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UNITED STATES
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): MAY 16, 2003
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UNIVERSAL COMPRESSION HOLDINGS, INC.
UNIVERSAL COMPRESSION, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 001-15843 13-3989167
TEXAS 333-48279 74-1282680
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification Number)
4444 BRITTMOORE ROAD
HOUSTON, TEXAS 77041
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 335-7000
NOT APPLICABLE
(Former name or former address, if changed since last report.)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
EXHIBIT NO. DESCRIPTION
----------- -----------
99.1 Press Release dated May 15, 2003 (regarding a proposed private
placement of $175.0 million principal amount of senior notes
due 2010)
ITEM 9. REGULATION FD DISCLOSURE
A. INTRODUCTION
On May 15, 2003, Universal Compression, Inc. (the "Company") issued a press
release announcing its proposed private placement of $175.0 million principal
amount of senior notes due 2010 (the "New Notes"). On May 16, 2003, the Company
began distribution of a preliminary offering memorandum related to the New
Notes. The Company also announced that it intends to use the net proceeds of the
proposed private placement of the New Notes to purchase for cash up to $229.75
million in aggregate principal amount of its outstanding 9 7/8% senior discount
notes due 2008 (the "9 7/8% Notes") by means of a tender offer.
Also, on May 16, 2003, the Company provided a presentation concerning the New
Notes offering to the internal sales force of the joint book-running managers
for the New Notes offering. You may obtain a copy of the presentation materials
under the Company Information-Company Overview section of the Company's website
at www.universalcompression.com. Copies of this presentation material are
available at no charge through our Investor Relations Department Universal
Compression, Inc., 4444 Brittmoore Road, Houston, Texas 77041, (713) 335-7460.
The information contained in this Current Report on Form 8-K is neither an offer
to sell nor a solicitation of an offer to buy any of the New Notes. The New
Notes to be offered will not be registered under the Securities Act of 1933, as
amended (the "Securities Act"), or applicable state securities laws and may not
be offered or sold in the United States absent registration or an applicable
exemption from the registration requirements of the Securities Act.
The information contained in this Current Report on Form 8-K is also not an
offer to purchase, a solicitation of an offer to purchase, or a solicitation of
an offer to sell the 9 7/8% Notes. The offer to purchase the 9 7/8% Notes may
only be made pursuant to the terms of the Company's Offer to Purchase and the
accompanying Letter of Transmittal.
B. LIMITATION ON INCORPORATION BY REFERENCE
In accordance with General Instruction B.2 of Form 8-K, the information set
forth in this Item 9 shall not be deemed to be "filed" for purposes of Section
18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise subject to the liabilities of that section, nor shall such information
be deemed incorporated by reference in any filing under the Securities Act or
the Exchange Act, except as shall be expressly set forth by specific reference
in such a filing. The information set forth in this Item 9 shall not be deemed
an admission as to the materiality of any information in this report on Form 8-K
that is required to be disclosed solely to satisfy the requirements of
Regulation FD.
C. SUPPLEMENTAL INFORMATION
The following sets forth certain supplemental information contained in the
preliminary offering memorandum dated May 16, 2003 relating to the proposed
private placement of the New Notes (the "preliminary offering memorandum").
Except as otherwise indicated in the supplemental information set forth below,
or as the context may otherwise require, (i) the words "we," "our," "us" and
"the Company" refer to Universal Compression, Inc. and its subsidiaries, (ii)
"notes" refer to the unsecured senior notes due 2010 of the Company that are the
subject of the preliminary offering memorandum, (iii) "9 7/8% senior discount
notes" refer to our 9 7/8% senior discount notes due 2008, (iv) "tender offer"
refers to our offer to purchase, for cash, a portion of our outstanding 9 7/8%
senior discount notes by means of a tender offer, (v) "revolving credit
facility" refers to our $125 million senior secured revolving credit facility,
(vi) "BRL lease facility" refers to our lease facility pursuant to which we, as
lessee, lease compression equipment from BRL Universal Equipment 2001 A, L.P.,
as lessor, (vii) "ABS lease facility" refers to our $200 million asset-backed
securitization lease facility with UCO Compression 2002 LLC, and (viii)
references to our fiscal years refer to the twelve month period ended March 31
of such years (for example, our fiscal 2002 is fiscal year ended March 31,
2002).
