FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                For the Quarterly Period Ended December 31, 2001

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

               For the transition period from ________ to ________

Commission File Numbers: 001-15843
                         333-48279

                      UNIVERSAL COMPRESSION HOLDINGS, INC.
                           UNIVERSAL COMPRESSION, INC.
           (Exact name of registrants as specified in their charters)

                                                                                                      
              DELAWARE                                                                                        13-3989167
                TEXAS                                                                                         74-1282680
  (States or other jurisdictions of                                                                        (I.R.S. Employer
   incorporation of organization)                                                                        Identification Nos.)


        4440 BRITTMOORE ROAD
           HOUSTON, TEXAS                                                                                     77041-8004
   (Address of principal executive                                                                            (Zip Code)
              offices)


                                 (713) 335-7000
              (Registrants' telephone number, including area code)

    Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.

                                 Yes [X] No [ ]

UNIVERSAL COMPRESSION, INC. MEETS THE CONDITIONS SET FORTH IN GENERAL
INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q
WITH THE REDUCED DISCLOSURE FORMAT.

As of January 31, 2001, there were 30,588,323 shares of Universal Compression
Holdings, Inc.'s common stock, $0.01 par value, outstanding and 4,910 shares of
Universal Compression, Inc.'s common stock, $10.00 par value, outstanding.




                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      UNIVERSAL COMPRESSION HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
                                   (UNAUDITED)



                                                      DECEMBER 31, 2001    MARCH 31, 2001
                                                      -----------------    --------------
                                                                       
ASSETS
Current Assets:
    Cash                                                 $   18,968          $   12,279
    Accounts receivable, net                                103,268              87,088
    Inventories, net                                        129,099             120,939
    Other current assets                                     31,712              24,212
                                                         ----------          ----------
          Total current assets                              283,047             244,518

Property, plant and equipment:
   Contract compression equipment                           659,645             592,449
   Other                                                     79,398              52,810
   Accumulated depreciation                                 (90,984)            (55,634)
                                                         ----------          ----------
          Net property, plant and equipment                 648,059             589,625

Goodwill                                                    389,436             294,358
Other assets, net                                            50,781              47,755
                                                         ----------          ----------
          Total assets                                   $1,371,323          $1,176,256
                                                         ==========          ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Accounts payable and accrued liabilities            $  174,139          $  143,303
     Current  portion of  long-term  debt and
        capital lease obligations                             3,724               3,452
                                                         ----------          ----------
           Total current liabilities                        177,863             146,755

 Long-term debt                                             213,841             204,875
 Non-current deferred tax liability                         107,006              90,126
 Deferred gain                                              121,635              75,146
 Capital lease obligations                                    4,360               6,086
 Other liabilities                                              906                 694
                                                         ----------          ----------
           Total liabilities                                625,611             523,682

 Common stock                                                   306                 285
 Treasury stock                                                (934)               (134)
 Paid in capital                                            723,296             663,882
 Currency translation adjustment                                868                 845
 Deferred compensation                                       (2,609)                 --
 Retained earnings/(deficit)                                 24,785             (12,304)
                                                         ----------          ----------
           Total stockholders' equity                       745,712             652,574
                                                         ----------          ----------

           Total liabilities and stockholders' equity    $1,371,323          $1,176,256
                                                         ==========          ==========


     See accompanying notes to unaudited consolidated financial statements.




                                       2

                      UNIVERSAL COMPRESSION HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                   (UNAUDITED)



                                                                         THREE MONTHS ENDED            NINE MONTHS ENDED
                                                                            DECEMBER 31,                 DECEMBER 31,
                                                                  ------------------------------- ----------------------------
                                                                        2001             2000          2001           2000
                                                                  ---------------  -------------- --------------  ------------
                                                                                                      
 Revenues:
     Contract compression                                               $85,942        $ 36,172     $ 247,082         $ 91,127
     Sales                                                               91,437          23,800       244,966           42,201
                                                                        -------        --------     ---------         --------
          Total revenues                                                177,379          59,972       492,048          133,328

 Costs and expenses:
     Contract compression, exclusive of depreciation and                 29,567          12,259        86,881           31,132
       amortization
     Cost of sales, exclusive of depreciation and                        76,557          21,332       206,262           36,360
       amortization
     Depreciation and amortization                                       12,233           7,726        35,325           21,903
     Selling, general and administrative                                 16,134           4,747        44,623           11,970
     Operating leases                                                    14,788           3,539        40,354            6,223
     Interest expense                                                     5,357           5,372        17,462           18,597
     Other (income) / expense                                               194             (42)          430             (299)
     Non-recurring charges                                                   --              --            --            7,059
                                                                        -------        --------     ---------         --------
          Total costs and expenses                                      154,830          54,933       431,337          133,245
                                                                        -------        --------     ---------         --------

 Income before income taxes and extraordinary items                      22,549           5,039        60,711              382
 Income taxes                                                             8,798           1,909        23,622              163

     Income before extraordinary items                                  $13,751        $  3,130     $  37,089         $    219
                                                                        -------        --------     ---------         --------
     Extraordinary loss, net of $3,759
          income tax benefit                                                 --              --            --           (6,264)
                                                                        -------        --------     ---------         --------
     Net income (loss)                                                  $13,751        $  3,130     $  37,089         $ (6,045)
                                                                        =======        ========     =========         ========

Weighted average common and common equivalent shares outstanding:
        Basic                                                            30,567          14,666        29,819           12,342
                                                                        -------        --------     ---------         --------
        Diluted                                                          30,844          15,052        30,087           12,714
                                                                        -------        --------     ---------         --------
 Earnings per share - basic:
        Income before extraordinary items                               $  0.45        $   0.21     $    1.24         $   0.02
        Extraordinary loss                                                   --              --            --           ($0.51)
                                                                        -------        --------     ---------         --------
        Net income (loss)                                               $  0.45        $   0.21         $1.24          ($0.49)
                                                                        -------        --------        ------         --------
  Earnings per share - diluted:
        Income before extraordinary items                               $  0.45        $   0.21     $    1.23            $0.02
        Extraordinary loss                                                   --              --            --           ($0.49)
                                                                        -------        --------     ---------         --------
        Net income (loss)                                               $  0.45        $   0.21     $    1.23           ($0.47)
                                                                        -------        --------     ---------         --------


     See accompanying notes to unaudited consolidated financial statements.




                                       3

                      UNIVERSAL COMPRESSION HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)



                                                              NINE MONTHS ENDED
                                                                DECEMBER 31,
                                                          -------------------------
                                                            2001             2000
                                                          --------         --------
                                                                     
Cash flows from operating activities:
  Net income (loss)                                        $37,089          ($6,045)
  Adjustments to reconcile net income (loss) to cash
    provided by operating activities, net of effect
    of acquisitions:
       Depreciation and amortization                        35,325           21,903
       Gain on asset sales                                    (375)            (102)
       Amortization of debt issuance costs                   2,018            1,136
       Accretion of discount notes                          14,881           14,362
       Deferred income taxes                                17,384           (1,125)
       Accounts receivable                                  10,641          (21,902)
       Inventories                                          23,196          (11,796)
       Accounts payable and accrued expenses               (42,935)          13,630
       Other                                                (4,410)           3,684
                                                           -------          -------
            Net cash provided by operating activities       92,814           13,745

Cash flows from investing activities:
       Additions to property, plant and equipment, net    (139,367)         (47,425)
       Sale-leaseback of vehicles                               --           (1,276)
       Acquisitions                                       (175,170)        (114,667)
       Proceeds from sale of fixed assets                    2,404          154,611
                                                          --------         --------
            Net cash used in investing activities         (312,133)          (8,757)

Cash flows from financing activities:
       Principal repayments of long-term debt               (5,952)        (107,368)
       Repayments under revolving line of credit                --          (72,000)
       Net repayments on sale-leaseback of vehicles         (1,825)            (442)
       Net borrowings (repayments) on financing            181,000          (10,580)
          leases
       Common stock issuance                                56,580          196,773
       Debt issuance costs                                  (3,818)          (5,320)
       Treasury stock                                           --              (12)
                                                          --------         --------
            Net cash provided by financing activities      225,985            1,051

Effect of exchange rate                                         23               --

Net increase in cash and cash equivalents                    6,689            6,039
Cash and cash equivalents at beginning of period            12,279            1,403
                                                          --------         --------
Cash and cash equivalents at end of period                $ 18,968         $  7,442
                                                          ========         ========


     See accompanying notes to unaudited consolidated financial statements.




                                       4

                      UNIVERSAL COMPRESSION HOLDINGS, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

1. BASIS OF PRESENTATION

Organization

    Universal Compression Holdings, Inc. (the "Company") was formed on December
12, 1997 for the purpose of acquiring Tidewater Compression Service, Inc.
("TCS") from Tidewater Inc. ("Tidewater"). Upon completion of the acquisition on
February 20, 1998 (the "Tidewater Acquisition"), TCS became the Company's wholly
owned subsidiary and changed its name to Universal Compression, Inc.
("Universal"). Through this subsidiary, the Company's gas compression service
operations date back to 1954. The Company is a holding company which conducts
its operations through its wholly owned subsidiary, Universal.

    On May 30, 2000, the Company completed an initial public offering of
7,275,000 shares of its common stock, which provided the Company with net
proceeds (after deducting underwriting discounts and commissions) of
approximately $149.2 million. Concurrently with the initial public offering, the
Company implemented a recapitalization pursuant to which all existing classes of
the Company's stock were converted into common stock. Also concurrently with the
initial public offering, the Company entered into a $50 million revolving credit
facility and $200 million operating lease facility. The proceeds of the offering
and the $62.6 million in initial proceeds from the new operating lease facility
were used to repay $192.7 million of indebtedness, and the remaining proceeds
were used for working capital and to pay expenses associated with the offering
and concurrent financing transactions.

    On February 9, 2001, the Company completed its acquisition of Weatherford
Global Compression Services, L.P. and certain related entities ("Weatherford
Global"), a supplier of natural gas compression equipment and services and a
division of Weatherford International, Inc. ("Weatherford"). Under the terms of
the agreement, a subsidiary of Weatherford was merged into Universal in exchange
for 13,750,000 shares of the Company's common stock. Pursuant to a voting
agreement entered into concurrently with the Weatherford Global acquisition,
Weatherford agreed to limit its voting power to 33 1/3% of the Company's
outstanding common stock, subject to certain limitations. The voting agreement
terminated in December 2001 following the reduction of Castle Harlan Partner
III, L.P.'s and its affiliates' ownership of the Company's outstanding common
stock to below 5%.

    On July 3, 2001, the Company completed a public offering (the "Offering") of
1,333,333 shares of its common stock, together with 2,666,667 shares of the
Company's common stock sold by certain selling stockholders, including Castle
Harlan Partners III, L.P. ("Castle Harlan") and its affiliates. The shares were
sold in the Offering at a price of $28.50 per share, and the Offering provided
the Company with net proceeds (after deducting underwriting discounts and
commissions) of approximately $36.1 million. The Company used the proceeds to
fund the cash portion of the purchase price in its acquisition of KCI, Inc., to
repay a portion of KCI's indebtedness concurrently with the acquisition, as
described below, and to partially fund the purchase price in its acquisition of
Louisiana Compressor Maintenance, Inc., as described below.

    The Company completed the acquisition of Gas Compression Services, Inc.
("GCSI") on September 15, 2000, of ISS Compression, Inc. and its operating
subsidiary, IEW Compression, Inc. (collectively "IEW") on February 28, 2001, of
the international operations of Compressor Systems, Inc. ("CSII") on April 23,
2001, of KCI, Inc. ("KCI") on July 11, 2001, of Louisiana Compressor
Maintenance, Inc. ("LCM") on July 13, 2001 and of Technical Compression Service,
Inc. ("TCSI") on October 3, 2001.

