EX-99.1 2 a2018q-18kex991.htm EXHIBIT 99.1 Exhibit



Exhibit 99.1
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Exterran Corporation Announces First Quarter 2018 Results

Quarterly Highlights Include Sustained Revenue Growth and Sequential Margin Expansion Resulting from Ongoing, Focused Productivity Initiatives

HOUSTON, May 2, 2018 - Exterran Corporation (NYSE: EXTN) (“Exterran” or the “Company”) today announced net income from continuing operations for the first quarter of 2018 of $3.9 million, or $0.11 per share, on revenue of $350.4 million. This compares to net income from continuing operations of $2.1 million, or $0.06 per share, on revenue of $337.7 million for the fourth quarter of 2017 and net loss from continuing operations of $12.3 million, or $0.35 per share, on revenue of $245.4 million for the first quarter of 2017.

Andrew Way, Exterran’s President and Chief Executive Officer commented, “Revenue was the highest reported in eight quarters as we benefited from conversion of strong 2017 product bookings and contractual recoveries in our contract operations business. In addition, first quarter product bookings rebounded as expected from fourth quarter 2017 levels, with bookings of $193.4 million.

“We are pleased with the way the year has started, coupled with what we believe will be a very strong second quarter for contract operations and product orders, provides us strong momentum as we look to the second half of the year and beyond. Product segment margins continue to improve and our commercial teams continue to work their extensive project pipelines to capture new contract operations and aftermarket opportunities.”

Net income for the first quarter of 2018 was $5.3 million. This compares to net income of $6.7 million for the fourth quarter of 2017 and net income of $20.3 million for the first quarter of 2017.

EBITDA, as adjusted, was $50.7 million for the first quarter of 2018, as compared with EBITDA, as adjusted, of $50.5 million for the fourth quarter of 2017 and $34.5 million for the first quarter of 2017.

Selling, general and administrative expenses were $44.2 million in the first quarter of 2018, as compared with $44.5 million in the fourth quarter of 2017 and $44.4 million in the first quarter of 2017.

Contract Operations Segment
Contract operations revenue in the first quarter of 2018 was $96.5 million, a 1% increase from fourth quarter of 2017 revenue of $95.3 million and a 5% increase from first quarter of 2017 revenue of $92.0 million.

Contract operations gross margin in the first quarter of 2018 was $61.1 million, unchanged from fourth quarter of 2017 gross margin of $61.1 million and slightly lower from first quarter of 2017 gross margin of $61.2 million. Gross margin percentage in the first quarter of 2018 was 63%, as compared with 64% in the fourth quarter of 2017 and 67% in the first quarter of 2017.

The sequential revenue increase was primarily due to contractual recoveries, while the sequential gross margin percentage decrease was due to an increase in project expenses which are not expected to repeat.


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Aftermarket Services Segment
Aftermarket services revenue in the first quarter of 2018 was $26.4 million, a 14% decrease from fourth quarter of 2017 revenue of $30.5 million and a 17% increase from first quarter of 2017 revenue of $22.5 million.

Aftermarket services gross margin in the first quarter of 2018 was $7.5 million, a 7% decrease from fourth quarter of 2017 gross margin of $8.1 million and a 26% increase from first quarter of 2017 gross margin of $5.9 million. Gross margin percentage in the first quarter of 2018 was 28%, as compared with 26% in the fourth quarter of 2017 and 26% in the first quarter of 2017.

The sequential decrease in aftermarket service revenue and gross margin were driven by the normal first quarter decrease in parts sales and maintenance services in the Latin America region.

Product Sales Segment
Product sales revenue in the first quarter of 2018 was $227.5 million, a 7% increase from fourth quarter of 2017 revenue of $211.9 million, and a 74% increase from first quarter of 2017 revenue of $130.9 million.

