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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 21, 2001 (February 9, 2001)
UNIVERSAL COMPRESSION HOLDINGS, INC.
UNIVERSAL COMPRESSION, INC.
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(Exact names of registrants as specified in their charters)
DELAWARE 001-15843 13-3989167
TEXAS 333-48279 74-1282680
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(States or other jurisdictions (Commission File (IRS Employer
of incorporation) Numbers) Identification Nos.)
4440 BRITTMOORE ROAD, HOUSTON, TEXAS 77041
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(Address of principal executive offices) (Zip Code)
(713) 335-7000
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(Registrants' telephone number, including area code)
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Item 1. Changes in Control of Registrant
On February 9, 2001, Universal Compression Holdings, Inc., a Delaware
corporation (the "Company"), completed its acquisition of Weatherford Global
Compression Services, L.P. and related entities ("Weatherford Global") through a
merger (the "Merger") of Enterra Compression Company, a Delaware corporation
("Enterra"), with and into Universal Compression, Inc., a Texas corporation and
wholly-owned operating subsidiary of the Company ("UCI"), pursuant to the
Agreement and Plan of Merger dated October 23, 2000 (the "Merger Agreement") by
and among the Company, UCI, Enterra, WEUS Holding, Inc., a Delaware corporation
and the parent of Enterra ("WEUS"), and Weatherford International, Inc., a
Delaware corporation and the parent of WEUS ("Weatherford"). In consideration
for the Merger, WEUS received 13,750,000 shares of newly issued restricted
common stock of the Company, par value $.01 per share, which represents
approximately 48% of the Company's outstanding common stock. The Company issued
a press release on February 12, 2001 announcing the completion of the Merger, a
copy of which is filed herewith as Exhibit 99.1.
In connection with the Merger, WEUS and the Company have entered into a
Voting Agreement pursuant to which WEUS has agreed to limit its voting power to
33 1/3% of the Company's outstanding common stock until the earlier of two years
from the closing of the Merger or the date that Castle Harlan Partners III, L.P.
and its affiliates ("Castle Harlan") own less than 5% of the Company's
outstanding common stock. Prior to the Merger, Castle Harlan owned approximately
22% of the outstanding common stock of the Company and had the right to vote
approximately 38% of the outstanding shares. Following the Merger, Castle Harlan
owns approximately 11% of the outstanding common stock of the Company and has
voting control over approximately 20% of the Company's outstanding shares.
Pursuant to the terms of the Merger Agreement, the size of the
Company's Board of Directors has been increased from eight to eleven members as
a result of WEUS's right to designate three Board members. Effective upon
consummation of the Merger, the Company appointed the following WEUS designees
to its Board: Uriel E. Dutton, who will serve as a Class A director, with his
term of office expiring at the 2001 annual meeting of the Company's
shareholders; Curtis W. Huff, who will serve as a Class B director, with his
term of office expiring at the 2002 annual meeting of shareholders; and Bernard
J. Duroc-Danner, who will serve as a Class C director, with his term of office
expiring at the 2003 annual meeting of shareholders. These nominees will stand
for election to the Board at the Company's next succeeding annual meeting of
shareholders following the expiration of their respective term of office. As
long as WEUS and its affiliates own at least 20% of the Company's outstanding
common stock, WEUS has the right to designate three Board members. If WEUS's
ownership interest falls below 20%, WEUS may designate only two directors, and
if WEUS's ownership falls below 10%, WEUS will no longer be entitled to
designate directors to serve on the Company's Board.
In connection with the Merger, the Company entered into a Registration
Rights Agreement with WEUS which provides certain demand and piggyback
registration rights to
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WEUS. Under the terms of the agreement, WEUS may, at any time on up to three
occasions, require the Company to prepare and file a registration statement to
register shares of its common stock by providing a written demand for the
registration of shares with an aggregate market value of at least $20 million in
an underwritten offering, or at least $5 million in a non-underwritten offering.
The agreement provides that the Company must use its reasonable best efforts to
register the requested shares as soon as possible after the receipt of such
notice. In addition, at any time, WEUS may request to have its shares included
in any registration statement with respect to any proposed public offering by
the Company or other holders of the Company's common stock.
Weatherford Global also entered into a Transitional Services Agreement
pursuant to which Weatherford will continue to provide certain corporate and
administrative services including information technology, management information
systems and accounting support, to Weatherford Global for a fee for up to 120
days following the Merger.
Copies of the Voting Agreement, the Registration Rights Agreement and
the Transitional Services Agreement are listed as Exhibits 4.1, 4.3 and 10.1,
respectively (collectively, the "Related Agreements").
Item 2. Acquisition or Disposition of Assets.
Pursuant to the Merger Agreement, the Company acquired Enterra and its
subsidiaries, which engage in gas compression service operations in the United
States and abroad, from WEUS in exchange for 13,750,000 restricted shares of the
Company's common stock. Weatherford retained its recently acquired
Singapore-based operations and $10 million in accounts receivable. Immediately
prior to the Merger, Enterra acquired the interest of General Electric Capital
Corporation ("GE Capital") in Weatherford Global, and as a result of the Merger,
Weatherford Global has become an indirect, wholly-owned subsidiary of the
Company. The Company acquired the plant, equipment and other physical property
of Enterra and its subsidiaries, including Weatherford Global, and intends to
continue to use these assets in the gas compression business to the extent
practicable. For purposes of determining the amount of consideration to be paid
in the Merger, the 13,750,000 shares of the Company's common stock was valued at
$28.56 per share, which is the five-day average closing price surrounding
October 24, 2000, the announcement date of the Weatherford Global acquisition.