    These unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements presented in the
Company's Annual Report on Form 10-K for the year ended March 31, 2001. That
report contains a more comprehensive summary of the Company's major accounting
policies. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all appropriate adjustments, all of which are
normally recurring adjustments unless otherwise noted, considered necessary to
present fairly the financial position of the Company and its consolidated
subsidiaries and the results of operations and cash flows for the respective
periods. Operating results for the three-month period and nine-month period
ended December 31, 2001 are not necessarily indicative of the results that may
be expected for the fiscal year ending March 31, 2002.




                                       5


EARNINGS PER SHARE

    Basic and diluted net income (loss) per share are calculated in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share."

The following table sets forth the computation of basic and diluted net income
(loss) per share (in thousands, except share and per share amounts):



                                                       THREE MONTHS ENDED          NINE MONTHS ENDED
                                                          DECEMBER 31,               DECEMBER 31,
                                                  --------------------------- ------------------------
                                                     2001          2000         2001          2000
                                                  --------------------------- ------------------------
                                                                                
BASIC EARNINGS PER SHARE
Income before extraordinary items                   $13,751        $3,130      $37,089      $   219
Extraordinary loss, net of income tax                    --            --           --       (6,264)
                                                    -------        ------      -------      -------
Net income (loss)                                   $13,751        $3,130      $37,089      ($6,045)
Weighted average common stock outstanding            30,567        14,666       29,819       12,342
Basic net income (loss) per share:
  Before extraordinary loss                         $  0.45        $ 0.21      $  1.24      $  0.02
                                                    -------        ------      -------      -------
  Extraordinary loss, net of income tax                  --            --           --       ($0.51)
                                                    -------        ------      -------      -------
Basic net income (loss) per share                   $  0.45        $ 0.21      $  1.24       ($0.49)
                                                    =======        ======      =======      =======

DILUTED EARNINGS PER SHARE
Income before extraordinary items                   $13,751        $3,130      $23,338         $219
Extraordinary loss, net of income tax                    --            --           --       (6,264)
                                                    -------        ------      -------      -------
Net income (loss)                                   $13,751        $3,130      $37,089      ($6,045)
                                                    -------        ------      -------      -------
Weighted average common stock outstanding            30,567        14,666       29,819       12,342
Dilutive effect of stock options outstanding            277           386          268          372
                                                    -------        ------      -------      -------
Weighted average diluted common stock outstanding    30,844        15,052       30,087       12,714
                                                    =======        ======      =======      =======
Diluted income (loss) per share:
  Before extraordinary loss                         $  0.45        $ 0.21      $  1.23      $  0.02
                                                    -------        ------      -------      -------

  Extraordinary loss, net of income tax                  --            --           --       ($0.49)
                                                    -------        ------      -------      -------
Diluted net income (loss) per share                 $ 0.45         $ 0.21      $  1.23       ($0.47)
                                                    ======         ======      =======      =======


RECLASSIFICATIONS

    Certain reclassifications have been made to the prior year amounts to
conform to the current year classification.

2. RECENT ACCOUNTING PRONOUNCEMENTS

    In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." In
June 2000, the FASB issued SFAS No. 138, which amends certain provisions of SFAS
133 to clarify four areas causing difficulties in implementation. The amendment
included expanding the normal purchase and sale exemption for supply contracts,
permitting the offsetting of certain intercompany foreign currency derivatives
and thus reducing the number of third party derivatives, permitting hedge
accounting for foreign-currency denominated assets and liabilities, and
redefining interest rate risk to reduce sources of ineffectiveness. SFAS 133
requires that an entity recognize all derivative instruments as either assets or
liabilities in the balance sheet and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as (1) a
hedge of the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (2) a hedge of the exposure to
variable cash flows of a forecasted transaction, or (3) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
firm commitment, an available-for-sale security, or a foreign-currency-
denominated forecasted transaction. The accounting for changes in the fair value
of a derivative depends on the intended use of the derivative and the resulting
designation. We adopted SFAS 133 and the corresponding amendments under SFAS 138
on April 1, 2001. This statement had no impact on our consolidated results of
operations, financial position or cash flows.

    In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") 101,
"Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the
SEC's views in applying generally accepted accounting principles to revenue
recognition in financial statements. On June 26, 2000, the SEC issued an
amendment to SAB 101, effectively delaying its implementation until the fourth
quarter of fiscal years beginning after December 15, 1999. After reviewing SAB
101 and its amendment, we believe that our revenue recognition policy is
appropriate and that the effects of SAB 101 and its amendment were immaterial to
our results of operations.




                                       6


    In July 2001, the FASB issued SFAS No. 141, "Business Combinations,"
effective for all business combinations initiated after June 30, 2001 and SFAS
No. 142, "Goodwill and Other Intangible Assets." The Company elected to adopt
SFAS 142 effective April 1, 2001 as the first interim period financial
statements had not previously been issued. SFAS 141 addresses financial
accounting and reporting for goodwill and other intangible assets acquired in a
business combination at acquisition. SFAS 142 addresses financial accounting and
reporting for intangible assets acquired individually or with a group of other
assets (but not those acquired in a business combination) at acquisition. It
also addresses financial accounting and reporting for goodwill and other
intangible assets subsequent to their acquisition. Had SFAS 142 been effective
April 1, 2000, the Company would have adopted it in the first quarter of fiscal
2001 and income before taxes and net income during the three months ended
December 31, 2000 would have been $6.0 million and $3.7 million, respectively,
as a result of the elimination of $0.9 million of amortization expense related
to goodwill and the resultant tax expense. In addition, income before taxes and
extraordinary items and net loss during the nine months ended December 31, 2000
would have been $2.7 million and $4.7 million, respectively, as a result of the
elimination of $2.3 million of amortization expense related to goodwill,
together with an increase in the recorded income tax expense of $1.1 million.

    In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets". SFAS 144 provides new guidance on the
recognition of impairment losses on long-lived assets to be held and used or to
be disposed of and also broadens the definition of what constitutes a
discontinued operation and how the results of a discontinued operation are to be
measured and presented. SFAS 144 supersedes SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
Accounting Principle Board Opinion No. 30, while retaining many of the
requirements of these two statements. Under SFAS 144, assets held for sale that
are a component of an entity will be included in discontinued operations if the
operations and cash flows will be or have been eliminated from the ongoing
operations of the entity and the entity will not have any significant continuing
involvement in the operations prospectively. SFAS 144 is effective for fiscal
years beginning after December 15, 2001, with early adoption encouraged. SFAS
144 is not expected to materially change the methods used by the Company to
measure impairment losses on long-lived assets, but may result in additional
future dispositions being reported as discontinued operations than is currently
permitted. The Company will adopt SFAS 144 on April 1, 2002.

3. ACQUISITIONS

    On April 23, 2001, the Company acquired the international operations of CSII
based in Midland, Texas for approximately $30 million in cash. The acquisition
resulted in the recording of $13 million of goodwill, which is not subject to
amortization.

    On July 11, 2001, the Company acquired KCI, a Tulsa, Oklahoma based
fabricator of large horsepower compressors for approximately $26.3 million in
cash and 694,927 shares of the Company's common stock. In addition, the Company
incurred costs and assumed other liabilities related to the transaction of
approximately $6 million. Concurrently with the acquisition, the Company repaid
substantially all of KCI's approximately $51 million of indebtedness. In order
to fund the acquisition, the Company used approximately $50 million of the
availability under its revolving credit facility and $27.3 million of the funds
received from the Offering in July 2001. The acquisition resulted in the
recording of $40.2 million of goodwill, which is not subject to amortization.

    On July 13, 2001, the Company acquired LCM, a Houma, Louisiana based
supplier of maintenance, repair, overhaul and upgrade services to the natural
gas pipeline and related markets for approximately $26.3 million in cash. In
order to fund the acquisition, the Company used approximately $25 million of the
availability under its revolving credit facility and $1.3 million of the funds
received from the Offering . The acquisition resulted in the recording of $17.4
million of goodwill, which is not subject to amortization.

    On October 3, 2001, the Company acquired TCSI, located in Belle Chase,
Louisiana. TCSI provides compression parts and services to the natural gas
producing industry as well as to the refinery and petrochemical industries.
Under the terms of the purchase agreement, the Company acquired TCSI for
approximately $22.5 million in cash. In order to fund the acquisition, the
Company used approximately $19 million under its ABS Operating Lease Facility
and approximately $3.5 million under its revolving credit facility. The
acquisition resulted in the recording of $20.6 million of goodwill, which is not
subject to amortization.

    On September 15, 2000, the Company completed the merger of GCSI, a supplier
of natural gas compression equipment and services with fabrication and overhaul
facilities in Michigan and Texas. In connection with the merger, the Company
entered into an escrow agreement with the selling shareholders of GCSI pursuant
to which certain of the shares issued to the shareholders are being held in
escrow to indemnify the Company against certain losses it may incur. On October
17, 2001, 28,379 of these escrow shares of the Company's common stock were
released to the Company to satisfy certain indemnified matters.

    The Company's acquisitions were accounted for as purchases and accordingly,
the results of operations of the acquired businesses are included in the
accompanying financial statements from the dates of acquisition. In addition,
the Company is permitted to make, and has occasionally made, changes  to their
purchase price allocation during the first year after completing each
acquisition.



                                       7


4. INVENTORIES, NET

Inventories, net, consisted of the following (in thousands):



                                                  DECEMBER 31,      MARCH 31,
                                                      2001            2001
                                                ----------------  ------------
                                                            
                                Raw materials       $ 80,679       $ 63,473
                                Finished goods         9,484         38,705
                                Work-in-progress      38,936         18,761
                                                    --------       --------
                                Total               $129,099       $120,939
                                                    ========       ========


5. OPERATING LEASE FACILITIES

    In May 2000, the Company and Universal entered into a $200 million operating
lease facility pursuant to which the Company sold and leased back certain
compression equipment from a Delaware business trust for a five-year term. The
rental payments under the lease facility included an amount based on LIBOR plus
a variable amount depending on the Company's operating and financial results,
applied to the funded amount of the lease. Under the lease facility, the Company
received an aggregate of approximately $155 million in proceeds from the sale of
compression equipment in May, November and December 2000 and, in connection with
the GCSI acquisition, in September 2000. The equipment was sold and leased back
by the Company for a five-year period from May 2000 and deployed by the Company
under its normal operating procedures. The equipment sold had a book value of
approximately $106 million and the equipment sale resulted in deferred gain of
approximately $49 million that was transferred to new operating lease facilities
in connection with the Weatherford Global acquisition and restructuring of
previous operating lease obligations.

    The Company had residual value guarantees on the equipment under the
operating lease facility of approximately 85% of the funded amounts that were
due upon termination of the lease and which could have been satisfied by a cash
payment or the exercise of a purchase option for the full funded amount and any
related costs and expenses. The facility contained certain covenants restricting
the Company's operations, including its ability to enter into acquisition and
sales transactions, incur additional indebtedness, permit additional liens on
its assets and pay dividends. This facility was collateralized by liens on the
lessor's compression equipment subject to the lease with Universal and certain
related rights. Under the operating lease facility, Universal was the lessee and
the Company guaranteed certain of Universal's obligations thereunder. The
Company replaced this facility with new operating lease facilities.

    In connection with the Weatherford Global acquisition, on February 9, 2001,
the Company raised $427 million under a new seven-year term senior secured notes
operating lease facility (the "SSN Operating Lease Facility") funded primarily
through an offering of $350 million 8 7/8% senior secured notes due 2008 by an
unaffiliated entity that is the lessor under the operating lease. The Company
also concurrently entered into a new $125 million secured revolving credit
facility and a new $200 million asset-backed securitization operating lease
facility (the "ABS Operating Lease Facility"), which facility consists of a
series of six leases with terms ranging from three to eight years. At the
closing of the Weatherford Global acquisition, 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 previous operating lease
obligations and refinance certain existing indebtedness of the Company
(including the previous operating lease facility described above in the first
paragraph) and Weatherford Global.