Product sales gross margin in the first quarter of 2018 was $27.2 million, an 11% increase from fourth quarter of 2017 gross margin of $24.5 million and a 140% increase from first quarter of 2017 gross margin of $11.3 million. Gross margin percentage in the first quarter of 2018 improved 40 basis points as compared to fourth quarter of 2017 and 330 basis points as compared to first quarter of 2017.

The sequential increase in revenue and gross margin was primarily due to an increase in processing and treating equipment and compression equipment sales, resulting from higher activity in the North America region. The gross margin was positively impacted as a result of a continued strong focus on productivity.

Product sales backlog was $426.9 million at March 31, 2018, as compared to $461.0 million at December 31, 2017 and $424.6 million at March 31, 2017. Product bookings for the first quarter of 2018 were $193.4 million, resulting in a book-to-bill ratio of 85%. This compares to bookings of $113.0 million for the fourth quarter of 2017 and bookings of $249.2 million for the first quarter of 2017.

Sale of PEQ Assets
On April 17, 2018, the Company entered into a definitive agreement for the sale of its North America production equipment manufacturing facility and associated inventory to Titan Production Equipment Acquisition, LLC, an affiliate of Castle Harlan, Inc. The sale is not expected to have a material financial impact to the Company, and it allows Exterran to accelerate its growth strategy by focusing as a systems and process company for oil, gas, water and power. The Company will continue to manufacture production equipment outside of North America. In addition, Exterran will continue to offer its customers complete solutions in gas gathering, processing, treating and compression, including offering production equipment in North America through Titan.


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Conference Call Information
The Company will host a conference call at 10 a.m. Central Time on Thursday, May 3, 2018. The call can be accessed from the Companys website at www.exterran.com or by telephone at 877-524-8416. For those who cannot listen to the live call, a telephonic replay will be available through Thursday, May 10, 2018 and may be accessed by calling 877-660-6853 and using the pass code 13679034.

For information, contact:
Dave Barta, Chief Financial Officer, 281-836-7825
Or visit www.exterran.com

About Exterran Corporation
Exterran Corporation (NYSE: EXTN) is a global systems and process company offering solutions in the oil, gas, water and power markets. We are a market leader in natural gas processing and treatment and compression products and services, providing critical midstream infrastructure solutions to customers throughout the world. Exterran Corporation is headquartered in Houston, Texas and operates in approximately 30 countries.

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Non-GAAP and Other Financial Information
Gross Margin is defined as revenue less cost of sales (excluding depreciation and amortization expense). Gross margin percentage is defined as gross margin divided by revenue. The Company evaluates the performance of its segments based on gross margin for each segment.

EBITDA, as adjusted, a non-GAAP measure, is defined as net income (loss) excluding income (loss) from discontinued operations (net of tax), cumulative effect of accounting changes (net of tax), income taxes, interest expense (including debt extinguishment costs), depreciation and amortization expense, impairment charges, restructuring and other charges, non-cash gains or losses from foreign currency exchange rate changes recorded on intercompany obligations, expensed acquisition costs and other items. EBITDA, as adjusted, excludes the benefit of the two previously announced sales of our Venezuelan assets.

Adjusted net income (loss) from continuing operations and diluted adjusted net income (loss) from continuing operations per common share, non-GAAP measures, are defined as net income (loss) and earnings per share, excluding the impact of income (loss) from discontinued operations (net of tax), cumulative effect of accounting changes (net of tax), impairment charges (net of tax), restructuring and other charges (net of tax), the benefit of the previously announced sale of our joint ventures’ Venezuelan assets, the effect of income tax adjustments that are outside of the Company’s anticipated effective tax rates and other items.

See tables below for additional information concerning non-GAAP financial information, including a reconciliation of the non-GAAP financial information presented in this press release to the most directly comparable financial information presented in accordance with GAAP. Non-GAAP financial information supplements should be read together with, and are not an alternative or substitute for, the Company’s financial results reported in accordance with GAAP. Because non-GAAP financial information is not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names.