In addition, the Company assumed indebtedness of Weatherford Global, including
operating leases, of approximately $323 million.
Item 5. Other Events
At a special meeting of the shareholders of the Company held on
February 9, 2001 for the purpose of approving the issuance of shares in
connection with the Merger, the shareholders of the Company also approved
Amendment Number Three to the Company's Incentive Stock Option Plan (the "Option
Plan Amendment"), which increased the number of shares of the Company's common
stock authorized for issuance under the Incentive Stock Option Plan from
1,912,421 to 3,012,421 shares. This increase includes shares sufficient to cover
options issued to the employees the Company received as a result of the Merger.
The Option Plan Amendment is listed as Exhibit 4.4.
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In connection with the Merger, the Company has refinanced substantially
all of its and Weatherford Global's indebtedness and operating lease obligations
through various financing arrangements which were consummated simultaneously
with the Merger. The Company raised $427 million under a new operating lease
facility funded primarily through the offering of $350 million of 8 7/8% Senior
Secured Notes due 2008 by an unaffiliated entity (the "SSN Operating Lease
Facility"). The Company has also entered into a new $125 million secured
revolving credit facility (the "Revolving Credit Facility") and a new $200
million asset-backed securitization operating lease facility ("the "ABS
Operating Lease Facility"). As of the consummation of the Merger, the Company
funded approximately $80 million under the ABS Operating Lease Facility and had
no amounts outstanding under the new revolving credit facility. The proceeds
from the two new operating lease facilities were used to restructure existing
operating lease obligations and refinance certain existing indebtedness of the
Company and Weatherford Global.
Following the Merger and the related financing transactions, the
Company had approximately $198 million outstanding under its 9 7/8% Senior
Discount Notes due 2008 and approximately $13 million of other indebtedness. In
addition, the Company has funded approximately $427 million under the SSN
Operating Lease Facility and approximately $80 million under the ABS Operating
Lease Facility. The Company currently has unused commitments of approximately
$245 million (approximately $120 million under the ABS Operating Lease Facility
and $125 million under the Revolving Credit Facility).
The financing documents are listed as Exhibits 4.2 and 10.2 through
10.12 (collectively, the "Financing Documents").
The Related Agreements, the Option Plan Amendment, the Financing
Documents and the press release are incorporated into Items 1, 2 and 5 by
reference and the foregoing descriptions of such documents and the transactions
contemplated thereby are qualified in their entirety by reference to such
exhibits.
As part of the effort to achieve the cost synergies previously
disclosed, the Company has announced the closing of its facilities in Traverse
City, Michigan, Mineral Wells, Texas and Grand Junction, Colorado. In addition,
the Company expects to close the Weatherford Global facility in Corpus Christi,
Texas sometime this year.
One of the selling shareholders under the Company's existing shelf
registration statement, Michael Pahl, has resigned as an employee of the
Company. Mr. Pahl is a former officer and shareholder of Gas Compression
Services, Inc. ("GCSI"), which the Company acquired on September 15, 2000. The
shelf registration statement was filed pursuant to the terms of a registration
rights agreement with respect to the registration of the resale of shares of the
Company's common stock received by Mr. Pahl in the GCSI acquisition.
Statements about the Company's outlook and all other statements in this
release other than historical facts are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. 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 out of Universal's control, that could cause actual results to differ
materially from such statements. While it Universal believes that the assumption
concerning future events are reasonable, it cautions that there are inherent
difficulties in predicting certain important factors that could impact future
performance and the successful integration of the business. Such risks and
uncertainties include, but are not limited to, (1) competition among the various
providers of contract compression services, (2) conditions in the oil and gas
industry, including the demand for natural gas as well as impacts from the price
of natural gas and oil, (3) failure to consummate acquisitions and integrate
acquired businesses, (4) changes in safety and environmental regulations
pertaining to the production and transportation of natural gas, (5) changes in
economic or political conditions in the markets in which the Company operates,
(6)
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introduction of competing technologies by other companies, (7) the ability to
retain and grow the customer base, (8) employment workforce factors, including
loss of key employees, and (9) liability claims related to the use of the
products and services. These factors, when applicable, are discussed in the
Company's filings with the Securities and Exchange Commission, copies of which
are available to the public. The Company disclaims any intention or obligation
to revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
The financial statements of Enterra, Weatherford Compression
(Weatherford's compression business prior to formation of the Weatherford Global
joint venture in February 1999) and Global Compression Holdings, Inc. (GE
Capital's compression business prior to formation of the Weatherford Global
joint venture in February 1999) are incorporated by reference from the Company's
Definitive Proxy Statement dated December 27, 2000.
(b) Pro Forma Financial Information
The following unaudited pro forma consolidated condensed financial
statements are filed with this report:
(i) Unaudited Pro Forma Combined Condensed Balance Sheet as of
September 30, 2000;
(ii) Unaudited Pro Forma Combined Statement of Operations for
the Six Months Ended September 30, 2000;
(iii) Unaudited Pro Forma Combined Statement of Operations for
the Year Ended March 31, 2000; and
(iv) Unaudited Pro Forma Combined Statement of Operations for
the Twelve Months Ended September 30, 2000.
(c) Exhibits
Exhibit No. Description
2.1 Agreement and Plan of Merger dated as of October 23, 2000 by
and among Universal Compression Holdings, Inc., Universal
Compression, Inc., Weatherford International, Inc., WEUS
Holding, Inc. and Enterra Compression Company (incorporated by
reference to Exhibit 10.1 to Universal Compression Holdings,
Inc.'s Current Report on Form 8-K filed with the Securities
and Exchange Commission on October 28, 2000).