1. The following information is included in the preliminary offering
memorandum:
(a) The following table illustrates our key financial and operating
statistics during the last two fiscal years:
YEAR ENDED MARCH 31,
------------------------
2002 2003
---------- ----------
(DOLLARS IN THOUSANDS)
Domestic horsepower (end of period)......................... 1,890,935 1,957,015
International horsepower (end of period).................... 345,093 368,437
---------- ----------
Total horsepower (end of period)....................... 2,236,028 2,325,452
Average horsepower utilization rate......................... 88.8% 83.3%
Revenues.................................................... $ 679,989 $ 625,218
Percentage of revenues from:
Contract compression................................... 48.2% 53.1%
Fabrication............................................ 31.1% 26.0%
Aftermarket services................................... 20.7% 20.9%
EBITDA, as adjusted(a)...................................... $ 207,315 $ 201,150
---------------
(a) EBITDA, as adjusted, is defined below.
(b) SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
The following selected historical consolidated financial and operating data
is included in the preliminary offering memorandum:
TIDEWATER
COMPRESSION
(PREDECESSOR
COMPANY) THE COMPANY
------------ --------------------------------------------------------------------------------------
PERIOD FROM PERIOD FROM
APRIL 1, DECEMBER 12,
1997 1997 NINE MONTHS NINE MONTHS
THROUGH THROUGH YEAR ENDED MARCH 31, ENDED ENDED
FEBRUARY 20, MARCH 31, ----------------------------------------- DECEMBER 31, DECEMBER 31,
1998 1998(6) 1999 2000 2001 2002 2001 2002
------------ ------------ -------- -------- -------- -------- ------------ ------------
(IN THOUSANDS)
STATEMENT OF
OPERATIONS DATA:
Revenues............. $95,686 $13,119 $129,498 $136,295 $232,466 $679,989 $492,048 $470,630
Gross profit(1)...... 47,752 6,891 61,887 69,000 109,407 268,346 198,905 199,287
Selling, general and
administrative
expenses........... 8,669 1,305 16,862 16,797 21,092 60,890 44,623 50,406
Depreciation and
Amortization....... 23,310 1,560 19,308 26,000 33,485 48,600 35,325 44,087
Interest expense,
net................ -- 2,896 26,251 30,916 22,622 23,017 17,462 16,174
Operating lease
expense............ -- -- -- -- 14,443 55,401 40,354 46,069
Foreign currency gain
(loss)............. -- -- (40) (4) (177) 42 (177) (615)
Income tax expense
(benefit).......... 6,271 529 (166) (696) 3,871 30,931 23,622 16,644
Income (loss) before
extraordinary
items.............. 10,759 617 (489) (3,863) 5,490 49,408 37,089 26,593
Net income (loss).... 10,759 617 (489) (3,863) (1,142) 49,408 37,089 26,593
OTHER FINANCIAL DATA:
EBITDA, as
adjusted(2)........ $40,340 $ 5,930 $ 48,476 $ 55,561 $ 88,787 $207,315 $154,029 $150,182
RATIOS:
EBITDA, as adjusted,
to fixed
charges(3)......... -- 2.0x 1.8x 1.8x 2.4x 2.6x 2.7x 2.4x
Total debt to EBITDA,
as adjusted........ -- -- 6.5x 6.2x 8.4x(4) 4.5x(5) -- --
TIDEWATER
COMPRESSION
(PREDECESSOR
COMPANY) THE COMPANY
------------ ----------------------------------------------------------------------------------------
PERIOD FROM PERIOD FROM
APRIL 1, DECEMBER 12,
1997 1997 NINE MONTHS NINE MONTHS
THROUGH THROUGH YEAR ENDED MARCH 31, ENDED ENDED
FEBRUARY 20, MARCH 31, ------------------------------------------- DECEMBER 31, DECEMBER 31,
1998 1998(6) 1999 2000 2001 2002 2001 2002
------------ ------------ -------- -------- --------- --------- ------------ ------------
(IN THOUSANDS)
Capital expenditures:
Expansion.......... $(11,902) $ (1,820) $(63,408) $(49,871) $(55,384) $(137,790) $(112,309) $(55,099)
Overhauls.......... (5,698) (218) (7,626) (9,920) (9,901) (27,000) (11,925) (22,330)
Other.............. 3,803 (351,107) 8,038 (1,312) (2,721) (23,229) (15,135) (21,719)
Cash flows provided
by (used in)
Operating
activities....... $ 33,491 $ (699) $ 24,042 $ 47,029 $ 92,881 $ 131,837 $ 92,837 $147,989
Investing
activities....... (13,797) (353,145) (62,996) (61,103) (3,318) (160,256) (312,133) (91,512)
Financing
activities....... (17,870) 356,226 39,499 12,550 (76,687) 22,316 225,985 (11,742)
AS OF MARCH 31,
---------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
-------- -------- -------- ---------- ---------- ----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital(7)................. $ 13,882 $ 22,288 $ 5,869 $ 97,832 $ 139,544 $ 158,059
Total assets....................... 379,108 436,487 466,345 1,171,534 1,276,781 1,954,506
Total debt......................... 261,508 316,348 345,832 215,107(8) 226,762(9) 945,155(10)
Stockholder's equity............... 105,797 105,308 101,445 647,624 695,396 740,503
---------------
(1) Gross profit is defined as total revenue less (a) contract compression
expenses and (b) cost of sales (exclusive of depreciation and amortization).