    On October 23, 2001, the Company increased the SSN Operating Lease Facility
by $122 million, which was funded through the unaffiliated entity's offering of
an additional $100 million of 8 7/8% senior secured notes due 2008, together
with an $18.3 million increase in its borrowings under an existing term loan and
an additional $3.7 million equity investment in such entity that is the lessor
under the operating lease. The net proceeds from the sale of equipment under the
SSN Operating Lease Facility were used to repay all of the outstanding
indebtedness under the revolving credit facility, with the remaining proceeds
used to repay a portion of the obligations under the ABS Operating Lease
Facility and for general corporate purposes.

    Under the operating lease facilities, Universal, or a subsidiary of
Universal, as lessee, makes rental payments to the lessor for the leased
equipment. The Company guarantees certain of Universal's obligations under the
operating lease facilities. Under the SSN Operating Lease Facility, the rental
payments include amounts based on the interest accrued on the 8 7/8% senior
secured notes and an amount based on LIBOR or a variable base rate equal to the
sum of the interest accrued on the lessor's term loan, the yield on the equity
investment in the lessor and other fees. The equipment leased by Universal under
the SSN Operating Lease Facility includes the equipment that had an appraised
value as of February 2001 of approximately $427 million and additional equipment
with an appraised value as of October



                                       8


2001 of approximately $122 million. Universal has residual value guarantees on
the equipment under the SSN Operating Lease Facility of approximately 82% of the
funded amounts that are due upon termination of the lease in the event a
purchase option for the full funded amount and any related costs and expenses
or renewal options are not selected by the lessee.

    Under the ABS Operating Lease Facility, the rental payments are based on
LIBOR or a variable base rate equal to the sum of the interest accrued on the
outstanding notes plus the yield on the equity investment in the facility. The
ABS Operating Lease Facility is collateralized by a first priority security
interest in all of the assets under the facility. Pursuant to the lease, a
wholly-owned subsidiary of Universal has guaranteed the residual value of the
equipment under the facility in an amount equal to approximately 85% of the
funded amount in the ABS Operating Lease Facility that is due upon termination
of the lease in the event a purchase option for the full funded amount and any
related costs and expenses or renewal options are not selected by the lessee.

    At December 31, 2001, the Company had outstanding operating leases' balance
totaling $708.5 million, consisting of $549.0 million under its SSN Operating
Lease Facility and $159.5 million under its ABS Operating Lease Facility. The
equipment sold under the SSN Operating Lease Facility had a net book value of
approximately $466.9 million and resulted in a deferred gain of approximately
$82.1 million to the Company. The equipment sold under the ABS Operating Lease
Facility had a book value of approximately $120.0 million and resulted in a
deferred gain of approximately $39.5 million to the Company.

    The Company is not, and has not been, a lender, affiliate or investor in
any manner in any of its lessors.

    The Company annually assesses whether it is probable that the value of the
property at the end of the lease terms will be less than the respective residual
value guarantee for each operating lease. On the date the deficiency becomes
probable, the expected deficiency (up to the maximum for which the Company is
responsible) would be accrued by the Company using the straight-line method over
the remaining term of the leases.

6. LONG-TERM DEBT

    Castle Harlan's reduced ownership of the Company's common stock following
the Offering in July 2001 constituted a change of control under the indenture
governing the Company's 9 7/8% senior discount notes, giving the holders of the
notes the right to require the Company to repurchase those notes through August
23, 2001. The Company repurchased approximately $5.8 million face value of the 9
7/8% senior discount notes in August 2001 using borrowings under its revolving
credit facility.

7. STOCKHOLDERS' EQUITY

    In August 2001, the Company adopted a restricted stock plan which provides
for the grant of restricted stock awards to key employees of the Company. The
plan allows for restricted stock awards of up to 350,000 shares of restricted
common stock. As of December 31, 2001, the Company had awarded 100,000 shares of
common stock under the plan to participants as an incentive for future services.
None of the shares awarded were vested at December 31, 2001. The vesting
schedule and forefeiture restrictions for any rewards under the restricted stock
plan is specified in an agreement between the Company and each participant.
Generally, the restricted shares vest 25% upon the second anniversary of the
grant and 25% on each anniversary thereafter through the fifth anniversary as
long as the participant remains employed with the Company. However, the initial
grants for 2001 vest 25% on January 1, 2003 and 25% on each January 1st
thereafter through January 1, 2006. On August 16, 2001, the market value of
shares awarded at the close of trading on the New York Stock Exchange was $2.9
million ($28.55 per share). This amount was recorded as deferred compensation as
a separate component of stockholders' equity and is being amortized over the
vesting period.

8. EXTRAORDINARY LOSSES

    During the quarter ended June 30, 2000, the Company incurred extraordinary
losses of $6.3 million (net of $3.8 million income tax benefit) related to its
debt restructuring that occurred concurrently with the Company's initial public
offering of its common stock.




                                       9

9. NON-RECURRING CHARGES

    During the quarter ended June 30, 2000, the Company incurred non-recurring
charges of $7.1 million related to the early termination of a management
agreement and a consulting agreement and other related fees in connection with
the Company's initial public offering and concurrent financing transactions.

10. RELATED PARTY TRANSACTIONS

Management Agreement

    Castle Harlan, Inc. ("CHI"), an affiliate of a significant stockholder of
the Company, entered into an agreement in February 1998 whereby, in exchange for
certain management services rendered, the Company agreed to pay a fee to CHI
totaling $3 million per year. The amount was paid in advance for the first year
and quarterly in advance thereafter. The agreement was for a term of five years,
renewable automatically from year to year thereafter unless CHI or its
affiliates beneficially own less than 20% of the then outstanding stock of the
Company.

    In connection with the initial public offering in the quarter ended June 30,
2000, the Company terminated its management agreement with CHI. In exchange for
such termination, the Company paid $3 million in cash and issued 136,364 shares
of its common stock to CHI.

Transitional Services Agreement

    Concurrently with the February 9, 2001 closing of the Weatherford Global
acquisition, Weatherford International, Inc. and Weatherford Global, as the
Company's subsidiary, entered into a transitional services agreement under which
Weatherford International, Inc. provided certain administrative and support
services, such as shared corporate office space and general communication and
information services, to Weatherford Global until June 9, 2001. Weatherford
Global paid Weatherford International Inc. $125,000 for thirty days of these
services.

11.  INDUSTRY SEGMENTS

    Prior to the Weatherford Global acquisition, the Company had three principal
industry segments: Domestic Rental and Maintenance, International Rental and
Maintenance (including Canada) and Engineered Products. Due to the Weatherford
Global merger, the changing nature of the markets the Company serves, and in
order to align itself with those markets, the Company changed its internal
business organization during fiscal 2001. In addition, during the second quarter
of fiscal 2002, the Company changed the name of its Rental and Maintenance
segments to Contract Compression. The Company is now organized into four
businesses or operating segments: Domestic Contract Compression, International
Contract Compression (including Canada), Fabrication, and Parts Sales and
Service. The two Contract Compression Segments provide natural gas compression
rental and maintenance services to meet specific customer requirements. The
International Contract Compression Segment represents all of the Company's
international rental and maintenance operations (including Canada). The
Fabrication Segment provides services related to the design, fabrication and
sale of natural gas and air compression packages to meet customer
specifications. The Parts Sales and Service Segment involves the sale of parts
and the service of compressor units owned by producers and gatherers of
natural gas.

    The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately since each business
requires different marketing strategies due to customer specifications. The
Company evaluates the performance of its reportable segments based on gross
margin and operating income. Gross margin is defined as total revenue less
rental expense, cost of sales (exclusive of depreciation and amortization),
gain on asset sales and interest income. Operating income excludes non-recurring
charges, interest and other income, interest expense and income taxes.
Additionally, the Company has no material sales to other segments, and
accordingly, there are no inter-segment revenues to be reported.




                                       10


The following table presents revenues and other financial information by
industry segment for the three-month period ended December 31, 2001 (in
thousands):



                             DOMESTIC         INTERNATIONAL
                             CONTRACT           CONTRACT                          PARTS SALES
                            COMPRESSION        COMPRESSION        FABRICATION     AND SERVICE        TOTAL
                                                                                  
      Revenues               $69,423            $16,519          $55,258          $36,179        $177,379
      Gross margin           $44,465            $11,910           $6,555           $8,325         $71,255
      Operating income       $30,281             $6,532           $1,882           $4,193         $42,888


The following table presents revenues and other financial information by
industry segment for the three-month period ended December 31, 2000 (in
thousands):



                             DOMESTIC         INTERNATIONAL
                             CONTRACT           CONTRACT                          PARTS SALES
                            COMPRESSION        COMPRESSION        FABRICATION     AND SERVICE        TOTAL
                                                                                   
      Revenues               $31,747             $4,425          $17,329           $6,471         $59,972
      Gross margin           $20,526             $3,387           $1,705             $763         $26,381
      Operating income       $10,836             $1,354           $1,015             $703         $13,908


The following table presents revenues and other financial information by
industry segment for the nine-month period ended December 31, 2001 (in
thousands):


                               DOMESTIC         INTERNATIONAL
                               CONTRACT           CONTRACT                         PARTS SALES
                              COMPRESSION        COMPRESSION       FABRICATION     AND SERVICE       TOTAL
                                                                                     
       Revenues               $200,214            $46,868           $144,325        $100,641        $492,048
       Gross margin           $127,095            $33,106            $16,802         $21,902        $198,905
       Operating income        $84,419            $18,487             $5,121         $10,930        $118,957


The following table presents revenues and other financial information by
industry segment for the nine-month period ended December 31, 2000 (in
thousands):



                               DOMESTIC         INTERNATIONAL
                               CONTRACT           CONTRACT                          PARTS SALES
                              COMPRESSION        COMPRESSION        FABRICATION     AND SERVICE      TOTAL
                                                                                  
       Revenues                $78,317           $12,810           $33,308          $8,893       $133,328
       Gross margin            $50,295            $9,700            $4,590          $1,251        $65,836
       Operating income        $24,217            $3,952            $2,732          $1,062        $31,963


No individual customer accounted for more than 10% of revenues for any of the
periods presented.


12.  COMMITMENTS AND CONTINGENCIES

    In the ordinary course of business, the Company is involved in various
pending or threatened legal actions. In the opinion of management, the amount of
ultimate liability, if any, with respect to these actions will not have a
material adverse effect on the Company's financial position, operating results
or cash flows.

    The Company has no other commitments or contingent liabilities, which, in
the judgment of management, would result in losses that would materially affect
the Company's consolidated financial position or operating results.

    On May 24, 2001, the Company entered into an agreement with Tidewater to
settle acquisition-related claims, which included costs for remediation pursuant
to an environmental assessment, in exchange for payment to the Company of $1
million and termination of the purchase price adjustment agreement, which
eliminated any payment obligation by the Company under that agreement.




                                       11

                           UNIVERSAL COMPRESSION, INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
                                   (UNAUDITED)



                                                                      DECEMBER 31, 2001     MARCH 31, 2001
                                                                      -----------------    ----------------
                                                                                     
 ASSETS
 Current Assets:
     Cash                                                             $    18,968          $     12,279
     Accounts receivable, net                                             103,268                87,088
     Inventories, net                                                     129,099               120,939
     Other current assets                                                  31,559                24,059
                                                                      -----------          ------------
           Total current assets                                           282,894               244,365

 Property, plant and equipment:
   Contract compression equipment                                         659,645               592,449
   Other                                                                   79,398                52,810
   Accumulated depreciation                                               (90,984)              (55,634)
                                                                      -----------          ------------
           Net property, plant and equipment                              648,059               589,625

 Goodwill                                                                 389,205               294,127
 Other assets, net                                                         46,443                43,417
                                                                      -----------          ------------
           Total assets                                               $ 1,366,601          $  1,171,534
                                                                      ===========          ============

 LIABILITIES AND STOCKHOLDER'S EQUITY
  Current Liabilities:
      Accounts payable and accrued liabilities                        $   173,914          $    143,531
      Current portion of long term debt and capital lease obligation        3,724                 3,452
                                                                      -----------          ------------
            Total current liabilities                                     177,638               146,983

  Long-term debt                                                          213,841               204,875
  Non-current deferred tax liability                                      107,006                90,126
  Deferred gain                                                           121,635                75,146
  Capital lease obligations                                                 4,360                 6,086
  Other liabilities                                                           906                   694
                                                                      -----------          ------------
            Total liabilities                                             625,386               523,910

  Common stock                                                                 49                    49
  Paid in capital                                                         708,086               651,607
  Currency translation adjustment                                             868                   845
  Retained earnings / (deficit)                                            32,212                (4,877)
                                                                      -----------          ------------
            Total stockholder's equity                                    741,215               647,624
                                                                      -----------          ------------
            Total liabilities and stockholder's equity                $ 1,366,601          $  1,171,534
                                                                      ===========          ============


     See accompanying notes to unaudited consolidated financial statements.