4.1 Voting Agreement dated as of February 9, 2001 by and among
Weatherford International, Inc., WEUS Holdings, Inc. and
Universal
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Compression Holdings, Inc. (incorporated by reference to
Exhibit 4.1 to Universal Compression Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended December
31, 2000).
4.2 Registration Rights Agreement with respect to the 8?% Senior
Secured Notes, dated as of February 9, 2001, among BRL
Universal Equipment 2001 A, L.P., BRL Universal Equipment
Corp., Universal Compression Holdings, Inc., Universal
Compression, Inc., Deutsche Banc Alex. Brown Inc., First Union
Securities, Inc., Goldman Sachs & Co., Banc One Capital
Markets, Inc. and Scotia Capital (USA), Inc. (incorporated by
reference to Exhibit 4.2 to Universal Compression Holdings,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
December 31, 2000).
4.3 Registration Rights Agreement dated as of February 9, 2001 by
and among WEUS Holding, Inc. and Universal Compression
Holdings, Inc. (incorporated by reference to Exhibit 4.3 to
Universal Compression Holdings, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended December 31, 2000).
4.4 Amendment Number Three to Universal Compression Holdings, Inc.
Incentive Stock Option Plan, dated November 27, 2000
(incorporated by reference to Exhibit 4.7 to Universal
Compression Holdings, Inc.'s Registration Statement on Form
S-8 filed on February 9, 2001).
10.1 Transitional Services Agreement dated as of February 9, 2001
by and among Weatherford International, Inc. and Weatherford
Global Compression Services, L.P. (incorporated by reference
to Exhibit 10.1 to Universal Compression Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended December
31, 2000).
10.2 Form of Equipment Lease Agreement with respect to the senior
secured notes operating lease facility, dated as of February
9, 2001, between BRL Universal Equipment 2001 A, L.P., as
Lessor, and Universal Compression, Inc., as Lessee
(incorporated by reference to Exhibit 10.2 to Universal
Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 2000).
10.3 Form of Participation Agreement, dated as of February 9, 2001,
among Universal Compression, Inc., as Lessee, Universal
Compression Holdings, Inc., as Guarantor, BRL Universal
Compression Equipment 2001 A, L.P., as Lessor, Bankers Trust
Company and the other financial institutions listed on the
signature pages as Tranche B Lenders, The Bank of New York,
not in its individual capacity but as Indenture Trustee,
Paying Agent, Transfer Agent and Registrar for the Tranche A
Noteholders, BRL Universal Equipment Management, Inc., as
Lessor General Partner, Bankers Trust Company, as
Administrative Agent and Collateral Agent
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for Tranche B Lenders and Indenture Trustee on behalf of the
Tranche A Noteholders, Deutsche Banc Alex. Brown Inc., as
Arranger, The Bank of Nova Scotia, as Syndicate Agent for
Tranche B Lenders, Bank One, N.A., as Documentation Agent for
Tranche B Lenders, and First Union National Bank, as Managing
Agent (incorporated by reference to Exhibit 10.3 to Universal
Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 2000).
10.4 Indenture with respect to the 8 7/8% Senior Secured Notes due
2008, dated as of February 9, 2001, among BRL Universal
Equipment 2001 A, L. P. and BRL Universal Equipment Corp., as
Issuers, and The Bank of New York, as Indenture Trustee
(incorporated by reference to Exhibit 10.4 to Universal
Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 2000).
10.5 Form of Tranche B Loan Agreement, dated as of February 9,
2001, among BRL Universal Equipment 2001 A, L.P., as Borrower,
Bankers Trust Company, as Administrative Agent and Collateral
Agent, and The Tranche B Lenders Party Hereto, as Tranche B
Lenders (incorporated by reference to Exhibit 10.5 to
Universal Compression Holdings, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended December 31, 2000).
10.6 Form of Master Lease Agreement, with respect to the ABS
operating lease facility, dated as of February 9, 2001,
between BRL Universal Compression Funding I, L.P., as Head
Lessor and UCO Compression LLC, as Head Lessee (incorporated
by reference to Exhibit 10.6 to Universal Compression
Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended December 31, 2000).
10.7 Senior Secured Revolving Credit Agreement, dated as of
February 9, 2001, among Universal Compression, Inc., as
Borrower, First Union National Bank, as Administrative Agent,
Bank One, N.A., as Syndication Agent, and the lenders
signatory hereto (incorporated by reference to Exhibit 10.7 to
Universal Compression Holdings, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended December 31, 2000).
10.8 Guaranty and Collateral Agreement made by Universal
Compression Holdings, Inc. and Universal Compression, Inc. and
in favor of First Union National Bank, as Administrative
Agent, dated as of February 9, 2001 (incorporated by reference
to Exhibit 10.8 to Universal Compression Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended December
31, 2000).
10.9 Security Agreement (Pledge and Assignment), dated as of
February 9, 2001, between Universal Compression International,
Inc. and First Union
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National Bank, as Administrative Agent (incorporated by
reference to Exhibit 10.9 to Universal Compression Holdings,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
December 31, 2000).
10.10 Form of Indenture, dated as of February 9, 2001, between BRL
Universal Compression Funding I, L.P., Issuer, and Wells Fargo
Bank Minnesota, National Association, Indenture Trustee
(incorporated by reference to Exhibit 10.10 to Universal
Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 2000).