(2) EBITDA, as adjusted, is defined as net income plus income taxes, interest
expense, leasing expense, management fees, depreciation and amortization,
foreign currency gains or losses, excluding non-recurring items and
extraordinary gains or losses. For the nine months ended December 31, 2002
(effective in the quarter ended September 30, 2002), the Company changed its
definition of EBITDA, as adjusted, to exclude foreign currency gains or
losses. All periods prior to December 31, 2002 have been recalculated from
amounts previously disclosed by the Company to be consistent with this new
definition of EBITDA, as adjusted. EBITDA, as adjusted, represents a measure
upon which management assesses financial performance, and financial
covenants in our current borrowing arrangements are tied to similar
measures. The financial covenants in our current financing arrangements
permit us to exclude non-recurring and extraordinary gains and losses.
EBITDA, as adjusted, is not a measure of financial performance under
generally accepted accounting principles ("GAAP") and should not be
considered an alternative to operating income or net income as an indicator
of our operating performance or to net cash provided by operating activities
as a measure of our liquidity. Additionally, the EBITDA, as adjusted,
computation used herein may not be comparable to other similarly titled
measures of other companies. We believe that EBITDA, as adjusted, is a
useful measure that is frequently used by securities analysts, investors and
other interested parties in the evaluation of companies in our industry.
The following table reconciles our EBITDA, as adjusted, to net income or
(loss):
TIDEWATER
COMPRESSION
(PREDECESSOR
COMPANY) THE COMPANY
------------ -----------------------------------------------------------------------------------
PERIOD FROM PERIOD FROM
APRIL 1, DECEMBER 12,
1997 1997 NINE MONTHS NINE MONTHS
THROUGH THROUGH YEAR ENDED MARCH 31, ENDED ENDED
FEBRUARY 20, MARCH 31, -------------------------------------- DECEMBER 31, DECEMBER 31,
1998 1998(6) 1999 2000 2001 2002 2001 2002
------------ ------------ ------- ------- ------- -------- ------------ ------------
(IN THOUSANDS)
EBITDA, AS ADJUSTED:... $ 40,340 $ 5,930 $ 48,476 $ 55,561 $ 88,787 $207,315 $154,029 $150,182
Depreciation and
amortization....... (23,310) (1,560) (19,308) (26,000) (33,485) (48,600) (35,325) (44,087)
Operating lease
expense............ -- -- -- -- (14,443) (55,401) (40,354) (46,069)
Interest expense,
net................ -- (2,896) (26,251) (30,916) (22,622) (23,017) (17,462) (16,174)
Management fee....... -- (328) (3,200) (3,200) -- -- -- --
Foreign currency gain
(loss)............. -- -- (40) (4) (177) 42 (177) (615)
Other non-recurring
charges............ -- -- -- -- (8,699) -- -- --
Income taxes......... (6,271) (529) (166) 696 (3,871) (30,931) (23,622) (16,644)
Extraordinary loss,
net................ -- -- -- -- (6,632) -- -- --
------- ------ ------- ------- ------- -------- -------- --------
NET INCOME (LOSS)...... $ 10,759 $ 617 $ (489) $ (3,863) $ (1,142) $ 49,408 $ 37,089 $ 26,593
======= ====== ======= ======= ======= ======== ======== ========
(3) For the purpose of computing this ratio, fixed charges consist of interest,
whether expensed or capitalized, operating lease expense and amortization
of loan costs.
(4) For the purpose of computing this ratio, total debt includes $427.0 million
and $100.5 million, respectively, outstanding under the BRL lease facility
and ABS lease facility as of March 31, 2001.
(5) For the purpose of computing this ratio, total debt includes $549.0 million
and $159.5 million, respectively, outstanding under the BRL lease facility
and ABS lease facility as of March 31, 2002.
(6) Represents our historical consolidated financial statements for the period
from December 12, 1997 (inception) through March 31, 1998. However, we had
no operations until the acquisition of Tidewater Compression on February
20, 1998.
(7) Working capital is defined as current assets minus current liabilities.
(8) Excludes $427.0 million and $100.5 million, respectively, outstanding under
the BRL lease facility and ABS lease facility as of March 31, 2001. Amount
includes capital lease obligations.
(9) Excludes $549.0 million and $159.5 million, respectively, outstanding under
the BRL lease facility and ABS lease facility as of March 31, 2002. Amount
includes capital lease obligations.
(10) Excludes approximately $6.2 million of letters of credit issued under our
revolving credit facility.
