Exterran Holdings Inc. is the global market leader in full service natural gas compression and a premier provider of sales operations maintenance fabrication service and equipment for oil and gas production processing and transportation applications. Exterran serves customers across the energy spectrum from producers to transporters to processors to storage owners. EXTERRAN HOLDINGS INC. has a market cap of $1.25 billion; its shares were traded at around $20.01 with a P/E ratio of 7.2 and P/S ratio of 0.3. EXTERRAN HOLDINGS INC. had an annual average earning growth of 8.8% over the past 10 years. Highlight of Business Operations:Given the current economic environment in North America and anticipated impact of lower natural gas prices and capital spending by customers, we expect a further reduction in demand and profitability in our business. In addition, we believe that the available supply of idle and underutilized compression equipment owned by our customers and competitors will continue to negatively impact our ability to maintain or improve our horsepower utilization and revenues in the near term. In international markets, although we expect a decline in demand for our contract operations services, we believe there will continue to be demand for our Total Solutions projects throughout Latin America and the Eastern Hemisphere although the demand has softened from prior year levels. In Venezuela, we are experiencing longer cycles of outstanding receivables, as are many other service providers. In the first quarter of 2009, we received only a minimal amount of payments on our receivables in Venezuela and we recorded an impairment in our non-consolidated affiliates in Venezuela. See Note 6 to the Condensed Consolidated Financial Statements included in Part I, Item 1 (Financial Statements) of this report for further discussion of the impairment of our non-consolidated affiliates in the first quarter of 2009 and Note 15 of the Financial Statements for further discussion of recent developments in Venezuela. As of March 31, 2009, we had assets in Venezuela of approximately $399.3 million, including receivables of $107.2 million, primarily related to projects for the Venezuelan state-owned oil company.
The decrease in revenue, cost of sales and gross margin (defined as revenue less cost of sales, excluding depreciation and amortization expense) was primarily due to lower average operating horsepower in the three months ended March 31, 2009 compared to the three months ended March 31, 2008. Revenue for the three months ended March 31, 2009 benefited from the inclusion of $6.9 million in revenues of EMIT Water Discharge Technology, LLC (EMIT), which we acquired in July 2008. Gross margin, a non-GAAP financial measure, is reconciled, in total, to net income (loss), its most directly comparable financial measure calculated, and presented in accordance with GAAP in Selected Financial Data Non-GAAP Financial Measure of this report. Gross margin decreased by only $0.1 million despite a $4.7 million decrease in revenue primarily due to a focus on managing operating costs including some benefit of savings realized as a result of synergies from the merger.
The increase in revenues in the three months ended March 31, 2009 compared to the three months ended March 31, 2008 was primarily caused by an increase of revenues in the Middle East of approximately $6.2 million, partially offset by a decrease in revenues in Mexico of approximately $4.3 million. The decrease in gross margin and gross margin percentage was primarily due to the expiration of a large job in Mexico and a $1.1 million charge recorded for an arbitration settlement related to our Colombia operations during the current year period.
The increase in revenue in the three months ended March 31, 2009 compared to the three months ended March 31, 2008 was primarily due to $20.2 million of higher revenues in our production and processing equipment fabrication product line, partially offset by a $14.1 million reduction in revenues in our compressor and accessory fabrication product line. The increase in production and processing equipment fabrication revenues was primarily due to revenues recognized on projects awarded to us in 2008, prior to the deterioration of market conditions that has led to a lower level of bookings. The decrease in compressor and accessory fabrication revenues as well as the decrease in the overall fabrication gross margin percentage in the three months ended March 31, 2009 compared to the same period in the prior year primarily relates to the deterioration of market conditions.
Read the The complete ReportEXH is in the portfolios of Seth Klarman of The Baupost Group, John Griffin, Richard Aster Jr of Meridian Fund, Richard Aster Jr of Meridian Fund, PRIMECAP Management, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.