10.11 Form of Series 2001-1 Supplement, dated as of February 9,
2001, to Indenture dated as of February 9, 2001, between BRL
Universal Compression Funding I, L.P., Issuer, and Wells Fargo
Bank Minnesota, National Association, Indenture Trustee
(incorporated by reference to Exhibit 10.11 to Universal
Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 2000).
10.12 Engagement and Indemnity Letter, dated February 9, 2001, among
Universal Compression, Inc., Universal Compression Holdings,
Inc., Deutsche Banc Alex. Brown Inc., First Union Securities,
Inc., Goldman Sachs & Co., Banc One Capital Markets, Inc.,
Scotia Capital (USA), Inc., BRL Universal Equipment 2001 A,
L.P., and BRL Universal Equipment Corp (incorporated by
reference to Exhibit 10.12 to Universal Compression Holdings,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
December 31, 2000).
99.1* Press Release of Universal Compression Holdings, Inc. dated
February 12, 2001.
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* Filed herewith
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
UNIVERSAL COMPRESSION HOLDINGS, INC.
UNIVERSAL COMPRESSION, INC.
(Registrants)
Date: February 21, 2001 By: /s/ RICHARD W. FITZGERALD
-----------------------------------------
Richard W. FitzGerald
Senior Vice President and Chief Financial
Officer
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial
statements are based on the historical consolidated financial statements and the
notes thereto of the Company (also referred to as "Universal" and "UCH") and
Weatherford Global (also referred to as "WGC" and "Enterra") and have been
prepared to illustrate the effect of the Weatherford Global acquisition and the
related financing transactions. The unaudited pro forma combined condensed
financial statements should be read in conjunction with the historical financial
statements and accompanying disclosures incorporated by reference into this
Current Report on Form 8-K and with the Company's historical financial
statements and accompany disclosures contained in the Company's filings made
pursuant to the Securities and Exchange Act of 1934, as amended.
The unaudited pro forma combined condensed balance sheet as of
September 30, 2000 and the unaudited pro forma combined condensed statements of
operations for the six months ended September 30, 2000 and the fiscal year ended
March 31, 2000 have been prepared to give effect to the transactions set forth
below as if those transactions had occurred at the balance sheet date and at the
beginning of the income statement periods. Because the fiscal years of UCH and
WGC differ, WGC's historical operating results for the fiscal year ended March
31, 2000 include its first quarter results of 2000, combined with its results
for the nine months ended December 31, 1999.
The unaudited pro forma combined condensed financial statements
presented herein give effect to:
o UCH's initial public offering of its common stock and
concurrent debt restructuring and operating lease facility,
which occurred in May 2000, as well as UCH's common stock
split and conversion of its preferred stock and non-voting
common stock that occurred concurrently with the initial
public offering;
o the transfer of WGC's Singapore-based operations and related
assets to Weatherford entities other than Enterra and its
subsidiaries prior to the WGC acquisition; and
o completion of the WGC acquisition and the related financing
transactions, including the SSN Operating Lease Facility and
ABS Operating Lease Facility.
The unaudited pro forma combined condensed financial statements do not
give effect to the Company's acquisition of GCSI, which was completed September
15, 2000 and related cost savings or the cost savings and synergies that
Universal's management expects to realize as a result of the WGC acquisition.
The unaudited pro forma combined condensed financial statements presented below
do not reflect future events that may occur after the WGC acquisition.
We have accounted for the WGC acquisition using the purchase method of
accounting. WGC's property, plant and equipment balances have been adjusted to
their estimated fair values. In addition, WGC's reported current assets and
current liabilities are assumed to be their estimated fair values included in
the unaudited pro forma combined condensed financial statements. The final
allocation of the purchase price of the merger will differ from the amounts
represented in the unaudited pro forma combined condensed financial statements.
The unaudited pro forma combined condensed financial statements are
provided for informational purposes only and do not purport to represent what
the Company's financial position or results of operations would actually have
been had the WGC acquisition occurred on such dates or to project the Company's
results of operations or financial position for any future period.
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UNIVERSAL COMPRESSION HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
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ENTERRA
ADJUSTED MERGER PRO FORMA AS
UCH ACTUAL ACTUAL(1) ADJUSTMENTS ADJUSTED
---------- ----------- ----------- ------------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and equivalents............................ $ 1,535 $ 3,834 $ -- $ 5,369
Accounts receivable, net........................ 26,847 43,957 -- 70,804
Inventories..................................... 14,722 95,965 -- 110,687
Current deferred tax asset...................... 227 2,414 -- 2,641
Other........................................... 1,396 5,950 -- 7,346
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Total current assets....................... 44,727 152,120 -- 196,847
Property, plant and equipment.....................
Rental equipment................................ 359,993 279,083 (75,731) (2) 563,345
Other........................................... 26,525 64,817 (39,817) (2) 51,525
Less: accumulated depreciation................. (44,391) (71,064) 75,780 (2) (39,675)
---------- ---------- ---------- -----------
Net property, plant, and equipment............ 342,127 272,836 (39,768) 575,195
Goodwill and intangibles, net of
amortization.................................... 131,557 224,724 (133,225) (3) 223,056
Notes receivable.................................. 4,929 1,719 -- 6,648
Other assets, net................................. 8,611 8,925 9,339 (4) 26,875
Long-term deferred tax asset...................... 7,509 -- -- 7,509
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Total assets............................... $539,460 $660,324 $(163,654) $1,036,130
========== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities........ $ 31,412 $ 42,889 $ -- $ 74,301
Current portion of long-term debt............... 1,991 14,170 (14,170) (5) 1,991
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Total current liabilities.................. 33,403 57,059 (14,170) 76,292
Capital lease obligation.......................... 5,952 1,260 (1,260) (5) 5,952
Long term deferred tax liabilities................ 2,806 32,248 (1,853) (6) 33,201
Long-term debt.................................... 196,429 685 (685) (5) 196,429
Minority interest liability....................... -- 198,508 (198,508) (7) --
Long-term payable due to Weatherford.............. -- 59,946 (59,946) (8) --
Other............................................. 39,192 94,316 (60,541) (9) 72,967
--------- --------- --------- ----------
Total liabilities.......................... 277,782 444,022 (336,963) 384,841
Total stockholders' equity................. 261,678 216,302 173,309 (10) 651,289
--------- --------- --------- ----------
Total liabilities and stockholders'
equity .................................. $539,460 $660,324 $(163,654) $1,036,130
========= ========= ========== ==========
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements.