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Forward-Looking Statements
All statements in this release (and oral statements made regarding the subjects of this release) other than historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements may include words such as “guidance,” “anticipate,” “estimate,” “expect,” “forecast,” “project,” “plan,” “intend,” “believe,” “confident,” “may,” “should,” “can have,” “likely,” “future” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. Examples of forward-looking information in this release include, but are not limited to: Exterran’s financial and operational strategies and ability to successfully effect those strategies; Exterran’s expectations regarding future economic and market conditions; Exterran’s financial and operational outlook and ability to fulfill that outlook; demand for Exterran’s products and services and growth opportunities for those products and services; and statements regarding industry activity levels and infrastructure build-out opportunities.

These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside Exterrans control, which could cause actual results to differ materially from such statements. As a result, any such forward-looking statements are not guarantees of future performance or results. While Exterran believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. Among the factors that could cause results to differ materially from those indicated by such forward-looking statements are: local, regional, national and international economic conditions and the impact they may have on Exterran and its customers; Exterran’s reduced profit margins or loss of market share resulting from competition or the introduction of competing technologies by other companies; Exterran’s ability to secure new oil and gas product sales customers; conditions in the oil and gas industry, including a sustained imbalance in the level of supply or demand for oil or natural gas or a sustained low price of oil or natural gas; Exterran’s ability to timely and cost-effectively execute projects; Exterran enhancing its asset utilization, particularly with respect to its fleet of compressors; Exterran’s ability to integrate acquired businesses; employment and workforce factors, including the ability to hire, train and retain key employees; Exterran’s ability to accurately estimate costs and time required under Exterran’s fixed price contracts; liability related to the use of Exterran’s products and services; changes in political or economic conditions in key operating markets, including international markets; changes in current exchange rates, including the risk of currency devaluations by foreign governments, and restrictions on currency repatriation; risks associated with Exterran’s operations, such as equipment defects, equipment malfunctions and natural disasters; any non-performance by third parties of their contractual obligations, including the financial condition of our customers; changes in safety, health, environmental and other regulations; the effectiveness of Exterran’s internal controls going forward, including the existence of any control deficiencies identified in the future; the results of governmental actions relating to pending investigations, including Exterrans pending Securities and Exchange Commission investigation; the results of any shareholder actions relating to the restatement of Exterran’s financial statements; the effect of the agreements related to Exterran’s spin-off, and the anticipated effects of restructuring its business; and Exterran’s indebtedness and its ability to fund its operations, capital commitments and other contractual cash obligations, including our debt obligations.

These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in Exterran’s Annual Report on Form 10-K for the year ended December 31, 2017, and other filings with the Securities and Exchange Commission available on the Securities and Exchange Commission’s website www.sec.gov. A discussion of these risks is expressly incorporated by reference into this release. Except as required by law, Exterran expressly disclaims any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events or otherwise.

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EXTERRAN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
March 31,
 
December 31,
 
March 31,
 
 
2018
 
2017
 
2017
Revenues:
 
 
 
 
 
 
Contract operations
 
$
96,493

 
$
95,322

 
$
92,045

Aftermarket services
 
26,371

 
30,496

 
22,524

Product sales
 
227,519

 
211,871

 
130,856

 
 
350,383

 
337,689

 
245,425

Costs and expenses:
 
 
 
 
 
 
Cost of sales (excluding depreciation and amortization expense):
 
 
 
 
 
 
Contract operations
 
35,385

 
34,251

 
30,798

Aftermarket services
 
18,897

 
22,428

 
16,612

Product sales
 
200,336

 
187,372

 
119,537

Selling, general and administrative
 
44,242

 
44,463

 
44,411

Depreciation and amortization
 
31,029

 
29,714

 
24,752

Long-lived asset impairment
 
1,804

 
5,700

 

Restatement related charges
 
621

 
408

 
2,172

Restructuring and other charges
 

 
154

 
2,308

Interest expense
 
7,219

 
7,497

 
7,087

Other (income) expense, net
 
1,420

 
537

 
(1,819
)
 
