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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for
Use of the
Commission Only (as
permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
UNIVERSAL COMPRESSION HOLDINGS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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[Universal Compression logo]
UNIVERSAL COMPRESSION HOLDINGS, INC.
4440 BRITTMOORE ROAD
HOUSTON, TEXAS 77041
January 26, 2001
Dear Shareholder:
Attached to this letter is a supplement to our Proxy Statement dated
December 27, 2000 relating to a special meeting of shareholders of Universal
Compression Holdings, Inc., which updates our proposed financing transactions in
connection with our pending acquisition of Weatherford Global Compression
Services, L.P. and certain related entities (WGC). The supplement also includes
revised unaudited pro forma combined condensed financial information to
illustrate the effect of the proposed WGC acquisition and related financing
transactions.
OUR BOARD OF DIRECTORS BELIEVES THAT THE ISSUANCE OF 13,750,000 SHARES OF
OUR COMMON STOCK IN CONNECTION WITH THE WGC ACQUISITION AND THE AMENDMENT TO OUR
INCENTIVE STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF OUR COMMON STOCK
AUTHORIZED FOR ISSUANCE UNDER THE PLAN FROM 1,912,421 SHARES TO 3,012,421 SHARES
ARE FAIR TO AND IN THE BEST INTERESTS OF OUR SHAREHOLDERS AND RECOMMENDS THAT
YOU VOTE FOR THESE PROPOSALS.
In order to give you an opportunity to evaluate the attached supplement, we
will not submit the proposed issuance of our common stock in the acquisition and
the amendment to our Incentive Stock Option Plan to a vote when the special
meeting is convened on February 6, 2001. Instead, the only action that will be
taken at such meeting will be to adjourn the meeting until Friday, February 9,
2001, on which date the special meeting will reconvene at 9:00 a.m., local time,
at the Drury Inn, 100 Highway 6, Houston, Texas 77079.
You have already received a proxy card on which you can vote, and you may
have already returned the card. HOWEVER, WE HAVE ENCLOSED AN ADDITIONAL PROXY
CARD FOR YOUR USE, IN CASE YOU HAVE MISPLACED THE PROXY CARD PREVIOUSLY SENT TO
YOU OR YOU WISH TO CHANGE YOUR VOTE. IF YOU HAVE ALREADY VOTED YOUR PROXY AND DO
NOT WISH TO CHANGE YOUR VOTE, YOU DO NOT NEED TO RETURN THIS ADDITIONAL PROXY
CARD. If you have any questions concerning the procedures required to vote your
shares or how to change your vote if you have already voted, please contact
Morrow & Co., Inc. at (800) 607-0088.
On behalf of the board of directors, we thank you for your support and urge
you to vote FOR the proposed issuance of our common stock in connection with the
WGC acquisition and FOR the proposed amendment to our Incentive Stock Option
Plan.
/s/ STEPHEN A. SNIDER
Stephen A. Snider
President and Chief Executive
Officer
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UNIVERSAL COMPRESSION HOLDINGS, INC.
4440 BRITTMOORE ROAD
HOUSTON, TEXAS 77041
---------------------
SUPPLEMENT TO
PROXY STATEMENT DATED DECEMBER 27, 2000
RELATING TO
SPECIAL MEETING OF SHAREHOLDERS
---------------------
GENERAL INFORMATION
Universal Compression Holdings, Inc., a Delaware corporation ("UCH"),
hereby supplements its Proxy Statement dated December 27, 2000 furnished to its
shareholders in connection with the special meeting scheduled for Tuesday,
February 6, 2001 at 10:00 a.m., local time, at the Drury Inn, 100 Highway 6,
Houston, Texas 77079.
This supplement should be read in conjunction with the proxy statement.
However, matters in this supplement supersede any contrary statements contained
in the proxy statement. If you need another copy of the proxy statement, please
contact our General Counsel at the address appearing at the top of this
supplement.