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UNIVERSAL COMPRESSION HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2000
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UCH
IPO/DEBT ENTERRA ENTERRA MERGER
UCH RESTRUCTURE ADJUSTED ADJUSTMENTS PRO FORMA
ACTUAL ADJUSTMENTS ACTUAL (1) -------------- AS ADJUSTED
--------- ----------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues..................................... $ 73,613 $ -- $ 113,972 $ -- $ 187,585
Rentals and cost of sales.................... 33,901 -- 66,311 -- 100,212
--------- ---------- ---------- --------- ---------
Gross margin........................ 39,712 -- 47,661 -- 87,373
Selling, general and administrative.......... 7,224 -- 15,688 -- 22,912
--------- ---------- ---------- --------- ---------
Operating Profit................ 32,488 -- 31,973 -- 64,461
Depreciation and amortization................ 14,177 (382) (11) 18,829 (10,752) (16) 21,872
Operating lease.............................. 2,684 924 (12) 10,860 6,781 (17) 21,249
Interest expense............................. 13,225 (2,793) (13) 5,860 (5,922) (18) 10,370
Interest income.............................. -- -- -- (2,505) (19) (2,505)
Other, net................................... 7,059 (7,059) (14) 117 -- 117
--------- --------- ---------- --------- ---------
Income (loss) before income
taxes and minority interest..... (4,657) 9,310 (3,693) 12,398 13,358
Income taxes (benefit)....................... (1,746) 3,491 (15) (1,631) 4,649 (15) 4,763
Minority interest expense, net of taxes -- -- 306 (306) (20) --
--------- --------- ---------- --------- ---------
Income (loss) before
extraordinary items............. $ (2,911) $ 5,819 $ (2,368) $ 8,055 $ 8,595
========= ========= ========== ========= =========
Weighted average common and common
equivalent shares outstanding:
Basic............................... 11,173 2,166 -- 13,750 27,089 (21)
Diluted............................. 11,173 2,331 -- 13,750 27,254 (21)
--------- --------- ---------- --------- ---------
Earnings (loss) per share:
Basic............................... $ (0.26) $ -- $ 0.32
========= ========== =========
Diluted............................. $ (0.26) $ -- $ 0.32
========= ========== =========
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements.
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UNIVERSAL COMPRESSION HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2000
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UCH
IPO/DEBT ENTERRA ENTERRA
UCH RESTRUCTURE ADJUSTED MERGER PRO FORMA
ACTUAL ADJUSTMENTS ACTUAL (1) ADJUSTMENTS AS ADJUSTED
---------- ----------- ---------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues..................................... $ 136,449 $ -- $ 237,763 $ -- $ 374,212
Rentals and cost of sales.................... 67,295 -- 139,346 -- 206,641
--------- ---------- ---------- ---------- ---------
Gross margin........................ 69,154 -- 98,417 -- 167,571
Selling, general and administrative.......... 16,797 (3,200)(22) 30,272 -- 43,869
--------- ---------- ---------- ---------- ---------
Operating Profit.................... 52,357 3,200 68,145 -- 123,702
Depreciation and amortization................ 26,006 (3,559)(23) 34,739 (17,318)(25) 39,868
Operating lease.............................. -- 5,702 (12) 14,344 21,075 (26) 41,121
Interest expense............................. 34,327 (15,727)(24) 5,293 (5,190)(27) 18,703
Interest income.............................. -- -- -- (11,614)(28) (11,614)
Other, net................................... -- -- (2,378) -- (2,378)
--------- ---------- ---------- ---------- ---------
Income (loss) before income taxes
and minority interest........... (7,976) 16,784 16,147 13,047 38,002
Income taxes (benefit)....................... (1,994) 6,378 (15) 7,013 4,893 (15) 16,290
Minority interest expense, net of taxes -- -- 4,194 (4,194)(20) --
--------- ---------- ---------- ---------- ---------
Income (loss) before
extraordinary items............. $ (5,982) $ 10,406 $ 4,940 $ 12,348 $ 21,712
========= ========== ========== ========== =========
Weighted average common and common
equivalent shares outstanding:
Basic............................... 2,476 10,495 -- 13,750 26,721 (29)
Diluted............................. 2,476 11,181 -- 13,750 27,407 (29)
--------- ---------- ---------- ---------- ---------
Earnings (loss) per share:
Basic............................... $ (2.42) $ -- $ 0.81
========= ========== =========
Diluted............................. $ (2.42) $ -- $ 0.79
========= ========== =========
See accompanying Notes to Unaudited Pro Forma
Combined Condensed Financial Statements.