                                       12

                           UNIVERSAL COMPRESSION, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
                                   (UNAUDITED)



                                                                        THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                                           DECEMBER 31,                      DECEMBER 31,
                                                                 --------------------------------  -------------------------------
                                                                       2001             2000             2001             2000
                                                                 ---------------  ---------------  ---------------  --------------
                                                                                                             
Revenues:
     Contract compression                                             $ 85,942         $ 36,172        $ 247,082         $ 91,127
     Sales                                                              91,437           23,800          244,966           42,201
                                                                        ------           ------          -------           ------
         Total revenues                                                177,379           59,972          492,048          133,328

Costs and expenses:
    Contract compression, exclusive of depreciation and amortization    29,567           12,259           86,881           31,132
    Cost of sales, exclusive of depreciation and amortization           76,557           21,332          206,262           36,360

    Depreciation and amortization                                       12,233            7,725           35,325           21,897
    Selling, general and administrative                                 16,134            4,747           44,623           11,971
    Operating leases                                                    14,788            3,539           40,354            6,223
    Interest expense                                                     5,357            5,372           17,462           17,999
    Other (income) / expense                                               194              (42)             430             (299)
    Non-recurring charges                                                   --               --               --            7,059
                                                                      --------         --------        ---------        ---------
         Total costs and expenses                                      154,830           54,932          431,337          132,342
                                                                      --------         --------        ---------        ---------
Income before income taxes and extraordinary items                      22,549            5,040           60,711              986
Income taxes                                                             8,798            1,909           23,622              389
                                                                      --------         --------        ---------        ---------
       Income before extraordinary items                              $ 13,751         $  3,131        $  37,089        $     597
                                                                      --------         --------        ---------        ---------
       Extraordinary loss, net of $2,037
            income tax benefit                                              --               --               --           (3,393)
                                                                      --------         --------        ---------        ---------
       Net income (loss)                                              $ 13,751         $  3,131        $  37,089          ($2,796)
                                                                      ========         ========        =========        =========


     See accompanying notes to unaudited consolidated financial statements.




                                       13

                           UNIVERSAL COMPRESSION, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)



                                                                          NINE MONTHS ENDED
                                                                            DECEMBER 31,
                                                                      --------------------------
                                                                        2001              2000
                                                                      ---------         --------
                                                                                     
 Cash flows from operating activities:
  Net income (loss)                                                   $  37,089          ($2,796)
   Adjustments to reconcile net income (loss) to cash
    provided by operating activities, net of effect of acquisitions:
      Depreciation and amortization                                      35,325           21,897
      Gain on asset sales                                                  (375)            (102)
      Amortization of debt issuance costs                                 2,018            1,121
      Increase in payable to parent                                          --           13,779
      Accretion of discount notes                                        14,881          153,851
      Deferred income taxes                                              17,384              597
      Accounts receivable                                                10,641          (21,902)
      Inventories                                                        23,196          (11,796)
      Accounts payable and accrued expenses                             (42,935)          13,630
      Other                                                              (4,410)           3,806
                                                                      ---------          -------
           Net cash provided by operating activities                     92,814          172,085

 Cash flows from investing activities:
      Additions to property, plant and equipment, net                  (139,367)         (47,425)
      Sale-leaseback of vehicles                                             --           (1,276)
      Acquisitions                                                     (175,170)        (114,667)
      Proceeds from sale of fixed assets                                  2,404          154,611
                                                                      ---------          -------
             Net cash used in investing activities                     (312,133)          (8,757)

 Cash flows from financing activities:
      Principal repayments of long-term debt                             (5,952)         (75,132)
      Repayments under revolving line of credit                              --          (72,000)
      Net repayments on sale-leaseback of vehicles                       (1,825)            (442)
      Net borrowings (repayments) on financing leases                   181,000          (10,580)
      Investment in subsidiary by parent                                 56,580            6,185
      Debt issuance costs                                                (3,818)          (5,320)
                                                                      ---------           -------
            Net cash provided (used) by financing activities            225,985         (157,289)


Effect of exchange rate                                                      23               --
Net increase  in cash and cash equivalents                                6,689            6,039
Cash and cash equivalents at beginning of period                         12,279            1,403
                                                                      ---------            -----
Cash and cash equivalents at end of period                            $  18,968           $7,442
                                                                      =========           ======


    See accompanying notes to unaudited consolidated financial statements.




                                       14

                           UNIVERSAL COMPRESSION, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

1. BASIS OF PRESENTATION

Organization

    Universal Compression, Inc. was formed on December 12, 1997 for the purpose
of acquiring Tidewater Compression Service, Inc. ("TCS") from Tidewater Inc.
("Tidewater"). Upon completion of the acquisition on February 20, 1998 (the
"Tidewater Acquisition"), TW Acquisition Corporation was merged with and into
TCS, which changed its name to Universal Compression, Inc. ("Universal").
Universal is a wholly owned subsidiary of Universal Compression Holdings, Inc.
("Holdings").

    On May 30, 2000, Holdings completed an initial public offering of 7,275,000
shares of its common stock, which provided Holdings with net proceeds (after
deducting underwriting discounts and commissions) of approximately $149.2
million. Concurrently with the initial public offering, Holdings implemented a
recapitalization pursuant to which all existing classes of Holdings' stock were
converted into common stock. Also concurrently with the initial public offering,
Universal entered into a $50 million revolving credit facility and $200 million
operating lease facility. The proceeds of the offering and the $62.6 million in
initial proceeds from the new operating lease facility were used to repay $192.7
million of indebtedness, and the remaining proceeds were used for working
capital and to pay expenses associated with the offering and concurrent
financing transactions.

    On February 9, 2001, Universal completed its acquisition of Weatherford
Global Compression Services, L.P. and certain related entities ("Weatherford
Global"), a supplier of natural gas compression equipment and services and a
division of Weatherford International, Inc. ("Weatherford"). Under the terms of
the agreement, a subsidiary of Weatherford was merged into Universal in exchange
for 13,750,000 shares of Holdings' common stock. Pursuant to a voting agreement
entered into concurrently with the Weatherford Global acquisition, Weatherford
agreed to limit its voting power to 33 1/3% of Holdings' outstanding common
stock, subject to certain limitations. The voting agreement terminated in
December 2001 following the reduction of Castle Harlan Partners III, L.P.'s
("Castle Harlan") and its affiliates' ownership of Holdings' outstanding common
stock to below 5%.

    On July 3, 2001, Holdings completed the public offering (the "Offering") of
1,333,333 shares of its common stock, together with 2,666,667 shares of
Holdings' common stock sold by certain selling stockholders, including Castle
Harlan and its affiliates. The shares were sold in the Offering at a price of
$28.50 per share, and the Offering provided Holdings with net proceeds (after
deducting underwriting discounts and commissions) of approximately $36.1
million.

    Universal completed its acquisition of Gas Compression Services, Inc.
("GCSI") on September 15, 2000, of ISS Compression, Inc. and its operating
subsidiary, IEW Compression, Inc. (collectively "IEW") on February 28, 2001, of
the international operations of Compressor Systems, Inc. ("CSII") on April 23,
2001, of KCI, Inc. ("KCI") on July 11, 2001, of Louisiana Compressor
Maintenance, Inc. ("LCM") on July 13, 2001 and of Technical Compression Service,
Inc. ("TCSI") on October 3, 2001.

    These unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements presented in Universal's
Annual Report on Form 10-K for the year ended March 31, 2001. That report
contains a more comprehensive summary of Universal's major accounting policies.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all appropriate adjustments, all of which are normally
recurring adjustments unless otherwise noted, considered necessary to present
fairly the financial position of Universal and its consolidated subsidiaries and
the results of operations and cash flows for the respective periods. Operating
results for the three-month period and nine-month period ended December 31, 2001
are not necessarily indicative of the results that may be expected for the
fiscal year ending March 31, 2002.

RECLASSIFICATIONS

    Certain reclassifications have been made to the prior year amounts to
conform to the current year classification.

2. RECENT ACCOUNTING PRONOUNCEMENTS

    In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." In June 2000, the FASB issued
SFAS No. 138, which amends certain provisions of SFAS 133 to clarify four areas
causing difficulties in implementation. The amendment included



                                       15


expanding the normal purchase and sale exemption for supply contracts,
permitting the offsetting of certain intercompany foreign currency derivatives
and thus reducing the number of third party derivatives, permitting hedge
accounting for foreign-currency denominated assets and liabilities, and
redefining interest rate risk to reduce sources of ineffectiveness. SFAS 133
requires that an entity recognize all derivative instruments as either assets or
liabilities in the balance sheet and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as (1) a
hedge of the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (2) a hedge of the exposure to
variable cash flows of a forecasted transaction, or (3) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. The accounting for changes
in the fair value of a derivative depends on the intended use of the derivative
and the resulting designation. Universal adopted SFAS 133 and the corresponding
amendments under SFAS 138 on April 1, 2001. This statement had no impact on our
consolidated results of operations, financial position or cash flows.

    In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") 101,
"Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the
SEC's views in applying generally accepted accounting principles to revenue
recognition in financial statements. On June 26, 2000, the SEC issued an
amendment to SAB 101, effectively delaying its implementation until the fourth
quarter of fiscal years beginning after December 15, 1999. After reviewing SAB
101 and its amendment, Universal believes that our revenue recognition policy is
appropriate and that the effects of SAB 101 and its amendment were immaterial to
our results of operations.

    In July 2001, the FASB issued SFAS No. 141, "Business Combinations,"
effective for all business combinations initiated after June 30, 2001 and SFAS
No. 142, "Goodwill and Other Intangible Assets." We elected to adopt SFAS 142
effective April 1, 2001 as the first interim period financial statements had not
previously been issued. SFAS 141 addresses financial accounting and reporting
for goodwill and other intangible assets acquired in a business combination at
acquisition. SFAS 142 addresses financial accounting and reporting for
intangible assets acquired individually or with a group of other assets (but not
those acquired in a business combination) at acquisition. It also addresses
financial accounting and reporting for goodwill and other intangible assets
subsequent to their acquisition. Had SFAS 142 been effective April 1, 2000,
Universal would have adopted it in the first quarter of fiscal 2001 and income
before taxes and net income during the three months ended December 31, 2000
would have been $6.0 million and $3.7 million, respectively, as a result of the
elimination of $0.9 million of amortization expense related to goodwill and the
resultant tax expense. In addition, income before taxes and extraordinary items
and net loss during the nine months ended December 31, 2000 would have been $3.3
million and $1.4 million, respectively, as a result of the elimination of $2.3
million of amortization expense related to goodwill, together with an increase
in the recorded income tax expense of $1.3 million.

    In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets." SFAS 144 provides new guidance on the
recognition of impairment losses on long-lived assets to be held and used or to
be disposed of and also broadens the definition of what constitutes a
discontinued operation and how the results of a discontinued operation are to be
measured and presented. SFAS 144 supersedes SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
Accounting Principle Board Opinion No. 30, while retaining many of the
requirements of these two statements. Under SFAS 144, assets held for sale that
are a component of an entity will be included in discontinued operations if the
operations and cash flows will be or have been eliminated from the ongoing
operations of the entity and the entity will not have any significant continuing
involvement in the operations prospectively. SFAS 144 is effective for fiscal
years beginning after December 15, 2001, with early adoption encouraged. SFAS
144 is not expected to materially change the methods used by Universal to
measure impairment losses on long-lived assets, but may result in additional
future dispositions being reported as discontinued operations than is currently
permitted. Universal will adopt SFAS 144 on April 1, 2002.