Capitalized terms used in this supplement will have the meaning assigned to
them herein or, if not defined herein, will have the meaning assigned to them in
the proxy statement. The terms "Universal," "our company," "we," "us" and "our,"
when used in this supplement, refer to Universal Compression Holdings, Inc. and
its subsidiaries, including Universal Compression, Inc., as a combined entity,
except where it is made clear that the term means only the parent company, UCH.
This supplement is first being mailed to shareholders on or about January
29, 2001.
ADJOURNMENT AND RECONVENING OF THE SPECIAL MEETING
The special meeting will be convened on the date and time, and at the
location, specified under "General Information" above. However, in light of the
updated financing transactions and pro forma financial information described
under "Recent Developments" below, we will not submit the issuance of 13,750,000
shares of our common stock and the amendment of our Incentive Stock Option Plan
to a vote when the special meeting is convened on February 6, 2001. Instead, the
only action that will be taken at such meeting will be to adjourn the meeting
until February 9, 2001, on which date the special meeting will reconvene at the
Drury Inn, 100 Highway 6, Houston, Texas 77079, at 9:00 a.m., local time. The
record date for the special meeting, the reconvened special meeting on February
9, 2001 and any further adjournments or postponements remains the close of
business on December 8, 2000.
Shareholders who are entitled to vote at the special meeting, and who have
not already voted or who wish to change their vote, can use the enclosed proxy
card. Shareholders who have already voted using the proxy card sent to them with
the proxy statement need not vote again unless they wish to change their vote.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
PROPOSED ISSUANCE OF 13,750,000 SHARES OF OUR COMMON STOCK IN CONNECTION WITH
THE WGC ACQUISITION AND FOR THE PROPOSED AMENDMENT TO OUR INCENTIVE STOCK OPTION
PLAN.
You can vote by proxy or in person at the reconvened special meeting on
February 9, 2001. If you return your signed proxy card before the reconvened
special meeting, the proxy holders will vote your shares as you direct. Your
broker will vote your shares of common stock on the proposals only if you
provide instructions on how to vote. You should instruct your broker how to vote
your shares, following the
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directions your broker provides. If you do not provide instructions to your
broker, your shares will not be voted on the proposals and will have no effect
on the result of the vote, provided that holders of at least a majority of the
shares entitled to vote at the special meeting cast votes.
Our Board of Directors does not presently intend to bring any business
before the special meeting other than that referred to in the proxy statement,
as modified by this supplement.
RECENT DEVELOPMENTS
We have been negotiating the financing transactions that are necessary to
consummate our acquisition of Weatherford Global Compression Services, L.P. and
certain related entities ("WGC"). We intend to raise at least $427 million under
a new operating lease facility to be funded primarily through an offering of
approximately $350 million in senior secured notes by an unaffiliated entity. We
also intend to enter into a new secured revolving credit facility of up to $125
million and a new asset-backed securitization operating lease facility of up to
$200 million (the "ABS Operating Lease Facility"). We initially expect to fund
approximately $75 million under the ABS Operating Lease Facility and expect to
have no amounts initially outstanding under the new revolving credit facility.
The proceeds from the two new operating lease facilities will be used to
refinance certain existing indebtedness and restructure existing operating lease
obligations of Universal and WGC.
On January 2, 2001, Universal Compression, Inc., a Texas corporation and
wholly owned subsidiary of Universal Compression Holdings, Inc. ("UCI"),
commenced an offer to purchase all of its existing 9 7/8% Senior Discount Notes
due 2008. UCI also solicited the consent of the holders of the 9 7/8% Senior
Discount Notes to amend the indenture governing the notes to eliminate
substantially all the restrictive covenants.