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UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
(1) Reflects Enterra's historical balances adjusted to exclude its
Singapore-based operations (other than Australia and Thailand) and $10
million of accounts receivable, which were not included in the WGC
acquisition.
(2) Reflects (a) the preliminary revaluation of Enterra's property, plant
and equipment historical balances to estimated fair value ($63.2
million) and (b) the initial sale and leaseback of additional
compression equipment ($103.0 million) pursuant to the new operating
lease facilities consummated concurrently with the WGC acquisition.
(3) Represents the elimination of Enterra Adjusted Actual goodwill ($224.7
million) offset by Universal's preliminary estimate of the excess of
the total purchase price over the allocated fair value of the net
assets of Enterra ($91.5 million). The purchase price includes advisory
fees but not all acquisition related costs. The final allocation of the
purchase price in the WGC acquisition will differ from the amounts
represented in the unaudited pro forma combined condensed financial
statements.
(4) Represents adjustment for (a) the elimination of prepaid financing
costs associated with UCI's prior operating lease facility and
revolving credit facility ($4.9 million), which were refinanced
concurrently with the WGC acquisition and (b) the recording of prepaid
finance costs associated with the new operating lease facilities and
revolving credit facility ($14.2 million) entered into concurrently
with the WGC acquisition.
(5) Represents the retirement of WGC's debt using proceeds from the new
operating lease facilities ($16.1 million).
(6) Represents the estimated deferred income taxes related to expense items
associated with the elimination of prepaid financing costs associated
with UCI's prior operating lease facility and revolving credit
facility.
(7) Reflects the elimination of Enterra's minority interest liability as a
result of the purchase of GE Capital's interest by Enterra concurrently
with the WGC acquisition.
(8) Reflects the elimination of Enterra's payable to Weatherford
concurrently with the WGC acquisition.
(9) Represents the elimination of the deferred gain associated with the
retirement of the prior operating lease facilities of WGC ($92.9
million). Also reflects the estimated additional deferred gain ($32.4
million) associated with the sale of compression equipment pursuant to
the new operating lease facilities. Additional deferred gain is assumed
to equal approximately 40% of the proceeds from the sale of compression
equipment pursuant to such new operating lease facilities.
(10) Reflects the elimination of Enterra's stockholders' equity ($216.3
million) and the valuation of UCH's common stock issued to an affiliate
of Weatherford in the WGC acquisition ($392.7 million). Valuation
assumes 13,750,000 shares of UCH common stock valued at $28.56 per
share, which is the five-day average closing price surrounding October
24, 2000, the announcement date of the WGC acquisition. Also reflects
the write-off of prepaid finance costs ($3.1 million, net of taxes)
associated with the restructuring of UCI's prior operating lease
facility and revolving credit facility.
(11) Reflects the elimination of depreciation expense associated with the
sale of compression equipment pursuant to the prior UCI operating lease
facility, with initial funding under such facility of $62.6 million.
(12) Reflects the expenses associated with the prior UCI operating lease
facility, including the related commitment fee.
(13) Reflects the adjustment of interest expense related to the redemption
of certain indebtedness at the beginning of the period and incremental
borrowing during the period with the proceeds of UCH's initial public
offering
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15
and UCI's prior operating lease facility. Also includes the commitment
fees associated with the new revolving credit facility.
(14) Represents the non-recurring charges related to the elimination of a
management agreement and a consulting agreement and other related fees
in connection with UCH's initial public offering and concurrent
financing transactions in May 2000.
(15) An estimated statutory tax rate of 37.5% is assumed for pro forma
adjustments. The effective tax rate may differ.
(16) Reflects (a) an estimated adjustment to goodwill amortization resulting
from the change in the goodwill balance resulting form the preliminary
allocation of the purchase price in the WGC acquisition ($1.7 million),
(b) the estimated reduction of depreciation expense resulting from the
preliminary revaluation of the purchase price to rental equipment
acquired in the WGC acquisition and the additional sale of compression
equipment pursuant to the new operating lease facilities ($5.7
million), with an aggregate assumed funding under the new operating
leases of $476.9 million by the end of the period, which funding
includes the transfer of equipment from the prior operating lease
facilities and the sale and leaseback of additional equipment under the
new facilities and (c) the reduction of depreciation expense resulting
from the preliminary revaluation of the purchase price to
non-compression equipment acquired in the WGC acquisition ($3.4
million). Depreciation and amortization is calculated using an
estimated useful life of 15 years with a 20% salvage value for rental
equipment and an estimated useful life of seven years for
non-compression equipment, while goodwill is amortized over 40 years.
(17) Reflects the net rental payments associated with the new operating
lease facilities ($20.3 million) and amortization of the lease
structuring and arrangement fees ($1.0 million) estimated to be
approximately $13.5 million on the closing of the facilities. Also
reflects the elimination of the prior facilities ($14.5 million),
including the related commitment fee, with assumed funding under the
new facilities of $476.9 million by the end of the period. The new
operating lease facilities replaced Universal's and WGC's prior
existing facilities. The rental payments under the new lease facilities
are assumed to include an amount based on LIBOR plus a variable amount
depending on UCI's operating and financial results, applied to the
funded amount of the leases. The operating lease calculations assume an
interest rate of 9.08% and a seven-year lease term. A fluctuation of
.125% of actual rates related to the proposed new operating lease
facilities would result in an approximate change of $521,000 in rental
payments on an annual basis.
(18) Reflects the adjustment of interest expense related to the retirement
of WGC's indebtedness at the beginning of the period.