3. ACQUISITIONS

    On April 23, 2001, Universal acquired the international operations of
Compressor Systems, Inc. based in Midland, Texas for approximately $30 million
in cash. The acquisition resulted in the recording of $13 million of goodwill,
which is not subject to amortization.

    On July 11, 2001, Universal acquired KCI, a Tulsa, Oklahoma based fabricator
of large horsepower compressors for approximately $26.3 million in cash and
694,927 shares of Holdings' common stock. In addition, Universal incurred costs
and assumed other liabilities related to the transaction of approximately $6
million. Concurrently with the acquisition, Universal repaid substantially all
of KCI's approximately $51 million of indebtedness. In order to fund the
acquisition, Universal used approximately $50 million of the availability under
its revolving credit facility and $27.3 million of the funds received from
Holdings from the Offering in July 2001. The acquisition resulted in the
recording of $40.2 million of goodwill, which is not subject to amortization.




                                       16



    On July 13, 2001, Universal acquired LCM, a Houma, Louisiana based supplier
of maintenance, repair, overhaul and upgrade services to the natural gas
pipeline and related markets for approximately $26.3 million in cash. In order
to fund the acquisition, Universal used approximately $25 million of the
availability under its revolving credit facility and $1.3 million of the funds
received from Holdings from the Offering. The acquisition resulted in the
recording of $17.4 million of goodwill, which is not subject to amortization.

    On October 3, 2001, Universal completed its acquisition of TCSI, located in
Belle Chase, Louisiana. TCSI provides compression parts and services to the
natural gas producing industry as well as to the refinery and petrochemical
industries. Under the terms of the purchase agreement, Universal acquired TCSI
for approximately $22.5 million in cash. In order to fund the acquisition,
Universal used approximately $19 million under its ABS Operating Lease Facility
and approximately $3.5 million under its revolving credit facility. The
acquisition resulted in the recording of $20.6 million of goodwill, which is not
subject to amortization.

    On September 15, 2000, Universal completed the merger of GCSI, a supplier of
natural gas compression equipment and services with fabrication and overhaul
facilities in Michigan and Texas. In connection with the merger, Holdings
entered into an escrow agreement with the selling shareholders of GCSI pursuant
to which certain of the shares in Holdings issued to the shareholders are being
held in escrow to indemnify Holdings against certain losses it may incur. On
October 17, 2001, 28,379 of these escrow shares of Holdings' common stock were
released to Holdings to satisfy certain indemnified matters.

    Universal's acquisitions were accounted for as purchases and accordingly,
the results of operations of the acquired businesses are included in the
accompanying financial statements from the dates of acquisition. In addition,
the Company is permitted to make, and has occasionally made, changes to their
purchase price allocation during the first year after completing each
acquisition.

4. INVENTORIES, NET

Inventories, net, consisted of the following (in thousands):

                                    DECEMBER 31,      MARCH 31,
                                        2001            2001

                Raw materials          $ 80,679       $ 63,473
                Finished goods            9,484         38,705
                Work-in-progress         38,936         18,761
                Total                  $129,099       $120,939

5. OPERATING LEASE FACILITIES

    In May 2000, Universal entered into a $200 million operating lease facility
pursuant to which they sold and leased back certain compression equipment from a
Delaware business trust for a five-year term. The rental payments under the
lease facility included an amount based on LIBOR plus a variable amount
depending on their operating and financial results, applied to the funded amount
of the lease. Under the lease facility, Universal received an aggregate of
approximately $155 million in proceeds from the sale of compression equipment in
May, November and December 2000 and, in connection with the GCSI acquisition, in
September 2000. The equipment was sold and leased back by Universal for a
five-year period from May 2000 and deployed by Universal under its normal
operating procedures. The equipment sold had a book value of approximately $106
million and the equipment sale resulted in deferred gain of approximately $49
million that was transferred to new operating lease facilities in connection
with the Weatherford Global acquisition and restructuring of previous operating
lease obligations.

    Universal had residual value guarantees on the equipment under the operating
lease facility of approximately 85% of the funded amounts that were due upon
termination of the lease and which could have been satisfied by a cash payment
or the exercise of a purchase option for the full funded amount and any related
costs and expenses. The facility contained certain covenants restricting
Universal's operations, including its ability to enter into acquisition and
sales transactions, incur additional indebtedness, permit additional liens on
its assets and pay dividends. This facility was collateralized by liens on the
lessor's compression equipment subject to the lease with Universal and certain
related rights. Under the operating lease facility, Universal was the lessee and
Holdings guaranteed certain of Universal's obligations thereunder. Universal
replaced this facility with new operating lease facilities.

    In connection with the Weatherford Global acquisition, on February 9, 2001,
Universal raised $427 million under a new seven-year term senior secured notes
operating lease facility (the "SSN Operating Lease Facility") funded primarily
through an offering of $350 million 8 7/8% senior secured notes due 2008 by an
unaffiliated entity that is the lessor under the operating lease. Universal also




                                       17


concurrently entered into a new $125 million secured revolving credit facility
and a new $200 million asset-backed securitization operating lease facility (the
"ABS Operating Lease Facility"), which facility consists of a series of six
leases with terms ranging from three to eight years. At the closing of the
Weatherford Global acquisition, Universal 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 previous operating lease obligations and
refinance certain existing indebtedness of Universal (including the previous
operating lease facility described above in the first paragraph) and Weatherford
Global.

    On October 23, 2001, Universal increased the SSN Operating Lease Facility by
$122 million, which was funded through the unaffiliated entity's offering of an
additional $100 million of 8 7/8% senior secured notes due 2008, together with
an $18.3 million increase in its borrowings under an existing term loan and an
additional $3.7 million equity investment in such entity that is the lessor
under the operating lease. The net proceeds from the sale of equipment under the
SSN Operating Lease Facility were used to repay all of the outstanding
indebtedness under the revolving credit facility, with the remaining proceeds
used to repay a portion of the obligations under the ABS Operating Lease
Facility and for general corporate purposes.

    Under the operating lease facilities, Universal, or a subsidiary of
Universal, as lessee, makes rental payments to the lessor for the leased
equipment. Holdings guarantees certain of Universal's obligations under the
operating lease facilities. Under the SSN Operating Lease Facility, the rental
payments include amounts based on the interest accrued on the 8 7/8% senior
secured notes and an amount based on LIBOR or a variable base rate equal to the
sum of the interest accrued on the lessor's term loan, the yield on the equity
investment in the lessor and other fees. The equipment leased by Universal under
the SSN Operating Lease Facility includes the equipment that had an appraised
value as of February 2001 of approximately $427 million and additional equipment
with an appraised value as of October 2001 of approximately $122 million.
Universal has residual value guarantees on the equipment under the SSN Operating
Lease Facility of approximately 82% of the funded amounts that are due upon
termination of the lease in the event a purchase option for the full funded
amount and any related costs and expenses or renewal options are not selected by
the lessee.

    Under the ABS Operating Lease Facility, the rental payments are based on
LIBOR or a variable base rate equal to the sum of the interest accrued on the
outstanding notes plus the yield on the equity investment in the facility. The
ABS Operating Lease Facility is collateralized by a first priority security
interest in all of the assets under the facility. Pursuant to the lease, a
wholly-owned subsidiary of Universal has guaranteed the residual value of the
equipment under the facility in an amount equal to approximately 85% of the
funded amount in the ABS Operating Lease Facility that is due upon termination
of the lease in the event a purchase option for the full funded amount and any
related costs and expenses or renewal options are not selected by the lessee.

    At December 31, 2001, Universal had outstanding leases' balance totaling
$708.5 million, consisting of $549.0 million under its SSN Operating Lease
Facility and $159.5 million under its ABS Operating Lease Facility. The
equipment sold under the SSN Operating Lease Facility had a net book value of
approximately $466.9 million and resulted in a deferred gain of approximately
$82.1 million to Universal. The equipment sold under the ABS Operating Lease
Facility had a book value of approximately $120.0 million and resulted in a
deferred gain of approximately $39.5 million to Universal.

    Universal is not, and has not been, a lender, affiliate or investor in any
manner in any of its lessors.

    Universal annually assesses whether it is probable that the value of the
property at the end of the lease terms will be less than the respective residual
value guarantee for each operating lease. On the date the deficiency becomes
probable, the expected deficiency (up to the maximum for which Universal is
responsible) would be accrued by Universal using the straight-line method over
the remaining term of the leases.

6. LONG-TERM DEBT

    Castle Harlan's reduced ownership of Holdings' common stock following the
Offering in July 2001 constituted a change of control under the indenture
governing Universal's 9 7/8% senior discount notes, giving the holders of the
notes the right to require Universal to repurchase those notes through August
23, 2001. Universal repurchased approximately $5.8 million face value of the 9
7/8% senior discount notes in August 2001 using borrowings under its revolving
credit facility.




                                       18



7. EXTRAORDINARY LOSSES

    During the quarter ended June 30, 2000, Universal incurred extraordinary
losses of $3.4 million (net of $2.0 million income tax benefit) related to its
debt restructuring that occurred concurrently with Holdings' initial public
offering of its common stock.

8. NON-RECURRING CHARGES

    During the quarter ended June 30, 2000, Universal incurred non-recurring
charges of $7.1 million related to the early termination of a management
agreement and a consulting agreement and other related fees in connection with
Holdings' initial public offering and concurrent financing transactions.


9. RELATED PARTY TRANSACTIONS

Management Agreement

    Castle Harlan, Inc. ("CHI"), an affiliate of a significant stockholder of
Holdings, entered into an agreement in February 1998 whereby, in exchange for
certain management services rendered, Holdings agreed to pay a fee to CHI
totaling $3 million per year. The amount was paid in advance for the first year
and quarterly in advance thereafter. The agreement was for a term of five years,
renewable automatically from year to year thereafter unless CHI or its
affiliates beneficially own less than 20% of the then outstanding stock of
Holdings.

    In connection with the initial public offering in the quarter ended June 30,
2000, Holdings terminated its management agreement with CHI. In exchange for
such termination, Holdings paid $3 million in cash and issued 136,364 shares of
its common stock to CHI.

Transitional Services Agreement

    Concurrently with the February 9, 2001 closing of the Weatherford Global
acquisition, Weatherford International, Inc. and Weatherford Global, as
Universal's subsidiary, entered into a transitional services agreement under
which Weatherford International, Inc. provided certain administrative and
support services, such as shared corporate office space and general
communication and information services, to Weatherford Global until June 9,
2001. Weatherford Global paid Weatherford International, Inc $125,000 for thirty
days of these services.

10.  INDUSTRY SEGMENTS

    Prior to the Weatherford Global acquisition, Universal had three principal
industry segments: Domestic Rental and Maintenance, International Rental and
Maintenance (including Canada) and Engineered Products. Due to the Weatherford
Global merger, the changing nature of the markets Universal serves, and in order
to align itself with those markets, Universal changed its internal business
organization during fiscal 2001. In addition, during the second quarter of
fiscal 2002, Universal changed the name of its Rental and Maintenance segments
to Contract Compression. Universal is now organized into four principal
businesses or operating segments: Domestic Contract Compression, International
Contract Compression (including Canada), Fabrication, and Parts Sales and
Service. The two Contract Compression Segments provide natural gas compression
rental and maintenance services to meet specific customer requirements. The
International Contract Compression Segment represents all of Universal's
international rental and maintenance operations (including Canada). The
Fabrication Segment provides services related to the design, fabrication and
sale of natural gas and air compression packages to meet customer
specifications. The Parts Sales and Service Segment involves the sale of parts
to and the service of compressor units owned by producers and gatherers of
natural gas.