On January 26, 2001, UCI announced that it had terminated its offer to
purchase its 9 7/8% Senior Discount Notes. The related consent solicitation
expired at 5:00 p.m., New York City time, on January 24, 2001. Our pending
acquisition of WGC and related financing transactions are not conditioned upon
the completion of the tender offer and consent solicitation. The requisite
consents from the holders of the 9 7/8% notes for the proposed amendment to the
indenture governing the notes were not received prior to the extended deadline.
The existing 9 7/8% notes will remain outstanding and, upon consummation of
the pending WGC acquisition, will be subject to the right of the holders to
require Universal to repurchase the notes at 101% of the accreted value, plus
accrued and unpaid interest, if any, pursuant to the terms of the indenture. To
the extent holders exercise such right, we intend to fund such repurchase of the
9 7/8% notes under our new revolving credit facility or the ABS Operating Lease
Facility. As a result of the termination of the tender offer and expiration of
the consent solicitation, we adjusted the amount we initially expected to fund
under the ABS Operating Lease Facility.
In connection with the proposed financing transactions, we have updated our
unaudited pro forma financial information contained in the proxy statement. The
section entitled "Selected Unaudited Pro Forma Combined Condensed Financial
Information of Universal Compression Holdings, Inc." on page 17 of the proxy
statement is revised to give effect to the events recited above under "Recent
Developments" by replacing in its entirety the table set forth on page 17 of the
proxy statement with the following:
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SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION OF UNIVERSAL COMPRESSION HOLDINGS, INC.
The pro forma financial data set forth in the table below has been derived
from the Unaudited Pro Forma Combined Condensed Financial Statements and the
notes thereto which are included in this proxy statement, as modified by this
supplement. You should read those statements for a further description of the
financial data summarized here. The selected unaudited pro forma statements of
operations data for the six months ended September 30, 2000 and the year ended
March 31, 2000 give effect to UCH's initial public offering, the WGC acquisition
and related financing transactions as if the transactions had occurred on April
1, 2000 for purposes of the six months ended September 30, 2000 and on April 1,
1999 for the year ended March 31, 2000. The unaudited pro forma balance sheet as
of September 30, 2000 gives effect to UCH's initial public offering, the WGC
acquisition and the related financing transactions as if the transactions had
occurred on September 30, 2000. Because the fiscal years of Universal and WGC
differ, WGC's historical operating results for the 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 pro forma financial data shown in the
table below are not necessarily indicative of what our results of operations or
financial position would have been had the WGC acquisition been completed as of
the date reflected or that may be achieved in the future. Please see "Unaudited
Pro Forma Combined Condensed Financial Information" in this supplement for a
description of the pro forma adjustments to the historical financial statements
of Universal and WGC showing the effect of the WGC acquisition and the related
financing transactions. You should also read the historical financial statements
and accompanying disclosures contained in the proxy statement. You should also
read Universal's Annual Report on Form 10-K for the fiscal year ended March 31,
2000, as amended, Universal's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000 and Universal's Current Reports on Form 8-K filed since
such date.
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 2000 MARCH 31, 2000
------------------ --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Statements of Operations Data:
Revenues.................................................. $187,585 $374,212
Total operating expenses.................................. 174,725 337,304
Income (loss) before income taxes and minority interest... 12,860 36,908
Income (loss) before extraordinary items.................. 8,284 21,028
Per Share Data:
Basic income (loss) before extraordinary items per
share.................................................. $ 0.31 $ 0.79
Shares used in computing basic income (loss) before
extraordinary items per share.......................... 27,089 26,721
Diluted income (loss) before extraordinary items per
share.................................................. $ 0.30 $ 0.77
Shares used in computing diluted net income (loss) before
extraordinary items per share.......................... 27,254 27,407
AS OF
SEPTEMBER 30, 2000
------------------
(IN THOUSANDS)
Balance Sheet Data:
Cash and equivalents...................................... $ 5,369
Total current assets...................................... 196,847
Total current liabilities................................. 76,292
Total noncurrent liabilities.............................. 308,774
Total stockholders' equity................................ 651,289
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The section entitled "Risk Factors" commencing on page 18 of the proxy
statement is amended to give effect to the events recited above under "Recent
Developments" in this supplement by adding the following risk factor:
TO THE EXTENT THAT HOLDERS OF UCI'S 9 7/8% SENIOR DISCOUNT NOTES REQUIRE UCI TO
REPURCHASE THE NOTES FOLLOWING THE ACQUISITION OF WGC, WE MUST FINANCE SUCH
REPURCHASE.