(c)SUMMARY HISTORICAL CONSOLIDATED
FINANCIAL AND OPERATING INFORMATION
The following tables present summary historical consolidated financial and
operating data of Universal Compression, Inc. and its consolidated subsidiaries
for the periods and dates indicated, as well as its balance sheet data as of
March 31, 2003.
YEAR ENDED MARCH 31,
--------------------------------------------
2000 2001 2002 2003
-------- -------- -------- -----------
(IN THOUSANDS) (UNAUDITED)
STATEMENTS OF OPERATIONS DATA:
Revenues.................................. $136,295 $232,466 $679,989 $625,218
Gross profit(1)........................... 69,000 109,407 268,346 267,968
Selling, general and administrative....... 16,797 21,092 60,890 67,944
Depreciation and amortization............. 26,000 33,485 48,600 63,706
Interest expense, net..................... 30,916 22,622 23,017 36,421
Operating lease expense................... -- 14,443 55,401 46,071
Income tax expense (benefit).............. (696) 3,871 30,931 20,975
Income (loss) before extraordinary
items................................... (3,863) 5,490 49,408 33,518
Net income (loss)......................... (3,863) (1,142) 49,408 33,518
OTHER DATA:
EBITDA, as adjusted(2).................... $ 55,561 $ 88,787 $207,315 $201,150
Capital expenditures...................... 61,103 68,006 188,019 120,750
RATIOS:
EBITDA, as adjusted, to fixed
charges(3).............................. 1.8x 2.4x 2.6x 2.4x
Total debt to EBITDA, as adjusted......... 6.2x 8.4x(4) 4.5x(5) 4.7x
MARCH 31, 2003
---------------------------
ACTUAL AS ADJUSTED(6)
---------- --------------
(UNAUDITED, IN THOUSANDS)
BALANCE SHEET DATA:
Cash and equivalents....................................... $ 71,693 $ 11,693
Total current assets....................................... 261,310 201,310
Goodwill, net.............................................. 388,480 388,480
Total current liabilities.................................. 103,251 121,595
Total noncurrent liabilities............................... 1,110,752 1,056,002
Total debt(7).............................................. 945,155 908,749
Stockholders' equity....................................... 740,503 731,647
---------------
(1) Gross profit is defined as total revenue less cost of rentals and cost of
sales (exclusive of depreciation and amortization).
(2) EBITDA, as adjusted, is defined above.
The following table reconciles our EBITDA, as adjusted, to net income:
YEAR ENDED MARCH 31,
-------------------------------------------
2000 2001 2002 2003
-------- -------- -------- -----------
(IN THOUSANDS) (UNAUDITED)
EBITDA, AS ADJUSTED................ $ 55,561 $ 88,787 $207,315 $201,150
Depreciation and amortization.... (26,000) (33,485) (48,600) (63,706)
Operating lease expense.......... -- (14,443) (55,401) (46,071)
Interest expense, net............ (30,916) (22,622) (23,017) (36,421)
Management fee................... (3,200) -- -- --
Foreign currency gain/(loss)..... (4) (177) 42 (459)
Non-recurring charges............ -- (8,699) -- --
Income taxes..................... 696 (3,871) (30,931) (20,975)
Extraordinary loss, net.......... -- (6,632) -- --
-------- -------- -------- --------
NET INCOME (LOSS).................. $ (3,863) $ (1,142) $ 49,408 $ 33,518
======== ======== ======== ========
The following table reconciles our EBITDA, as adjusted, to net income:
YEAR ENDED MARCH 31,
--------------------------------------------
2000 2001 2002 2003
-------- -------- -------- -----------
(IN THOUSANDS) (UNAUDITED)
EBITDA, AS ADJUSTED....................... $ 55,561 $ 88,787 $207,315 $201,150
Depreciation and amortization........... (26,000) (33,485) (48,600) (63,706)
Operating lease expense................. -- (14,443) (55,401) (46,071)
Interest expense, net................... (30,916) (22,622) (23,017) (36,421)
Management fee.......................... (3,200) -- -- --
Foreign currency gain/(loss)............ (4) (177) 42 (459)
Non-recurring charges................... -- (8,699) -- --
Income taxes............................ 696 (3,871) (30,931) (20,975)
Extraordinary loss, net................. -- (6,632) -- --
-------- -------- -------- --------
NET INCOME (LOSS)......................... $ (3,863) $ (1,142) $ 49,408 $ 33,518
======== ======== ======== ========
(3) For the purpose of computing this ratio, fixed charges consist of interest,
whether expensed or capitalized, operating lease expense and amortization of
loan costs.
(4) For the purpose of computing this ratio, total debt includes $427.0 million
and $100.5 million, respectively, outstanding under the BRL lease facility
and ABS lease facility as of March 31, 2001.