 
340,953

 
332,524

 
245,858

Income (loss) before income taxes
 
9,430

 
5,165

 
(433
)
Provision for income taxes
 
5,492

 
3,082

 
11,890

Income (loss) from continuing operations
 
3,938

 
2,083

 
(12,323
)
Income from discontinued operations, net of tax
 
1,399

 
4,579

 
32,644

Net income
 
$
5,337

 
$
6,662

 
$
20,321

 
 
 
 
 
 
 
Basic net income per common share:
 
 
 
 
 
 
Income (loss) from continuing operations per common share
 
$
0.11

 
$
0.06

 
$
(0.35
)
Income from discontinued operations per common share
 
0.04

 
0.12

 
0.93

Net income per common share
 
$
0.15

 
$
0.18

 
$
0.58

 
 
 
 
 
 
 
Diluted net income per common share:
 
 
 
 
 
 
Income (loss) from continuing operations per common share
 
$
0.11

 
$
0.06

 
$
(0.35
)
Income from discontinued operations per common share
 
0.04

 
0.12

 
0.93

Net income per common share
 
$
0.15

 
$
0.18

 
$
0.58

 
 
 
 
 
 
 
Weighted average common shares outstanding used in net income per common share:
 
 
 
 
 
 
Basic
 
35,301

 
35,101

 
34,850

Diluted
 
35,373

 
35,179

 
34,850



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EXTERRAN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
 
 
 
March 31, 2018
 
December 31, 2017
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
17,336

 
$
49,145

Restricted cash
546

 
546

Accounts receivable, net
237,211

 
266,052

Inventory, net
141,219

 
107,909

Costs and estimated earnings in excess of billings on uncompleted contracts

 
40,695

Contract assets
78,941

 

Other current assets
33,058

 
38,707

Current assets held for sale
16,604

 
15,761

Current assets associated with discontinued operations
17,781

 
23,751

Total current assets
542,696

 
542,566

Property, plant and equipment, net
837,528

 
822,279

Deferred income taxes
13,175

 
10,550

Intangible and other assets, net
98,118

 
76,980

Long-term assets held for sale
4,422

 
4,732

Long-term assets associated with discontinued operations
3,648

 
3,700

Total assets
$
1,499,587

 
$
1,460,807

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
Current liabilities:
 
 
 
Accounts payable, trade
$
177,718

 
$
148,744

Accrued liabilities
108,632

 
114,336

Deferred revenue

 
23,902

Billings on uncompleted contracts in excess of costs and estimated earnings

 
89,565

Contract liabilities
107,447

 

Current liabilities associated with discontinued operations
21,511

 
31,971

Total current liabilities
415,308

 
408,518

Long-term debt
386,580

 
368,472

Deferred income taxes
8,928

 
9,746

Long-term deferred revenue

 
92,485

Long-term contract liabilities
87,596

 

Other long-term liabilities
42,965

 
20,272

Long-term liabilities associated with discontinued operations
6,759

 
6,528

Total liabilities
948,136

 
906,021

Total stockholders’ equity
551,451

 
554,786

Total liabilities and stockholders’ equity
$
1,499,587

 
$
1,460,807



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EXTERRAN CORPORATION
UNAUDITED SUPPLEMENTAL INFORMATION
(In thousands, except percentages)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
March 31,

December 31,

March 31,
 
 
2018

2017

2017
Revenues:
 
 
 
 
 
 
Contract operations
 
$
96,493

 
$
95,322

 
$
92,045

Aftermarket services
 
26,371

 
30,496

 
22,524

Product sales
 
227,519

 
211,871

 
130,856

 
 
$
350,383

 
$
337,689

 
$
245,425

 
 
 
 
 
 
 
Gross margin:
 
 
 
 
 
 
Contract operations
 
$
61,108

 
$
61,071

 
$
61,247

Aftermarket services
 
7,474

 
8,068

 
5,912

Product sales
 
27,183

 
24,499

 
11,319

Total
 
$
95,765

 
$
93,638

 
$
78,478

 
 