(19) Represents interest income generated on an average excess cash balance
of $56.5 million invested at a rate equivalent to the SSN Operating
Lease Facility. The effect of a .25% change in interest rates on income
(loss) before extraordinary items would be $44,000.
(20) Reflects the elimination of Enterra's minority interest expense as a
result of the purchase of GE Capital's interest by Enterra concurrently
with the WGC acquisition.
(21) Includes the effect of the 7,275,000 shares of common stock offered in,
and the stock split and conversion that occurred concurrently with,
UCH's initial public offering and the 13,750,000 shares of UCH's common
stock issued to an affiliate of Weatherford in the WGC acquisition as
if these transactions had occurred at April 1, 2000. Also includes the
weighted average effect of the 1,400,726 shares of UCH's common stock
issued as partial consideration for the GCSI acquisition that occurred
on September 15, 2000. Excludes options to purchase up to 318,000
shares of UCH's common stock that we are obligated to issue to certain
WGC employees in connection with the WGC acquisition.
(22) Represents elimination of Castle Harlan management fees ($3.0 million)
and Mr. Urcis' consulting fees ($0.2 million) which were terminated at
the time of UCH's initial public offering and related debt
restructuring.
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16
(23) Reflects the elimination of depreciation expense associated with the
sale of compression equipment pursuant to the prior operating lease
facility, with initial funding under such facility of $61.3 million.
(24) Reflects the adjustment of interest expense related to the redemption
of certain indebtedness at the beginning of the period totaling $177.8
million and $12.8 million of incremental borrowing during the period
from the proceeds of UCH's initial public offering and its prior
operating lease facility. Also includes commitment fees associated with
Universal's prior revolving credit facility.
(25) Reflects (a) an estimated adjustment to goodwill amortization resulting
from the change in the goodwill balance resulting from the preliminary
allocation of the purchase price in the WGC acquisition ($3.1 million),
(b) the estimated reduction of depreciation expense resulting from the
preliminary revaluation of the purchase price to rental equipment
acquired in the WGC acquisition and the additional sale of compression
equipment pursuant to the new operating lease facilities ($7.5
million), with an aggregate assumed funding under such facilities of
$476.9 million by the end of the period, which funding includes the
transfer of equipment from the prior operating lease facilities and the
sale and leaseback of additional equipment under the new facilities and
(c) the reduction of depreciation expense resulting from the
preliminary revaluation of the purchase price to non-compression
equipment acquired in the WGC acquisition ($6.7 million). Depreciation
and amortization for rental equipment is calculated using an estimated
useful life of 15 years with a 20% salvage value for rental equipment
and an estimated useful life of seven years for non-compression
equipment, while goodwill is amortized over 40 years.
(26) Reflects the net rental payments associated with the new operating
lease facilities ($39.2 million) and amortization ($1.9 million) of the
lease structuring and arrangement fees, estimated to be approximately
$13.5 million on the closing of the facilities. Also reflects the
elimination of the prior operating lease facilities ($20.0 million),
including the related commitment fees, with assumed aggregate funding
under the SSN Operating Lease Facility and the ABS Operating Lease
Facility of $476.9 million by the end of the period. The new operating
lease facilities replaced Universal's and WGC's prior operating lease
facilities. The rental payments under the lease facilities are assumed
to include an amount based on LIBOR plus a variable amount depending on
UCI's operating and financial results, applied to the funded amount of
the leases. The operating lease calculations assume an interest rate of
8.79% and a seven-year lease term. A fluctuation of .125% of actual
rates related to the proposed new operating lease facilities would
result in an approximate change of $508,000 in rental payments on an
annual basis.
(27) Reflects the adjustment of interest expense ($5.3 million) related to
the retirement of WGC's indebtedness at the beginning of the period.
Also includes the net adjustment for amortization of up-front financing
costs and commitment fees associated with the new revolving credit
facility ($0.1 million).
(28) Represents interest income generated on an average excess cash balance
of $130.9 million invested at a rate equivalent to the SSN Operating
Lease Facility. The effect of a .25% change in interest rates on income
(loss) before extraordinary items would be $0.2 million.
(29) Includes the effect of the 7,275,000 shares offered in, and the stock
split and conversion that occurred concurrently with, UCH's initial
public offering and the 13,750,000 shares of UCH's common stock issued
to an affiliate of Weatherford in the WGC acquisition as if these
transactions had occurred at April 1, 1999. Excludes options to
purchase up to 318,000 shares of UCH's common stock that we are
obligated to issue to certain WGC employees in connection with the WGC
acquisition.
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EXHIBIT INDEX
Exhibit No. Description
2.1 Agreement and Plan of Merger dated as of October 23, 2000 by and among
Universal Compression Holdings, Inc., Universal Compression, Inc.,
Weatherford International, Inc., WEUS Holding, Inc. and Enterra
Compression Company (incorporated by reference to Exhibit 10.1 to
Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed
with the Securities and Exchange Commission on October 28, 2000).
4.1 Voting Agreement dated as of February 9, 2001 by and among Weatherford
International, Inc., WEUS Holdings, Inc. and Universal Compression
Holdings, Inc. (incorporated by reference to Exhibit 4.1 to Universal
Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2000).
4.2 Registration Rights Agreement with respect to the 8 7/8% Senior Secured
Notes, dated as of February 9, 2001, among BRL Universal Equipment 2001
A, L.P., BRL Universal Equipment Corp., Universal Compression Holdings,
Inc., Universal Compression, Inc., Deutsche Banc Alex. Brown Inc.,
First Union Securities, Inc., Goldman Sachs & Co., Banc One Capital
Markets, Inc. and Scotia Capital (USA), Inc. (incorporated by reference
to Exhibit 4.2 to Universal Compression Holdings, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended December 31, 2000).