    Universal's reportable segments are strategic business units that offer
different products and services. They are managed separately since each business
requires different marketing strategies due to customer specifications.
Universal evaluates the performance of its reportable segments based on gross
margin and operating income. Gross margin is defined as total revenue less
rental expense, cost of sales (exclusive of depreciation and amortization), gain
on asset sales and interest income. Operating income excludes non-recurring
charges, interest and other income, interest expense and income taxes.
Additionally, Universal has no material sales to other segments, and
accordingly, there are no inter-segment revenues to be reported.




                                       19


The following table presents revenue and other financial information by industry
segment for the three-month period ended December 31, 2001 (in thousands):



                                DOMESTIC        INTERNATIONAL
                                CONTRACT          CONTRACT                           PARTS SALES
                               COMPRESSION       COMPRESSION        FABRICATION      AND SERVICE      TOTAL
                                                                                     
        Revenues               $69,423            $16,519            $55,258         $36,179        $177,379
        Gross margin           $44,465            $11,910             $6,555          $8,325         $71,255
        Operating income       $30,281             $6,532             $1,882          $4,193         $42,888

The following table presents revenue and other financial information by industry
segment for the three-month period ended December 31, 2000 (in thousands):



                                 DOMESTIC        INTERNATIONAL
                                 CONTRACT          CONTRACT                          PARTS SALES
                                COMPRESSION       COMPRESSION       FABRICATION      AND SERVICE     TOTAL
                                                                                     
        Revenues                $31,747            $4,425           $17,329          $6,471         $59,972
        Gross margin            $20,526            $3,387            $1,705            $763         $26,381
        Operating income        $10,836            $1,354            $1,015            $703         $13,908


The following table presents revenue and other financial information by industry
segment for the nine-month period ended December 31, 2001 (in thousands):



                                DOMESTIC        INTERNATIONAL
                                CONTRACT          CONTRACT                           PARTS SALES
                               COMPRESSION       COMPRESSION        FABRICATION      AND SERVICE      TOTAL
                                                                                     
        Revenues             $200,214             $46,868          $144,325        $100,641          $492,048
        Gross margin         $127,095             $33,106           $16,802         $21,902          $198,905
        Operating income      $84,419             $18,487            $5,121         $10,930          $118,957


The following table presents revenue and other financial information by industry
segment for the nine-month period ended December 31, 2000 (in thousands):



                                 DOMESTIC        INTERNATIONAL
                                 CONTRACT          CONTRACT                          PARTS SALES
                                COMPRESSION       COMPRESSION        FABRICATION     AND SERVICE       TOTAL
                                                                                     
        Revenues                $78,317           $12,810           $33,308           $8,893        $133,328
        Gross margin            $50,295            $9,700            $4,590           $1,251         $65,836
        Operating income        $24,217            $3,952            $2,732           $1,062         $31,963



No individual customer accounted for more than 10% of revenues for any of the
periods presented.

11.  COMMITMENTS AND CONTINGENCIES

    In the ordinary course of business, Universal is involved in various pending
or threatened legal actions. In the opinion of management, the amount of
ultimate liability, if any, with respect to these actions will not have a
material adverse effect on Universal's financial position, operating results or
cash flows.

    Universal has no other commitments or contingent liabilities which, in the
judgment of management, would result in losses that would materially affect its
consolidated financial position or operating results.

    On May 24, 2001, Holdings entered into an agreement with Tidewater to settle
acquisition-related claims, which included costs for remediation pursuant to an
environmental assessment, in exchange for payment to Holdings of $1 million and
termination of the purchase price adjustment agreement, which eliminated any
payment obligation by Holdings under that agreement.




                                       20


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

    This report contains "forward-looking statements" intended to qualify for
the safe harbors from liability established by the Private Securities Litigation
Reform Act of 1995. All statements other than statements of historical fact
contained in this report are forward-looking statements. You can identify many
of these statements by looking for words such as "believes," "expects," "will,"
"intends," "projects," "anticipates," "estimates," "continues" or similar words
or the negative thereof.

    Such forward-looking statements include, without limitation:

     o    anticipated cost savings and other synergies resulting from the
          businesses we have acquired;

     o    the sufficiency of available cash flows to fund continuing operations;

     o    anticipated synergies, future revenues, gross margins and EBITDA, as
          adjusted, in our business and primary business segments, including
          from our acquisitions;

     o    capital improvements;

     o    the expected amount of capital expenditures;

     o    our future financial position;

     o    the future value of our equipment;

     o    our growth strategy and projected costs; and

     o    plans and objectives of our management for our future operations.

    Such forward-looking statements are subject to various risks and
uncertainties that could cause actual results to differ materially from those
anticipated as of the date of this report. The risks related to our business
described in our Annual Report on Form 10-K for the year ended March 31, 2001
under "Risk Factors" and elsewhere could cause actual results to differ from
those described in, or otherwise projected or implied by, the forward-looking
statements. Although we believe that the expectations reflected in these
forward-looking statements are based on reasonable assumptions, these
expectations may prove to be incorrect. Important factors that could cause
actual results to differ materially from the expectations reflected in these
forward-looking statements include, among other things:

     o    our inability to successfully integrate the businesses we have
          acquired or may acquire in the future;

     o    conditions in the oil and gas industry, including the demand for
          natural gas and the impact of the price of natural gas;

     o    competition among the various providers of contract compression
          services;

     o    changes in safety and environmental regulations pertaining to the
          production and transportation of natural gas;

     o    changes in economic or political conditions in our operating markets,
          including uncertainties relating to the current situation in
          Argentina;

     o    acts of war or terrorism or governmental or military responses
          thereto;

     o    introduction of competing technologies by other companies;

     o    our ability to retain and grow our customer base;




                                       21


     o    employment workforce factors, including loss of key employees; and

     o    liability claims related to the use of our products and services.

All subsequent written and oral forward-looking statements attributable to us or
any person acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section and elsewhere in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in our Annual Report on Form 10-K for the year ended March 31,
2001 under "Risk Factors." The forward-looking statements included herein are
only made as of the date of this report and we undertake no obligation to
publicly update such forward-looking statements to reflect new information,
subsequent events or otherwise.

The terms "our", "we," and "us" when used in this report refer to Universal
Compression Holdings, Inc. and its subsidiaries, including Universal
Compression, Inc. ("Universal"), as a combined entity, except where it is made
clear that such term means only the parent company, and includes its
predecessors.

GENERAL

    We were formed in December 1997 to acquire all of the outstanding stock of
Tidewater Compression Service, Inc. Upon completion of the acquisition in
February 1998, Tidewater Compression became our wholly-owned operating
subsidiary and changed its name to Universal Compression, Inc. Through this
subsidiary, our gas compression service operations date back to 1954.

    During the quarter ended June 30, 2000, we completed an initial public
offering of 7,275,000 shares of our common stock, par value $0.01 per share,
which provided us with net proceeds (after deducting underwriting discounts and
commissions) of approximately $149.2 million. Concurrently with our initial
public offering, we implemented a recapitalization pursuant to which all then
existing classes of our stock were converted into common stock. We used the
proceeds of the offering and the $62.6 million in initial proceeds from an
operating lease facility to repay $192.7 million of indebtedness, and the
remaining proceeds for working capital and to pay expenses associated with the
offering and concurrent financing transactions.

    On February 9, 2001, we completed our acquisition of Weatherford Global
Compression Services, L.P. and certain related entities ("Weatherford Global"),
a supplier of natural gas compression equipment and services and a division of
Weatherford International, Inc. Under the terms of the agreement, a subsidiary
of Weatherford International, Inc. was merged into Universal in exchange for
13,750,000 shares of our common stock. Pursuant to a voting agreement entered
into concurrently with the Weatherford Global acquisition, Weatherford agreed to
limit its voting power to 33 1/3% of our outstanding common stock, subject to
certain limitations. The voting agreement terminated in December 2001 following
the reduction of Castle Harlan Partner III, L.P.'s and its affiliates' ownership
of our outstanding common stock to below 5%.

    On July 3, 2001, we completed the public offering of 1,333,333 shares of our
common stock, together with 2,666,667 shares of our common stock sold by certain
selling stockholders, including Castle Harlan Partners III, L.P. and its
affiliates. The shares were sold in the offering at a price of $28.50 per share,
and the offering provided us with net proceeds (after deducting underwriting
discounts and commissions) of approximately $36.1 million. We used the proceeds
to fund the cash portion of the purchase price for our acquisition of KCI, to
repay a portion of KCI's indebtedness concurrently with the acquisition and to
partially fund the purchase price of our acquisition of LCM.

    Consummation of the July 2001 offering, and Castle Harlan's reduced
ownership of our common stock following that offering, gave the holders of
Universal's 9 7/8% senior discount notes the right to require us to repurchase
those notes at a price equal to 101% of the accreted value, plus accrued and
unpaid interest to date. We repurchased approximately $5.8 million face value of
the 9 7/8% senior discount notes in August 2001 using borrowings under our
revolving credit facility.

    Since our initial public offering, we have completed six primary
acquisitions. Our completed acquisitions include GCSI in September 2000,
Weatherford Global and IEW in February 2001, CSII in April 2001, KCI and LCM in
July 2001, and TCSI in October 2001. GCSI added approximately 138,000 horsepower
to our fleet and provided us with an increased customer base, additional market
segments and additional fabrication capabilities. IEW added approximately 26,000
horsepower to our fleet, as well as important offshore service capabilities.
CSII added approximately 34,000 horsepower to our fleet in Mexico and Argentina.
KCI added approximately 125,000 horsepower to our domestic fleet as well as
significant fabrication expertise and capabilities, a 100,000 square foot
fabrication facility in Tulsa, Oklahoma and expertise in the pipeline and
related natural gas markets. LCM added to our



                                       22


ability to be a supplier of maintenance, repair, overhaul and upgrade services
to natural gas pipeline and related markets. TCSI added to our compression parts
and service capabilities for the natural gas producing industry as well as the
refinery and petrochemical industries.

    Our Weatherford Global acquisition in February 2001 more than doubled our
size. We acquired Weatherford Global, which was the second largest natural gas
compression services company in the world in terms of horsepower, for 13,750,000
shares of our common stock (approximately 45% of our current total outstanding
shares) and the restructuring of approximately $323 million in debt and
operating lease obligations. This acquisition added over 950,000 horsepower to
our fleet and provided us with a number of important strategic and operational
benefits, including expanded international operations, an increased parts sales
and service business and cost savings and synergies.

    We are the second largest provider of natural gas contract compression,
sales, operations, maintenance and fabrication services to the natural gas
industry in terms of horsepower, with one of the largest natural gas compressor
fleets in the U.S. and a strong presence in key international markets.

                      UNIVERSAL COMPRESSION HOLDINGS, INC.

Three months ended December 31, 2001 compared to three months ended December 31,
2000

    Revenues. Our total revenues for the three months ended December 31, 2001
increased $117.4 million, or 196%, to $177.4 million, compared to $60.0 million
for the three months ended December 31, 2000. Our contract compression revenues
increased by $49.7 million, or 138%, to $85.9 million during the three months
ended December 31, 2001 from $36.2 million during the three months ended
December 31, 2000. Domestic contract compression revenues increased by $37.7
million, or 119%, to $69.4 million during the three months ended December 31,
2001 from $31.7 million during the three months ended December 31, 2000. Our
international contract compression revenues increased by $12.1 million, or 275%,
to $16.5 million during the three months ended December 31, 2001 from $4.4
million during the three months ended December 31, 2000. The increase in
domestic contract compression revenues primarily resulted from continued
expansion of our contract compression fleet through our acquisitions and our
capital expenditure program. The increase in international contract compression
revenues resulted from expansion of our international contract compression
fleet, primarily through the addition of horsepower from our acquisitions,
particularly our Weatherford Global acquisition and continued high utilization
rates.