 
 
 
 
 
Gross margin percentage:
 
 
 
 
 
 
Contract operations
 
63
%
 
64
%
 
67
%
Aftermarket services
 
28
%
 
26
%
 
26
%
Product sales
 
12
%
 
12
%
 
9
%
Total
 
27
%
 
28
%
 
32
%
 
 
 
 
 
 
 
Selling, general and administrative
 
$
44,242

 
$
44,463

 
$
44,411

% of revenue
 
13
%
 
13
%
 
18
%
 
 
 
 
 
 
 
EBITDA, as adjusted
 
$
50,733

 
$
50,501

 
$
34,535

% of revenue
 
14
%
 
15
%
 
14
%
 
 
 
 
 
 
 
Capital expenditures
 
$
49,219

 
$
52,551

 
$
20,590

Less: Proceeds from sale of PP&E
 
(2,260
)
 
(1,557
)
 
(2,584
)
Net Capital expenditures
 
$
46,959

 
$
50,994

 
$
18,006

 
 
 
 
 
 
 
 
 
March 31,
 
December 31,
 
March 31,
 
 
2018
 
2017
 
2017
 
 
 
 
 
 
 
Product Sales Backlog:
 
 
 
 
 
 
Compression equipment
 
$
206,252

 
$
254,745

 
$
221,994

Processing and treating equipment
 
199,122

 
178,814

 
143,562

Production equipment
 
9,481

 
14,138

 
36,126

Other product sales
 
12,041

 
13,349

 
22,872

Total product sales backlog
 
$
426,896

 
$
461,046

 
$
424,554


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EXTERRAN CORPORATION
UNAUDITED NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
March 31,
 
December 31,
 
March 31,
 
 
2018
 
2017
 
2017
Non-GAAP Financial Information—Reconciliation of Income (loss) before income taxes to Total gross margin:
 
 
 
 
 
 
Income (loss) before income taxes
 
$
9,430

 
$
5,165

 
$
(433
)
Selling, general and administrative
 
44,242

 
44,463

 
44,411

Depreciation and amortization
 
31,029

 
29,714

 
24,752

Long-lived asset impairment
 
1,804

 
5,700

 

Restatement related charges
 
621

 
408

 
2,172

Restructuring and other charges
 

 
154

 
2,308

Interest expense
 
7,219

 
7,497

 
7,087

Other (income) expense, net
 
1,420

 
537

 
(1,819
)
Total gross margin (1)
 
$
95,765

 
$
93,638

 
$
78,478

 
 
 
 
 
 
 
Non-GAAP Financial Information—Reconciliation of Net income to EBITDA, as adjusted:
 
 
 
 
 
 
Net income
 
$
5,337

 
$
6,662

 
$
20,321

Income from discontinued operations, net of tax
 
(1,399
)
 
(4,579
)
 
(32,644
)
Depreciation and amortization
 
31,029

 
29,714

 
24,752

Long-lived asset impairment
 
1,804

 
5,700

 

Restatement related charges
 
621

 
408

 
2,172

Restructuring and other charges
 

 
154

 
2,308

Interest expense
 
7,219

 
7,497

 
7,087

(Gain) loss on currency exchange rate remeasurement of intercompany balances
 
630

 
1,957

 
(1,462
)
Loss on sale of business
 

 

 
111

Penalties from Brazilian tax programs
 

 
(94
)
 

Provision for income taxes
 
5,492

 
3,082

 
11,890

EBITDA, as adjusted (2)
 
$
50,733

 
$
50,501

 
$
34,535

 
 
 
 
 
 
 
Non-GAAP Financial Information—Reconciliation of Net income to Adjusted net income (loss) from continuing operations:
 
 
 
 
 
 
Net income
 
$
5,337

 
$
6,662

 
$
20,321

Income from discontinued operations, net of tax
 
(1,399
)
 
(4,579
)
 
(32,644
)
Income (loss) from continuing operations
 
3,938

 
2,083

 
(12,323
)
Adjustment for items:
 