4.3 Registration Rights Agreement dated as of February 9, 2001 by and among
WEUS Holding, Inc. and Universal Compression Holdings, Inc.
(incorporated by reference to Exhibit 4.3 to Universal Compression
Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
December 31, 2000).
4.4 Amendment Number Three to Universal Compression Holdings, Inc.
Incentive Stock Option Plan, dated November 27, 2000 (incorporated by
reference to Exhibit 4.7 to Universal Compression Holdings, Inc.'s
Registration Statement on Form S-8 filed on February 9, 2001).
10.1 Transitional Services Agreement dated as of February 9, 2001 by and
among Weatherford International, Inc. and Weatherford Global
Compression Services, L.P. (incorporated by reference to Exhibit 10.1
to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended December 31, 2000).
18
10.2 Form of Equipment Lease Agreement with respect to the senior secured
notes operating lease facility, dated as of February 9, 2001, between
BRL Universal Equipment 2001 A, L.P., as Lessor, and Universal
Compression, Inc., as Lessee (incorporated by reference to Exhibit 10.2
to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended December 31, 2000).
10.3 Form of Participation Agreement, dated as of February 9, 2001, among
Universal Compression, Inc., as Lessee, Universal Compression Holdings,
Inc., as Guarantor, BRL Universal Compression Equipment 2001 A, L.P.,
as Lessor, Bankers Trust Company and the other financial institutions
listed on the signature pages as Tranche B Lenders, The Bank of New
York, not in its individual capacity but as Indenture Trustee, Paying
Agent, Transfer Agent and Registrar for the Tranche A Noteholders, BRL
Universal Equipment Management, Inc., as Lessor General Partner,
Bankers Trust Company, as Administrative Agent and Collateral Agent for
Tranche B Lenders and Indenture Trustee on behalf of the Tranche A
Noteholders, Deutsche Banc Alex. Brown Inc., as Arranger, The Bank of
Nova Scotia, as Syndicate Agent for Tranche B Lenders, Bank One, N.A.,
as Documentation Agent for Tranche B Lenders, and First Union National
Bank, as Managing Agent (incorporated by reference to Exhibit 10.3 to
Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended December 31, 2000).
10.4 Indenture with respect to the 8 7/8% Senior Secured Notes due 2008,
dated as of February 9, 2001, among BRL Universal Equipment 2001 A, L.
P. and BRL Universal Equipment Corp., as Issuers, and The Bank of New
York, as Indenture Trustee (incorporated by reference to Exhibit 10.4
to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended December 31, 2000).
10.5 Form of Tranche B Loan Agreement, dated as of February 9, 2001, among
BRL Universal Equipment 2001 A, L.P., as Borrower, Bankers Trust
Company, as Administrative Agent and Collateral Agent, and The Tranche
B Lenders Party Hereto, as Tranche B Lenders (incorporated by reference
to Exhibit 10.5 to Universal Compression Holdings, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended December 31, 2000).
10.6 Form of Master Lease Agreement, with respect to the ABS operating lease
facility, dated as of February 9, 2001, between BRL Universal
Compression Funding I, L.P., as Head Lessor and UCO Compression LLC, as
Head Lessee (incorporated by reference to Exhibit 10.6 to Universal
Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2000).
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10.7 Senior Secured Revolving Credit Agreement, dated as of February 9,
2001, among Universal Compression, Inc., as Borrower, First Union
National Bank, as Administrative Agent, Bank One, N.A., as Syndication
Agent, and the lenders signatory hereto (incorporated by reference to
Exhibit 10.7 to Universal Compression Holdings, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended December 31, 2000).
10.8 Guaranty and Collateral Agreement made by Universal Compression
Holdings, Inc. and Universal Compression, Inc. and in favor of First
Union National Bank, as Administrative Agent, dated as of February 9,
2001 (incorporated by reference to Exhibit 10.8 to Universal
Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2000).
10.9 Security Agreement (Pledge and Assignment), dated as of February 9,
2001, between Universal Compression International, Inc. and First Union
National Bank, as Administrative Agent (incorporated by reference to
Exhibit 10.9 to Universal Compression Holdings, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended December 31, 2000).
10.10 Form of Indenture, dated as of February 9, 2001, between BRL Universal
Compression Funding I, L.P., Issuer, and Wells Fargo Bank Minnesota,
National Association, Indenture Trustee (incorporated by reference to
Exhibit 10.10 to Universal Compression Holdings, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended December 31, 2000).
10.11 Form of Series 2001-1 Supplement, dated as of February 9, 2001, to
Indenture dated as of February 9, 2001, between BRL Universal
Compression Funding I, L.P., Issuer, and Wells Fargo Bank Minnesota,
National Association, Indenture Trustee (incorporated by reference to
Exhibit 10.11 to Universal Compression Holdings, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended December 31, 2000).
10.12 Engagement and Indemnity Letter, dated February 9, 2001, among
Universal Compression, Inc., Universal Compression Holdings, Inc.,
Deutsche Banc Alex. Brown Inc., First Union Securities, Inc., Goldman
Sachs & Co., Banc One Capital Markets, Inc., Scotia Capital (USA),
Inc., BRL Universal Equipment 2001 A, L.P., and BRL Universal Equipment
Corp (incorporated by reference to Exhibit 10.12 to Universal
Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2000).
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99.1* Press Release of Universal Compression Holdings, Inc. dated February
12, 2001.
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* Filed herewith