(5) For the purpose of computing this ratio, total debt includes $549.0 million
and $159.5 million, respectively, outstanding under the BRL lease facility
and ABS lease facility as of March 31, 2002.
(6) As adjusted to give effect to the tender of 100% of our outstanding 9 7/8%
senior discount notes (assuming a purchase price of 105.35% of their
aggregate principal amount). In connection with this purchase, we expect to
recognize a charge of approximately $8.9 million after tax related to the
purchase premium and the write-off of previously incurred debt issuance
costs.
(7) Excludes approximately $6.2 million of letters of credit issued under our
revolving credit facility.
(d) The following table sets forth the annual and long-term compensation
for fiscal 2003, 2002 and 2001 for our Chief Executive Officer, our other four
highest paid officers and a former officer who would have been one of our
highest paid officers had he been employed by us at the end of the most recent
fiscal year.
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- ---------------------------
FISCAL RESTRICTED STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER STOCK (SHARES) COMPENSATION(1)
--------------------------- ------ -------- -------- ------- ---------- ------------- ---------------
Stephen A. Snider............. 2003 $375,000 $ 93,750 -- -- 35,000 $ 28,561
President................... 2002 265,000 155,356 -- $856,500(2) 250,000 19,230
2001 222,917 350,437 -- -- 161,007 17,159
Ernie L. Danner............... 2003 275,000 117,232 -- -- 25,000 25,102
Executive Vice President
and....................... 2002 205,000 103,013 -- 571,000(2) 95,000 15,869
President, Latin America
Division.................. 2001 69,250 232,365 -- -- 104,057 310,019
Kirk E. Townsend.............. 2003 235,000 43,757 -- -- 20,000 20,940
President, U.S. Division.... 2002 180,005 100,000 -- 285,500(2) 90,000 13,660
2001 163,750 170,023 -- -- 64,286 14,959
Richard Leong(3).............. 2003 200,000 25,000 $46,536(4) 166,800(5) 25,000 19,582
President, Asia Pacific
Division.................. 2002 65,496 33,333 -- -- 40,000 2,829
2001 -- -- -- -- -- --
Shane S. Guiltner(6).......... 2003 175,621 20,230 -- 166,800(5) 15,000 6,104
President, Canada
Division.................. 2002 125,747 86,683 -- -- 30,000 6,944
2001 108,354 -- -- -- 26,726 8,311
Richard W. FitzGerald(7)...... 2003 250,000 46,900 -- -- -- 110,983
Senior Vice President and... 2002 205,000 103,013 -- 571,000(2) 95,000 15,633
Chief Financial Officer..... 2001 178,333 232,365 -- -- 90,333 12,506
---------------
(1) Represents matching contributions of $6,889, $6,065, $5,944, $7,096 and
$5,863 made by us in fiscal year 2003 under our 401(k) Savings Plan for each
of Messrs. Snider, Danner, Townsend, Leong and FitzGerald, respectively;
payments of $9,086, $6,664, $2,712, and $4,904 made by us in fiscal year
2003 under our Employees' Supplemental Savings Plan for each of Messrs.
Snider, Danner, Townsend and FitzGerald, respectively; health care premiums
of $11,776 made by us in fiscal year 2003 under our Executive Medical and
Dental Plan on behalf of each of Messrs. Snider, Danner, Townsend, Leong and
FitzGerald, and health care premiums of $318 on behalf of Mr. Guiltner;
represents life insurance and AD&D premiums of $810, $594, $508, $432 and
$540, made by us in fiscal year 2003 under our group life insurance and AD&D
plans for each of Messrs. Snider, Danner, Townsend, Leong and FitzGerald,
respectively; payments of $548 made by us in fiscal year 2003 associated
with Mr. Leong's relocation and assignment to Singapore; medical premiums of
$678 paid by us to Alberta Healthcare on behalf of Mr. Guiltner during
fiscal year 2003; supplemental health and insurance premiums of $769 in
fiscal year 2003 made by us on behalf of Mr. Guiltner; fiscal year 2003
Registered Retirement Savings Plan (RRSP) contributions of $4,339 made by us
on behalf of Mr. Guiltner; and the accelerated vesting of 5,000 of Mr.
FitzGerald's shares of his restricted stock of Universal Compression
Holdings, Inc. ("Holdings") with a value of $87,900, based on the closing
price of Holdings' common stock on the New York Stock Exchange, or NYSE, on
March 28, 2003.