 
 
 
 
 
Long-lived asset impairment
 
1,804

 
5,700

 

Restatement related charges
 
621

 
408

 
2,172

Restructuring and other charges
 

 
154

 
2,308

Loss on sale of business
 

 

 
111

Penalties from Brazilian tax programs
 

 
(94
)
 

Interest expense from Brazilian tax programs
 

 
(47
)
 

Tax impact of adjustments (3)
 

 
22

 
(104
)
Income tax benefit from Brazilian tax programs
 

 
(400
)
 

Income tax benefit from U.S. and Argentina tax reforms
 

 
(8,708
)
 

Adjusted net income (loss) from continuing operations (4)
 
$
6,363

 
$
(882
)
 
$
(7,836
)
 
 
 
 
 
 
 
Diluted income (loss) from continuing operations per common share
 
$
0.11

 
$
0.06

 
$
(0.35
)
Adjustment for items, after-tax, per diluted common share
 
0.07

 
(0.09
)
 
0.13

Diluted adjusted net income (loss) from continuing operations per common share (4) (5)
 
$
0.18

 
$
(0.03
)
 
$
(0.22
)
 
 
 
 
 
 
 
(1) Management evaluates the performance of each of the Company’s segments based on gross margin. Total gross margin, a non-GAAP measure, is included as a supplemental disclosure because it is a primary measure used by our management to evaluate the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key components of our operations. Management believes total gross margin is important supplemental information for investors because it focuses on the current performance of our operations and excludes the impact of the prior historical costs of the assets acquired or constructed that are utilized in those operations, the indirect costs associated with our SG&A activities, the impact of our financing methods, restatement related charges, restructuring and other charges and income taxes. In addition, the inclusion of depreciation and amortization expense may not accurately reflect the costs required to maintain and replenish the operational usage of our assets and therefore may not portray the costs from current operating activity.
 
(2) Management believes EBITDA, as adjusted, is an important measure of operating performance because it allows management, investors and others to evaluate and compare our core operating results from period to period by removing the impact of our capital structure (interest expense from outstanding debt), asset base (depreciation and amortization), our subsidiaries’ capital structure (non-cash gains or losses from foreign currency exchange rate changes on intercompany obligations), tax consequences, impairment charges, restatement related charges, restructuring and other charges, expensed acquisition costs and other items. Management uses EBITDA, as adjusted, as supplemental measures to review current period operating performance, comparability measures and performance measures for period to period comparisons. In addition, the Company's compensation committee has used EBITDA, as adjusted, in evaluating the performance of the Company and management and in evaluating certain components of executive compensation, including performance-based annual incentive programs.
 
 
 
 
 
 
 
(3) The tax impacts of adjustments were based on the Company’s statutory tax rates applicable to each item in the appropriate taxing jurisdictions. Using statutory tax rates for presentation of the non-GAAP measures allows a consistent basis for investors to understand financial performance of the Company across historical periods. The overall effective tax rate on adjustments was impacted by the inability to recognize tax benefits from charges in jurisdictions that are in cumulative-loss positions.
 
 
 
 
 
 
 
(4) Management believes adjusted net income (loss) from continuing operations and diluted adjusted net income (loss) from continuing operations per common share provide useful information to investors because it allows management, investors and others to evaluate and compare our core operating results from period to period by removing the impact of impairment charges, restructuring and other charges, restatement related charges, expensed acquisition costs and other items not appropriately reflective of our core business.
 
 
 
 
 
 
 
(5) Diluted adjusted net income (loss) from continuing operations per common share, was computed using the two-class method to determine the net income (loss) per share for each class of common stock and participating security (restricted stock and certain of our stock settled restricted stock units) according to participation rights in undistributed earnings. Accordingly, we have excluded adjusted net income from continuing operations attributable to participating securities of $0.2 million for the three months ended March 31, 2018 from our calculation of diluted adjusted net income from continuing operations per common share.


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