, as David said, between -- and they both impact EBITDA split between the impact to revenue and other.

Right. And at Holdings, that sum comes up to the $18.2 million. That's why it looks a little strange.

Our next question comes from Marc Silverberg from Barclays.

Just one quick one left for me. Regarding the elevated stop activity that you highlighted, were there any surprises with regard to specific conventional basins driving that slowdown? Or was it the usual suspects and just a larger number than what you had built into your forecast?

Yes, there was not any standouts that were of a magnitude that we could identify individually. It really was across the board, just a higher level. So no, there's no help I can -- that we can see from the information that helps us understand it differently than that.

And our next question comes from Sharon Lui from Wells Fargo.

Actually, my questions have been asked and answered.

And I will now turn the call back over to Brad Childers for closing remarks.

Okay. We thank everyone for your interest in Exterran Holdings and Exterran Partners, and we'll look forward to talking to you again next quarter. Thanks very much.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.