(2) Following is the aggregate number of shares of restricted stock and its
value, based on the closing price of Holdings' common stock on the NYSE, as
of March 31, 2003, held by each of the following officers: Mr. Snider,
22,500 shares valued at $392,625; Mr. Danner, 15,000 shares valued at
$261,750; and Mr. Townsend, 7,500 shares valued at $130,875. All such shares
of restricted stock were granted to these officers on August 16, 2001 and
vested 25% on January 1, 2003 and will vest 25% on each January 1 thereafter
until January 1, 2006. The values set forth in the table are based on $28.55
per share, the closing price of Holdings' common stock on the NYSE on August
16, 2001.
(3) Mr. Leong joined us in December 2001.
(4) Represents a foreign service premium of 25% of base salary payable to Mr.
Leong starting May 6, 2002, and associated with his work assignment in
Singapore.
(5) Following is the aggregate number of shares of restricted stock and its
value, based on the closing price of Holdings' common stock on the NYSE, as
of March 31, 2003, held by each of the following officers: Mr. Leong, 10,000
shares valued at $174,500; and Mr. Guiltner, 10,000 shares valued at
$174,500. All such shares of restricted stock were granted to these officers
on March 10, 2003 and will vest 25% on March 10, 2005 and will vest 25% on
each March 10 thereafter until March 10, 2008. The values set forth in the
table are based on $16.68 per share, the closing price of Holdings' common
stock on the NYSE on March 10, 2003.
(6) Mr. Guiltner joined us in February 2001 in connection with our acquisition
of Weatherford Global.
(7) Mr. FitzGerald separated from us in March 2003.
2. CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2003:
- on an actual basis; and
- on an as adjusted basis to give effect to the offering of the notes and
the application of the estimated net proceeds.
AS OF MARCH 31, 2003
--------------------------
ACTUAL AS ADJUSTED
----------- ------------
(UNAUDITED, IN THOUSANDS)
Cash and cash equivalents........................... $ 71,693 $ 11,693
========== ==========
Long-term debt, including current maturities
Other debt........................................ $ 8,224 $ 8,224
Revolving credit facility(1)...................... -- 18,344
9 7/8% senior discount notes...................... 229,750 --
Notes offered hereby.............................. -- 175,000
BRL lease facility................................ 532,181 532,181
ABS lease facility................................ 175,000 175,000
---------- ----------
Total long-term debt, including current
maturities.............................. $ 945,155 $ 908,749
---------- ----------
Stockholder's equity................................ $ 740,503 $ 731,647
---------- ----------
Total capitalization........................... $1,685,658 $1,640,396
========== ==========
---------------
(1) Excludes approximately $6.2 million of letters of credit issued under our
revolving credit facility.
3. The following statements are included in the preliminary offering
memorandum:
(a) We are the second largest natural gas compression services company in
the world in terms of compressor fleet horsepower, with a fleet as of March 31,
2003 of approximately 7,400 compressor units comprising approximately 2.3
million horsepower.
(b) For the year ended March 31, 2003, approximately 28% of our revenues
were attributable to international operations.
(c) As of March 31, 2003, we had approximately $945.2 million in
outstanding obligations, of which approximately $175 million was outstanding
under our ABS lease facility, approximately $532.2 million was outstanding under
our BRL lease facility and $229.75 million was outstanding under our 9 7/8%
senior discount notes. This amount excludes approximately $6.2 million of
letters of credit issued under our senior secured revolving credit facility,
which we refer to as our revolving credit facility. As of that date, we also had
unused availability, subject to the satisfaction of covenants contained therein,
of approximately $143.8 million ($118.8 million under our revolving credit
facility and approximately $25 million under our ABS lease facility).
(d) For the 2004 fiscal year, our capital expenditures, excluding
acquisitions, are expected to be approximately $90 to $110 million, of which
approximately $30 million is expected to be used for maintenance capital
expenditures.
(e) For the quarter ended March 31, 2003, our average horsepower
utilization rate was approximately 83.5%.
(f) As of March 31, 2003, we operated the second largest domestic fleet of
compressors in terms of horsepower with approximately 6,900 units comprising
approximately 2.0 million horsepower. We operate sales and service locations in
the primary onshore and offshore natural gas producing regions of the United
States. For the year ended March 31, 2003, approximately 80.0% of our contract
compression revenue and 42.5% of our total revenue was generated from domestic
contract compression operations.
(g) We operate internationally in Argentina, Canada, Mexico, Colombia,
Thailand, Australia, Venezuela, Peru and Brazil. As of March 31, 2003, we had
approximately 520 units comprising approximately 368,000 horsepower, in the
aggregate, in these markets. We intend to continue to expand our presence in
these markets and pursue opportunities in other strategic international areas.
For the year ended March 31, 2003, 28% of our total revenue was generated from
international operations, of which approximately 37.8% represents contract
compression revenue.
(h) For the year ended March 31, 2003, approximately 26.0% or $162.7
million of our total revenues were generated from fabrication operations.