The completion of the WGC acquisition will result in a change of control of
UCI under the indenture for the 9 7/8% Senior Discount Notes. As such, each
holder of the 9 7/8% Senior Discount Notes will have the right to require UCI to
repurchase such holder's 9 7/8% Senior Discount Notes at a price equal to 101%
of their accreted value, plus accrued and unpaid interest, if any, to the date
of repurchase. To the extent that holders of UCI's 9 7/8% Senior Discount Notes
require UCI to repurchase the notes, we currently intend to finance any such
repurchase through the use of commitments under our proposed new revolving
credit facility or our proposed ABS Operating Lease Facility. There can,
however, be no assurance as to the terms and conditions that will be available
to us for any such financing.
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The section entitled "Unaudited Pro Forma Combined Condensed Financial
Information" commencing on page 43 is revised to give effect to the events
recited above under "Recent Developments" in this supplement by replacing in
their entirety the data and tables beginning on page 43 and ending on page 50 of
the proxy statement with the following:
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 Universal and WGC (or "Enterra" in reference to the parent company of
WGC) and have been prepared to illustrate the effect of the WGC 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 contained in the proxy statement. You
should also read Universal's Annual Report on Form 10-K for the fiscal year
ended March 31, 2000, as amended, its Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000 and its Current Reports on Form 8-K filed since
such date.
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 Universal 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
herewith give effect to:
- the initial public offering of UCH's 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 UCH's preferred
stock and non-voting common stock that occurred concurrently with our
initial public offering;
- the transfer of GSI and related assets to Weatherford entities other than
Enterra and its subsidiaries prior to the WGC acquisition as described
more fully in "The Merger Agreement -- Certain Pre-Closing Transfers"
(page 65 of the proxy statement); and
- completion of the WGC acquisition and the related financing transactions.
We have not included in the unaudited pro forma combined condensed
financial statements the annual cost savings and other synergies of an estimated
$20 million that Universal's management expects to realize by the end of fiscal
2002 as a result of the WGC acquisition. While Universal believes these savings
and synergies will occur, we cannot assure you they will be realized either as
quickly or as fully expected, if at all. The unaudited pro forma combined
condensed financial statements also do not give effect to our acquisition of Gas
Compression Services, Inc. ("GCSI") on September 15, 2000. The unaudited pro
forma condensed combined financial statements presented below do not reflect
future events that may occur after the WGC acquisition.
At this time, Universal's management is finalizing negotiations with
several financial institutions to determine the appropriate debt structure of
the combined company. For purposes of the accompanying unaudited pro forma
combined condensed financial information the assumptions are (a) a new $427
million operating lease facility with an unaffiliated entity primarily funded
through an offering of approximately $350 million of senior secured notes by
such entity, (b) a new $125 million secured revolving credit facility and (c) a
new $200 million asset-backed securitization operating lease facility. We have
assumed that none of the current holders of our 9 7/8% Senior Discount Notes
will exercise their right to require Universal to repurchase the outstanding
bonds at 101% of the accreted value, plus accrued and unpaid interest, if any,
pursuant to the terms of the indenture following consummation of the WGC
acquisition. At this time, we cannot determine the final terms of the new
indebtedness and operating lease
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arrangements, or the final amount of our existing senior notes, if any, that the
holders of such notes may require us to repurchase, which amount could vary
significantly.
