Exhibit 12.1
Hanover Compressor Company
Computation of Ratio of Earnings to Fixed Charges
(Amounts in thousands of dollars, except ratio amounts)
Nine
Months
Ended
September Year Ended December 31,
30, --------------------------------------------
2003 (1) 2002 (2) 2001 2000 1999 1998
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Earnings:
Income (loss) from continuing operations before income taxes $(56,516) $(92,419) $112,000 $ 74,948 $60,463 $49,636
Add:
Interest on indebtedness and amortization of capitalized interest,
debt expense and discount (3) (4) 53,510 40,453 31,760 15,110 9,115 11,716
Leasing expense and the estimated interest factor attributable to
rents 49,118 96,863 71,347 46,132 22,486 6,310
Equity in income of non-consolidated affiliates in excess of
distributions of income (16,770) (2,223) (9,350) (3,518) (1,188) (1,369)
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Earnings (loss) as adjusted $ 29,342 $ 42,674 $205,757 $132,672 $90,876 $66,293
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Fixed charges:
Interest on indebtedness, amortization of debt expense and discount
and capitalized interest (3) (4) $ 53,875 $ 42,577 $ 34,250 $ 16,871 $10,597 $11,716
Leasing expense and the estimated interest factor attributable to
rents 49,118 96,863 71,347 46,132 22,486 6,310
-------- -------- -------- -------- ------- ------
Total fixed charges $102,993 $139,440 $105,597 $ 63,003 $33,083 $18,026
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Ratio of earnings to fixed charges -- -- 1.95 2.11 2.75 3.68
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(1) Due to Hanover's loss for the nine month period ended September 30, 2003,
the ratio was less than 1:1. Hanover would have had to generate additional
pre-tax earnings of $73.7 million to achieve coverage of 1:1. During this
nine-month period, we recorded $40.3 million in pre-tax charges related to
the settlement of shareholder litigation. For more information regarding
these pre-tax charges, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Nine Months Ended September
30, 2003 Compared to Nine Months Ended September 30, 2002--Provision for
Estimated Cost of Litigation Settlement."
(2) Due to Hanover's loss for the year ended December 31, 2002, the ratio was
less than 1:1. Hanover would have had to generate additional pre-tax
earnings of $96.8 million to achieve coverage of 1:1. During 2002, we
recorded $182.7 million in pre-tax charges. For a description of these
pre-tax charges, see footnote 27 in the notes to the consolidated financial
statements included in Hanover's Annual Report on Form 10-K for the year
ended December 31, 2002.
(3) Includes distributions on mandatorily redeemable convertible preferred
securities.
(4) The amounts that, prior to July 1, 2003, we reported as "Change in Fair
Value of Derivative Financial Instruments" in our Consolidated Statement of
Operations, have been reclassified as interest expense for the current and
prior periods.