(i) Our aftermarket services business sells parts and components, and
provides maintenance to customers who own their compression equipment or lease
their equipment from our competitors. For the year ended March 31, 2003, we
generated $130.6 million in revenues, or 20.9% of our total revenues, from this
segment of our business.
(j) Approximately $82.2 million of our outstanding debt bears interest at
floating rates. Changes in economic conditions could result in higher interest
rates, thereby increasing our interest expense and reducing our funds available
to make payments of interest and principal on the notes and for capital
investment, operations or other purposes. Our significant leverage increases our
vulnerability to general adverse economic and industry conditions.
(k) In addition, we operate in select international markets, with current
operations in Argentina, Canada, Mexico, Colombia, Thailand, Australia,
Venezuela, Peru and Brazil. For the year ended March 31, 2003, approximately 28%
of our revenues was attributable to international operations.
(l) We have standardized our contract compressor fleet around three primary
gas compressor platforms, which can be specialized to meet customers needs,
based on smaller horsepower applications (less than 150 horsepower), mid-range
applications (150-600 horsepower) and larger horsepower applications (over 600
horsepower). These three compressor platforms represent over 90% of our
horsepower. In recent years there has been substantial growth in customer demand
in the over 600 horsepower category and as a result we have increased the
average horsepower of our fleet and have increased our fabrication of upper
range units (generally over 600 horsepower). For the year ended March 31, 2003,
the average horsepower utilization rate for our fleet was approximately 83.3%,
which reflects average horsepower utilization based upon our total average fleet
horsepower. For the quarter ended March 31, 2003, this average rate was
approximately 83.5%.
As of March 31, 2003, our fleet consisted of 7,422 compressors, with an
average of 313 horsepower per unit, as reflected in the following table:
TOTAL HORSEPOWER % OF HORSEPOWER NUMBER OF UNITS
--------------------- --------------------- ---------------------
AS OF MARCH 31, AS OF MARCH 31, AS OF MARCH 31,
--------------------- --------------------- ---------------------
HORSEPOWER RANGE 2002 2003 2002 2003 2002 2003
---------------- --------- --------- --------- --------- --------- ---------
0-99................. 196,024 194,160 8.8 8.3 2,652 2,633
100-299.............. 462,751 458,021 20.7 19.7 2,688 2,640
300-599.............. 349,250 359,953 15.6 15.5 917 941
600-999.............. 380,251 404,159 17.0 17.4 517 551
1,000 and over....... 847,752 909,159 37.9 39.1 619 657
--------- --------- --------- --------- --------- ---------
Total........... 2,236,028 2,325,452 100% 100% 7,393 7,422
(m) ABS LEASE FACILITY
General
A wholly owned subsidiary of ours entered into a $200 million asset-backed
securitization lease facility as of December 31, 2002. As of May 15, 2003,
approximately $175 million was drawn under the ABS lease facility. We used the
proceeds of these facilities primarily (i) to restructure some of our lease
obligations; (ii) to expand our fleet; and (iii) for general corporate purposes.
Structure
Once fully funded, approximately $200 million of our compression equipment,
based on the current appraised fair market value, will have been sold to the ABS
lessor under the ABS lease facility. The debt and assets of the ABS lessor are
consolidated on our balance sheet as of December 31, 2002. UCO Compression 2002
LLC, a wholly owned subsidiary of ours ("ABS lessee"), leases the equipment from
the BRL Universal Compression Funding I 2002, L.P. ("ABS Lessor"), pursuant to a
lease agreement that will terminate on January 20, 2013.
We entered into a management agreement pursuant to which we manage, lease
and maintain the compression equipment that is subject to the ABS lease
facility. As consideration for our maintaining, operating and leasing the
compression equipment to its customers, the ABS lessee pays us a management fee
based on the horsepower of the equipment owned or leased by the ABS lessee plus
a fixed percentage of the rental revenues generated by such equipment. Holdings
guarantees our management performance obligations under the ABS management
agreement.
The ABS lessor has the ability to draw the remaining amounts (or repay and
redraw amounts) under the ABS lease facility until December 18, 2003 and the
notes relating to the ABS lease facility shall mature on the payment date
occurring in January 2023.
A nationally recognized insurance company provided the holders of the notes
relating to the ABS lease facility a policy guaranteeing the payment of
principal and interest on their notes and obtaining a credit rating on the notes
relating to the ABS lease facility. Standard & Poor's Corporation and Moody's
Investors Service rated the notes relating to the ABS facility with an
equivalent of "AAA" and "Aaa", respectively, resulting in a lower interest rate
for those notes.
Lease Payments
The lease payments under the ABS lease facility are payable monthly by the
ABS lessee and consist of (i) a fixed amount plus customary fees to maintain the
ABS lease facility and fees incurred in connection with certain interest rate
swap agreements entered into in connection with the ABS lease facility over the
scheduled payments to be received by ABS lessor from all interest rate swap
agreements entered into in connection with the ABS lease facility; and (ii) if
we elect such option, a principal payment, which is variable in amount,
depending on numerous different factors.