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 accompanying unaudited pro forma combined condensed financial
statements should be read in conjunction with the historical consolidated
financial statements of Universal and WGC and the notes thereto, which are
included in the proxy statement. The unaudited pro forma combined condensed
financial statements are provided for informational purposes only and do not
purport to represent what our financial position or results of operations would
actually have been had the WGC acquisition occurred on such dates or to project
our results of operations or financial position for any future period.
References to "Enterra" in the pro forma combined condensed financial
statements mean WGC as defined in the "Recent Developments" section of, and used
elsewhere in, this proxy statement, as modified by this supplement.
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UNIVERSAL COMPRESSION HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
---------------------------------------------------
ENTERRA
UCH ADJUSTED MERGER PRO FORMA
ACTUAL ACTUAL(1) ADJUSTMENTS AS 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
-------- -------- --------- ----------
Total current assets................ 44,727 152,120 -- 196,847
Property, plant and equipment
Rental equipment............................ 359,993 279,083 (77,147)(2) 561,929
Other....................................... 26,525 64,817 (39,817)(2) 51,525
Less: accumulated depreciation.............. (44,391) (71,064) 75,921(2) (39,534)
-------- -------- --------- ----------
Net property, plant, and equipment....... 342,127 272,836 (41,043) 573,920
Goodwill and intangibles, net of
amortization................................ 131,557 224,724 (134,225)(3) 222,056
Notes receivable.............................. 4,929 1,719 -- 6,648
Other assets, net............................. 8,611 8,925 11,839(4) 29,375
Long-term deferred tax asset.................. 7,509 -- -- 7,509
-------- -------- --------- ----------
Total assets........................ $539,460 $660,324 $(163,429) $1,036,355
======== ======== ========= ==========
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
-------- -------- --------- ----------
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 (60,316)(9) 73,192
-------- -------- --------- ----------
Total liabilities................... 277,782 444,022 (336,738) 385,066
Total stockholders' equity.......... 261,678 216,302 173,309(10) 651,289
-------- -------- --------- ----------
Total liabilities and stockholders'
equity............................ $539,460 $660,324 $(163,429) $1,036,355
======== ======== ========= ==========
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
----------------------------------------------------------------
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........................................... $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 (10,764)(16) 21,860
Operating lease.................................... 2,684 924(12) 10,860 7,316(17) 21,784
Interest expense................................... 13,225 (2,793)(13) 5,860 (5,922)(18) 10,370
Interest income.................................... -- -- -- (2,530)(19) (2,530)
Other, net......................................... 7,059 (7,059)(14) 117 -- 117
------- ------- -------- -------- --------
Income (loss) before income taxes and
minority interest........................ (4,657) 9,310 (3,693) 11,900 12,860
Income taxes (benefit)............................. (1,746) 3,491(15) (1,631) 4,462(15) 4,576
Minority interest expense, net of taxes............ -- -- 306 (306)(20) --
------- ------- -------- -------- --------
Income (loss) before extraordinary items... $(2,911) $ 5,819 $ (2,368) $ 7,744 $ 8,284
======= ======= ======== ======== ========
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) $ -- $ 0.31
======= ======== ========
Diluted.................................... $ (0.26) $ -- $ 0.30
======= ======== ========
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
-----------------------------------------------------------------------
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 (17,343)(25) 39,843
Operating lease............................... -- 5,702(12) 14,344 22,144(26) 42,190
Interest expense.............................. 34,327 (15,727)(24) 5,293 (5,190)(27) 18,703
Interest income............................... -- -- -- (11,564)(28) (11,564)
Other, net.................................... -- -- (2,378) -- (2,378)
-------- -------- -------- -------- ----------
Income (loss) before income taxes and
minority interest................... (7,976) 16,784 16,147 11,953 36,908
Income taxes (benefit)........................ (1,994) 6,378(15) 7,013 4,483(15) 15,880
Minority interest expense, net of taxes....... -- -- 4,194 (4,194)(20) --
-------- -------- -------- -------- ----------
Income (loss) before extraordinary
items............................... $ (5,982) $ 10,406 $ 4,940 $ 11,664 $ 21,028
======== ======== ======== ======== ==========
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) $ -- $ 0.79
======== ======== ==========
Diluted............................... $ (2.42) $ -- $ 0.77
======== ======== ==========
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 are 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 estimated initial sale and leaseback of additional compression
equipment ($104.2 million) pursuant to the proposed new operating lease
facilities assumed to be 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 ($90.5 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 operating lease facility and revolving credit
facility ($4.9 million), which, for purposes of these pro forma
adjustments, are assumed to be entirely refinanced concurrently with the
WGC acquisition and (b) the recording of prepaid finance costs associated
with the proposed operating lease facilities and revolving credit facility
($16.7 million).