    Domestic average contracted horsepower for the three months ended December
31, 2001 increased by 145% to approximately 1,653,000 horsepower from
approximately 676,000 horsepower for the three months ended December 31, 2000.
The increase in domestic average contracted horsepower primarily resulted from
the expansion of our domestic fleet through our acquisitions and our capital
expenditure program. In addition, international average contracted horsepower
for the three months ended December 31, 2001 increased by 436% to approximately
316,000 horsepower from approximately 59,000 horsepower for the three months
ended December 31, 2000, primarily through expansion of our international
contract compression fleet through our acquisitions and continued high
utilization rates. Our average horsepower utilization rate for the three months
ended December 31, 2001 was approximately 89.4%, up from 88.6% in the three
months ended December 31, 2000. At the end of the quarter, we had approximately
2.2 million horsepower. The horsepower utilization rate at December 31, 2001 was
approximately 88.4%.

    Our revenue from fabrication increased to $55.3 million for the quarter from
$17.3 million in the same quarter a year ago, an increase of 220%. The increase
in fabrication revenue, consisting mostly of equipment fabrication, was due
primarily to our acquisitions. Revenues from fabrication vary quarter to quarter
due to the time of completion of the equipment being sold. Our backlog of
fabrication projects at December 31, 2001 was approximately $101 million,
compared with a backlog of $30.5 million at the same time a year earlier. From
September 30 to December 31, 2001, our backlog of $101 million generally
remained constant, primarily due to customer demand and the continued expansion
of our fabrication business.

    Our revenues from parts sales and service increased to $36.2 million during
the three months ended December 31, 2001 from $6.5 million during the three
months ended December 31, 2000, an increase of 457%. The increase was due
primarily to our acquisitions of Weatherford Global, IEW and TCSI, which have
made the parts sales and service segment a more significant part of our
business.

    Gross Margin. Our gross margin (defined as total revenue less rental
expense, cost of sales (exclusive of depreciation and amortization), gain on
asset sales and interest income) for the three months ended December 31, 2001
increased $44.9 million, or 170%, to $71.3 million from $26.4 million for the
three months ended December 31, 2000. Our contract compression gross margin for
the three months ended December 31, 2001 increased $32.4 million, or 136%, to
$56.3 million compared to a gross margin of $23.9



                                       23


million for the three months ended December 31, 2000. Contract compression gross
margin increased primarily as the result of our contract compression revenue
growth discussed above and operating cost improvements. Our fabrication gross
margin for the three months ended December 31, 2001 increased $4.9 million, or
288%, to $6.6 million compared to a gross margin of $1.7 million for the three
months ended December 31, 2000. Fabrication gross margin increased primarily due
to increased sales resulting from our acquisitions.

    Our parts sales and service gross margin for the three months ended December
31, 2001 increased $7.5 million, or 938%, to $8.3 million compared to a gross
margin of $0.8 million for the three months ended December 31, 2000. Parts sales
and service gross margin increased primarily due to our acquisitions, our
continued growth within the service industry and operating cost improvements.

    Selling, General and Administrative Expenses. Our selling, general and
administrative expenses for the three months ended December 31, 2001 increased
$11.4 million, or 240%, compared to the three months ended December 31, 2000.
Selling, general and administrative expenses represented approximately 9% of
revenue for the three months ended December 31, 2001 compared to approximately
8% of revenue for the three months ended December 31, 2000. The percentage
increase was primarily due to normal expenses associated with our continued
growth within the industry.

    EBITDA, As Adjusted. Our EBITDA, as adjusted, for the three months ended
December 31, 2001 increased 154% to $55.1 million from $21.7 million for the
three months ended December 31, 2000, primarily due to increases in total
horsepower from acquisitions, continued expansion of our contract compression
fleet and parts and service division, improved utilization of our contract
compression fleet, gross margin contribution from fabrication and operating cost
improvements realized by contract compression operations, partially offset by
increased selling, general and administrative expenses as a percentage of
revenues, as discussed above. EBITDA, as adjusted, is defined as net income plus
income taxes, interest expense, leasing expense, management fees, depreciation
and amortization, excluding non-recurring items, minority interest and
extraordinary gains or losses. EBITDA, as adjusted, is not a measure of
financial performance under generally accepted accounting principles 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. EBITDA, as adjusted, represents a measure upon which
management assesses financial performance, and certain covenants in our
borrowing arrangements are tied to similar measures. We believe that EBITDA, as
adjusted, is a standard measure of financial performance used for valuing
companies in the compression industry. EBITDA, as adjusted, is a useful
yardstick as it measures the capacity of companies to generate cash without
reference to how they are capitalized, how they account for significant non-cash
charges for depreciation and amortization associated with assets used in the
business (the majority of which are long-lived assets in the compression
industry), or what their tax attributes may be.

    Depreciation and Amortization. Depreciation and amortization increased by
$4.5 million to $12.2 million during the three months ended December 31, 2001,
compared to $7.7 million during the three months ended December 31, 2000. The
increase resulted primarily from the expansion of our contract compression
fleet, offset partially by the compression equipment sold and leased back under
our operating lease facilities. Included in depreciation and amortization for
the three months ended December 31, 2000 is $0.9 million of goodwill
amortization expense. As of April 1, 2001, we adopted SFAS 142, which among
other things, eliminated the amortization of goodwill.

    Operating Leases. Operating leases' expense increased by $11.3 million to
$14.8 million during the three months ended December 31, 2001 from $3.5 million
during the three months ended December 31, 2000. The increase is due to the
expense associated with increased balances on the operating lease facilities
entered into concurrently with the Weatherford Global merger and the additional
$122 million increase of the seven-year term senior secured notes operating
lease facility (the "SSN Operating Lease Facility") in October 2001. The
outstanding balance under the operating lease facilities at December 31, 2001
was $708.5 million, consisting of $549.0 million under our SSN Operating Lease
Facility and $159.5 million under our asset-backed securitization operating
lease facility (the "ABS Operating Lease Facility").

    Interest Expense. Interest expense remained constant at $5.4 million for the
three months ended December 31, 2001 and for the three months ended December 31,
2000 because the primary component of our interest expense is the accretion of
our 9 7/8% senior discount notes, which remains fairly constant.

    Net Income. We had net income of $13.8 million for the three months ended
December 31, 2001 compared to net income of $3.1 million for the three months
ended December 31, 2000. The change was primarily due to an increase in gross
margins and contracted horsepower related to the continued expansion of our
fleet, offset partially by increased depreciation, increased leasing expense
from



                                       24


our operating lease facilities, increased selling, general and administrative
expense resulting from our increased headcount due to growth and increased
income tax expense resulting from our positive operating income.

Nine months ended December 31, 2001 compared to nine months ended December 31,
2000

    Revenues. Our total revenues for the nine months ended December 31, 2001
increased $358.7 million, or 269%, to $492.0 million, compared to $133.3 million
for the nine months ended December 31, 2000. Our contract compression revenues
increased by $156.0 million, or 171%, to $247.1 million during the nine months
ended December 31, 2001 from $91.1 million during the nine months ended December
31, 2000. Domestic contract compression revenues increased by $121.9 million, or
156%, to $200.2 million during the nine months ended December 31, 2001 from
$78.3 million during the nine months ended December 31, 2000. Our international
contract compression revenues increased by $34.1 million, or 266%, to $46.9
million during the nine months ended December 31, 2001 from $12.8 million during
the nine months ended December 31, 2000. The increase in domestic contract
compression revenue primarily resulted from continued expansion of our contract
compression fleet through our acquisitions and our capital expenditure program.
The increase in international contract compression revenues resulted from
expansion of our international contract compression fleet, primarily through the
addition of horsepower from our acquisitions, particularly our Weatherford
Global acquisition and continued high utilization rates.

    Domestic average contracted horsepower for the nine months ended December
31, 2001 increased by 178% to approximately 1,599,000 horsepower from
approximately 575,000 horsepower for the nine months ended December 31, 2000.
The increase in domestic average contracted horsepower primarily resulted from
the expansion of our domestic fleet through our acquisitions and our capital
expenditure program. In addition, international average rented horsepower for
the nine months ended December 31, 2001 increased 449% to approximately 302,000
horsepower from approximately 55,000 horsepower for the nine months ended
December 31, 2000, primarily through expansion of our international contract
compression fleet, through our acquisitions and continued high utilization
rates. Our average horsepower utilization rate for the nine months ended
December 31, 2001 was approximately 91.1%, up from 86.6% in the nine months
ended December 31, 2000. As of December 31, 2001, we had approximately 2.2
million horsepower. The horsepower utilization rate at December 31, 2001 was
approximately 88.4%.

    Our revenue from fabrication increased to $144.3 million for the nine-month
period from $33.3 million for the comparable period last year, an increase of
333%. The increase in fabrication revenue, consisting mostly of equipment
fabrication, was due primarily to our acquisitions. Revenues from fabrication
vary quarter to quarter due to the time of completion of the equipment being
sold. Our backlog of fabrication projects at December 31, 2001 was approximately
$101 million, compared with a backlog of $30.5 million at the same time a year
earlier. From September 30 to December 31, 2001, our backlog of $101 million
generally remained constant, primarily due to customer demand and the continued
expansion of our fabrication business.

    Our revenues from parts sales and service increased to $100.6 million during
the nine months ended December 31, 2001 from $8.9 million during the nine months
ended December 31, 2000, an increase of 1,030%. Parts sales and service revenue
increased primarily due to our acquisitions, which have made the parts sales and
service segment a more significant part of our business, our continued growth
within the industry and operating cost improvements.

    Gross Margin. Our gross margin (defined as total revenue less rental
expense, cost of sales (exclusive of depreciation and amortization), gain on
asset sales and interest income) for the nine months ended December 31, 2001
increased $133.1 million, or 202%, to $198.9 million from $65.8 million for the
nine months ended December 31, 2000. Our contract compression gross margin for
the nine months ended December 31, 2001 increased $100.2 million, or 167%, to
$160.2 million compared to a gross margin of $60.0 million for the nine months
ended December 31, 2000. Contract compression gross margin increased primarily
as the result of our contract compression revenue growth discussed above and
operating cost improvements. Our fabrication gross margin for the nine months
ended December 31, 2001 increased $12.2 million, or 265%, to $16.8 million
compared to a gross margin of $4.6 million for the nine months ended December
31, 2000. Fabrication gross margin increased primarily due to increased sales
resulting from our acquisitions.

    Our parts sales and service gross margin for the nine months ended December
31, 2001 increased $20.6 million or 1,585%, to $21.9 million compared to a gross
margin of $1.3 million for the nine months ended December 31, 2000. Parts sales
and service gross margin increased primarily due to our acquisitions, our
continued growth within the service industry and operating cost improvements.

    Selling, General and Administrative Expenses. Our selling, general and
administrative expenses for the nine months ended December 31, 2001 increased
$32.7 million or 273% compared to the nine months ended December 31, 2000.
Selling, general and administrative expenses represented approximately 9% of
revenue for the nine months ended December 31,



                                       25


2001 and December 31, 2000. The percentage remained constant primarily due to
the elimination of management fees in connection with our initial public
offering in May 2000, which was partially offset by higher selling, general and
administrative expenses associated with the operations of our acquired
businesses. These reductions have also been offset partially by increases in
certain expenses related to our operating as a publicly traded company.

    EBITDA, As Adjusted. Our EBITDA, as adjusted, for the nine months ended
December 31, 2001 increased 184% to $154.0 million from $54.2 million for the
nine months ended December 31, 2000, primarily due to increases in horsepower
from acquisitions, continued expansion of our contract compression fleet and
parts and service division, improved utilization of our contract compression
fleet, gross margin contribution from fabrication and operating cost
improvements realized by contract compression operations. EBITDA, as adjusted,
is defined as net income plus income taxes, interest expense, leasing expense,
management fees, depreciation and amortization, excluding non-recurring items,
minority interest and extraordinary gains or losses. EBITDA, as adjusted, is not
a measure of financial performance under generally accepted accounting
principles 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. EBITDA, as adjusted, represents a measure
upon which management assesses financial performance, and certain covenants in
our borrowing arrangements are tied to similar measures. We believe that EBITDA,
as adjusted, is a standard measure of financial performance used for valuing
companies in the compression industry. EBITDA, as adjusted, is a useful
yardstick as it measures the capacity of companies to generate cash without
reference to how they are capitalized, how they account for significant non-cash
charges for depreciation and amortization associated with assets used in the
business (the majority of which are long-lived assets in the compression
industry), or what their tax attributes may be.