At the end of the lease term, the ABS lessee will have the option to (i)
purchase the compression equipment that was subject to the ABS lease facility
for an amount equal to the lease payments then due and payable, plus the
appraised values of the compressors being purchased, plus any applicable
termination or breakage costs, or (ii) return the equipment to the ABS lessor
and pay a fee equal to 80% times the initial appraised value of the compressors
being returned minus any principal payments; (iii) request that the ABS lease
facility be renewed with respect to all of the compressors. In addition, the ABS
lessee will have the option to purchase the compression equipment at any time
during the term of the facility for a purchase price equal to the sum of the
appraised value of the compressors being purchased, the ratable portion of the
outstanding balance under the ABS lease facility and any hedge breakage costs
incurred by the ABS lessor.
Security
The ABS lease facility is secured by a first priority security interest in
all of the assets owned by both the ABS lessor and the ABS lessee under the
facility, with a approximate appraised fair market value as of December 31, 2002
of $260 million, including all of the compression equipment subject to the ABS
lease facility and the ABS lease.
Conditions to Funding
Future borrowings under the ABS lease facility are subject to customary
borrowing conditions plus three independent appraisals of the compression
equipment relating to advances totaling more than $17.5 million since January 1,
2003.
Triggering Events and Events of Default
Payment defaults by the ABS lessor under the facility, defaults by the ABS
lessee under the leases, defaults by us in our management obligations of the
equipment and defaults in certain revenue and collateralization tests constitute
"trigger events" under the facility. If a trigger event occurs, all excess cash
flow generated by the leased equipment and the excess collateral equipment will
be used only to make payments under the facility and may not be distributed to
us.
Defaults by the ABS lessor under the ABS lease facility include the failure
to make required interest and principal payments under the ABS lease facility
and other customary defaults.
Defaults by the ABS lessee under the ABS leases include:
- the failure to make timely lease payments;
- the failure to satisfy conditions with respect to the collateral; and
- other customary defaults.
Defaults by us as the manager of the equipment include:
- the failure to maintain and manage the asset-backed securitization
equipment portfolio to certain quantifiable standards;
- our ratio of EBITDA, as adjusted, to total interest expense (including
capital and lease payments) is less than 2.00 to 1.00;
- our minimum tangible worth is less than the sum of (a) $250,000; and (b)
50% of our cumulative positive net income after March 31, 2002, as
adjusted annually;
- our ratio of total debt to EBITDA, as adjusted, exceeds 5.50 to 1.00;
- bankruptcy events;
- defaults in facilities involving indebtedness equal to or greater than
$25 million until December 31, 2005, and $35 million thereafter;
- certain changes of control of us or Universal Compression Holdings, Inc.
and
- the failure to comply with customary representations and warranties.
D. FORWARD LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. The statements contained in this Current
Report on Form 8-K that are not historical facts (including without limitation
statements to the effect that we "believe," "expect," "anticipate," "plan,"
"intend" or "foresee," and other similar expressions) are forward-looking
statements. These forward-looking statements are based on our current
expectations and beliefs concerning future developments and their potential
effects on us. There can be no assurance that future developments affecting us
will be those anticipated by us. These forward-looking statements involve
significant risks and uncertainties (some of which are beyond our control) and
assumptions. They are subject to change based upon various factors, including
but not limited to the following risks and uncertainties:
- conditions in the oil and gas industry, including a sustained decrease in
the level of supply or demand for natural gas and the impact of the price
of natural gas;
- competition among the various providers of natural gas compression
services;
- changes in political or economic conditions in key operating markets,
including international markets;
- changes in safety and environmental regulations pertaining to the
production and transportation of natural gas;
- acts of war or terrorism or governmental or military responses thereto;
- introduction of competing technologies by other companies;
- our ability to retain and grow our customer base;
- our level of indebtedness and ability to fund our business;
- our ability to recoup our investment by re-leasing our compressors after
typically short initial lease terms;
- currency exchange rate fluctuations;
- employment workforce factors, including loss of key employees; and
- liability claims related to the use of our products and services.
Should one or more of these risks or uncertainties materialize, or should any of
our assumptions prove incorrect, actual results may vary in material respects
from those projected in the forward-looking statements. We undertake no
obligation to publicly update or revise any forward-looking statements contained
in this Current Report on Form 8-K whether as a result of new information,
future events or otherwise.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants has 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: May 16, 2003 /s/ J. MICHAEL ANDERSON
----------------------------------------
J. Michael Anderson
Senior Vice President and
Chief Financial Officer