(5) Represents the retirement of WGC's debt using proceeds from the proposed
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 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 forgiveness 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 existing operating lease facilities of WGC ($92.9
million). Also reflects the estimated additional deferred gain ($32.6
million) associated with the sale of compression equipment pursuant to the
proposed new operating lease facilities. Additional deferred gain is
assumed to equal approximately 30% 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
proposed restructuring of the existing operating lease facility and
revolving credit facility.
(11) Reflects the elimination of depreciation expense associated with the sale
of compression equipment pursuant to the existing operating lease facility,
with initial funding under the existing operating lease of $62.6 million.
(12) Reflects the expenses associated with the existing operating lease
facility, including the related commitment fee.
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(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 and its existing 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 from 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 estimated additional sale of compression
equipment pursuant to the proposed new operating lease facilities ($5.7
million), with an aggregate assumed funding under the proposed operating
leases of $478.4 million by the end of the period, which funding includes
the transfer of equipment from the existing 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 proposed new operating
lease facilities ($20.7 million) and amortization of the lease structuring
and arrangement fees ($1.1 million) estimated to be approximately $15.0
million on the closing of the facilities. Also reflects the elimination of
the existing facilities ($14.5 million), including the expected related
commitment fee, with assumed funding under the new facilities of $478.4
million by the end of the period, which facilities are currently being
negotiated. The proposed operating lease facilities will replace
Universal's and WGC's existing 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 9.16% 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 $523,000 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
$56.2 million invested at a rate equivalent to Universal's proposed new
senior secured notes 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 outstanding stock split and conversion that occurred concurrently with,
UCH's initial public offering and the 13,750,000 shares of UCH's common
stock to be 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.
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(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.
(23) Reflects the elimination of depreciation expense associated with the sale
of compression equipment pursuant to the existing 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 existing operating lease
facility. Also includes the commitment fees associated with Universal's
existing 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 ($3.2 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 estimated additional sale of compression
equipment pursuant to the proposed new operating lease facilities ($7.4
million), with an aggregate assumed funding under such facilities of $478.4
million by the end of the period, which funding includes the transfer of
equipment from the existing 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 proposed new operating
lease facilities ($40.0 million) and amortization ($2.1 million) of the
lease structuring and arrangement fees, estimated to be approximately $15.0
million on the closing of the facilities. Also reflects the elimination of
the existing operating lease facilities ($20.0 million), including the
related commitment fee, with assumed aggregate funding under the new
facilities of $478.4 million by the end of the period, which facilities are
currently being negotiated. The proposed operating lease facilities will
replace Universal's and WGC's existing 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 8.86% 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
$507,000 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 the amortization of up-front financing
costs and commitment fees associated with the proposed revolving credit
facility ($0.1 million).
(28) Represents interest income generated on an average excess cash balance of
$128.5 million invested at a rate equivalent to Universal's proposed new
senior secured notes 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 outstanding
stock split and conversion that occurred concurrently with, UCH's initial
public offering and the 13,750,000 shares of UCH's common stock to be
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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