    Non-recurring Charges. During the nine months ended December 31, 2000, we
incurred non-recurring charges of $7.1 million related to the early termination
of a management agreement and a consulting agreement and other related fees in
connection with our initial public offering and concurrent financing
transactions.

    Depreciation and Amortization. Depreciation and amortization increased by
$13.4 million to $35.3 million during the nine months ended December 31, 2001,
compared to $21.9 million during the nine months ended December 31, 2000. The
increase resulted primarily from the expansion of our contract compression
fleet, offset partially by the compression equipment sold and leased back under
our operating lease facilities. Included in depreciation and amortization for
the nine months ended December 31, 2000 is $2.3 million of goodwill amortization
expense. As of April 1, 2001, we adopted SFAS 142, which among other things,
eliminated the amortization of goodwill.

    Operating Leases. Operating leases' expense increased by $34.2 million to
$40.4 million during the nine months ended December 31, 2001 from $6.2 million
during the nine months ended December 31, 2000. The increase is due to the
expense associated with increased balances on the operating lease facilities
entered into concurrently with the Weatherford Global acquisition and the
additional $122 million increase of the SSN Operating Lease Facility in October
2001. The outstanding balance under the operating lease facilities at December
31, 2001 was $708.5 million, consisting of $549.0 million under our SSN
Operating Lease Facility and $159.5 million under our ABS Operating Lease
Facility.

    Interest Expense. Interest expense decreased $1.1 million to $17.5 million
for the nine months ended December 31, 2001 from $18.6 million for the nine
months ended December 31, 2000, primarily as a result of the reduction of debt
resulting from our initial public offering and financing restructurings.

    Extraordinary Loss. During the nine months ended December 31, 2000, we
incurred extraordinary losses of $10.0 million ($6.3 million net of income tax)
related to debt restructurings that occurred concurrently with our initial
public offering.

    Net Income (Loss). We had net income of $37.1 million for the nine months
ended December 31, 2001 compared to a net loss of $6.0 million for the nine
months ended December 31, 2000. The change was primarily due to extraordinary
and non-recurring charges incurred during the nine months ended December 31,
2000, as well as an increase in our gross margins and a decrease in interest
expense, offset partially by increased depreciation and amortization related to
the continued expansion of our fleet, increased leasing expense resulting from
our operating lease facilities, increased selling, general and administrative
expense resulting from our increased headcount due to growth, and increased
income tax expense resulting from our positive operating income.




                                       26


Liquidity and Capital Resources

    In May 2000, concurrently with our initial public offering, we entered into
a $200 million, five-year operating lease facility, which involved a sale and
leaseback of compression equipment to a trust. Under this operating lease
facility, certain of our compression equipment was sold to the trust for
approximately $155 million and leased back by us for a five-year period. At the
same time, we repaid and terminated a term loan and revolving credit facility
and entered into a $50 million secured revolving credit facility which had a
five-year term. This revolver and our previous operating lease facility were
repaid and terminated in February 2001 in connection with our Weatherford Global
acquisition.

    On July 3, 2001, we completed the offering of 1,333,333 shares of our common
stock together with 2,666,667, shares of our common stock sold by certain
selling stockholders, including Castle Harlan Partners III, L.P. and its
affiliates. The shares were sold in the offering at a price of $28.50 per share,
and the offering provided us with net proceeds (after deducting underwriting
discounts and commissions) of approximately $36.1 million. We used the proceeds
to fund the $26.3 million cash portion of the purchase price in our acquisition
of KCI, to repay a portion of KCI's indebtedness concurrently with the
acquisition, and to partially fund the $26.3 million cash portion of the
purchase price in our acquisition of LCM.

    Pursuant to the indenture governing Universal's 9 7/8% senior discount notes
due 2008, the holders of the notes had the right to require Universal to
repurchase the notes through August 23, 2001 as a result of the consummation of
the July 2001 equity offering as Castle Harlan's ownership of less than 20% of
our common stock constituted a change of control under the indenture. We
repurchased approximately $5.8 million face value of these notes in August 2001
with borrowings under our revolving credit facility. As of December 31, 2001,
Universal had approximately $210.7 million aggregate principal amount
outstanding under the 9 7/8% senior discount notes.

    During the third fiscal quarter, we completed our acquisition of TCSI for
approximately $22.5 million in cash. In addition, we recently reviewed our fleet
to identify compressors that were underperforming relative to the rest of our
fleet due to such factors as geographic location, age or maintenance. Following
our review, we sold approximately 230 compressors, averaging roughly 30
horsepower each, to our customers. Since the units that were sold were acquired
in the acquisitions we have made during the last twelve months, we have not
recognized any gain or loss on the sale of these assets. The value of the assets
was adjusted to equal the sale price and the offset was recorded as a decrease
to the acquiree's recorded goodwill balance.

    Our cash and cash equivalents balance at December 31, 2001 was $19.0
million, compared to $12.3 million at March 31, 2001.

    During the nine months ended December 31, 2001, cash flows from operations
provided $92.8 million, primarily from net income of $37.1 million, depreciation
of $35.3 million, a decrease in inventories of $23.2 million and $40.1 million
of other working capital. Partially offsetting this, we used cash in the amount
of $42.9 million to decrease accounts payable and accrued liabilities.

    During the nine months ended December 31, 2001, we used $312.1 million of
cash for investing activities, which primarily consisted of $139.4 million for
fixed asset additions and $175.1 million for acquisitions.

    During the nine months ended December 31, 2001, $226.0 million of cash
provided by financing activities, which primarily consisted of $181.0
million from proceeds from sales of compression equipment to our operating lease
facilities and $56.6 million from the issuance of common stock, partially offset
by repayments of debt and issuance costs related to the operating lease
facilities and stock offering of $11.6 million.

    On October 23, 2001, we sold an additional $122 million of compression
equipment to BRL Universal Equipment 2001 A, L.P. and leased the equipment back
under our existing SSN Operating Lease Facility. We used the net proceeds from
the sale of the compression equipment to repay all of the outstanding
indebtedness under our revolving credit facility with the remaining proceeds
used to repay a portion of the obligations under our ABS Operating Lease
Facility and for general corporate purposes. Most of the funds used to pay for
the compression equipment under the SSN Operating Lease Facility came from the
issuance and sale by the issuers, BRL Universal Equipment 2001 A, L.P. and BRL
Universal Equipment Corp., in a private placement in October 2001 of $100.0
million aggregate principal amount of additional 8 7/8% senior secured notes due
2008. On December 31, 2001, the SEC declared effective the registration
statement on Form S-4 (File No. 333-74342) filed by the issuers, Universal and
us with respect to the registration of $100.0 million aggregate principal amount
of new additional 8 7/8% senior secured notes due 2008 with our related lease
and guarantee obligations for exchange with the October 2001 $100.0 million
notes. The exchange offer will expire at 5:00 p.m., New York City time, on
February 19, 2002. The terms of the new additional notes are substantially
identical to the October



                                       27


2001 additional notes issued under an indenture dated February 9, 2001, except
that the new additional notes are freely transferable under the Securities Act
of 1933 and do not have any exchange or registration rights. The October 2001
notes increased the notes outstanding under the indenture to an aggregate
principal amount of $450.0 million.

    In accordance with generally accepted accounting principles, the operating
leases' balance of $708.5 million outstanding as of December 31, 2001, were not
recorded as liabilities in our consolidated balance sheet as of that date except
to the extent of approximately $121.6 million of deferred gain. Likewise, the
leased equipment under the operating leases, representing approximately 1.1
million horsepower and having a gross and net book value of approximately $606.6
million and $586.9 million, respectively, was not recorded as assets in our
December 31, 2001 consolidated balance sheet, and we did not record depreciation
of such leased equipment as an expense in our consolidated statements of
operations for periods ending on or prior to December 31, 2001. If the operating
leases were recorded on the consolidated balance sheet as of December 31, 2001,
total liabilities would have been increased by approximately $586.9 million, and
if the leased equipment under such operating leases (having a gross and net book
value, at the date they were sold to the lessors, of $606.6 million and $586.9
million, respectively) had been recorded as assets in such consolidated balance
sheet, total assets would have increased by approximately $586.9 million (less
depreciation). However, if such leased equipment had been recorded as assets in
our consolidated balance sheet, we would have recorded depreciation of such
equipment as an expense in our consolidated statements of operations. Under our
current policy, depreciation of owned contract compression equipment is
generally calculated using the straight line method over a period of 15 years
with residual value of 20%.

    As of December 31, 2001, our debt to capitalization ratio, including the
operating leases, was 55.5% and our book debt to capitalization ratio, excluding
operating leases, was 23.0%.

    As of February 11, 2002, subject to covenant and other restrictions, we had
unused credit availability of approximately $165.5 million (approximately $40.5
million under our asset-backed securitization facility and $125 million under
our revolving credit facility).

    We have realized approximately $20 million of cost savings on an annualized
basis from our Weatherford Global acquisition. The key drivers for the savings
were the elimination of overlapping areas of various domestic operations,
including fabrication facilities, as well as duplicate selling, general and
administrative activities.

    For fiscal 2002, we expect revenues to be approximately $670 to $675
million, with expected EBITDA, as adjusted, of approximately $212 to $213
million. These expected results are based on slight quarterly gross margin
improvements in both the domestic and international contract compression
segments and the parts sales and service segment, as well as continued revenue
growth in all business segments, although there are indications of a current
softness in the domestic compression market. We estimate that a 1% decrease in
utilization of our fleet would likely result in a decline in annual revenues of
approximately $3 million and a decline in annual EBITDA, as adjusted, of
approximately $2 million.

    Operating lease and net interest expense for the current fiscal year are
expected to be approximately $78 to $79 million, with depreciation of
approximately $48 to $49 million for the fiscal year.

    Under current market conditions, and assuming no negative impact from the
situation in Argentina, these projections are expected to result in
approximately $1.71 to $1.72 earnings per diluted share for the fiscal year.

    Capital expenditures, excluding acquisitions, are expected to be
approximately $190 million for the fiscal 2002 year, with approximately $110
million for domestic expansion, approximately $45 million for international
expenditures, approximately $25 to $27 million for maintenance capital
expenditures and approximately $5 million for general corporate expenditures. We
currently expect capital expenditures, excluding acquisitions, for the fiscal
year ending March 31, 2003 to be approximately $140 - $170 million.

    As a result of the financial situation in Argentina we are involved in
negotiations with our customers in Argentina as to the



                                       28

    currency in which contract amounts are to be paid, as mandated by the
Argentine government. The majority of our existing contracts were written to
ensure that we received U.S. dollars rather than Argentine pesos, thus reducing
our exposure to fluctuations in the Argentine peso's value. We are currently
evaluating the full impact of the measures taken by the Argentine government.
For the three- and nine-month periods ended December 31, 2001, Argentina
represented approximately 4.8% and 5.1% of our revenue, respectively, and 7.9%
and 8.4% of our EBITDA, as adjusted, respectively. Based on such estimates, we
do not believe the financial situation in Argentina will have a material adverse
effect on our consolidated financial position, operating results or cash flows.

    We believe that funds generated from our operations, together with our
existing cash and the additional capacity available under our revolving credit
facility and ABS Operating Lease Facility, will be sufficient to finance our
current operations, planned capital expenditures and internal growth for the
remainder of fiscal year 2002. If we were to make significant additional
acquisitions for cash, we may need to obtain additional debt, equity or
operating lease financing.


                           UNIVERSAL COMPRESSION, INC.

Three months ended December 31, 2001 compared to three months ended December 31,
2000

    Revenues. Universal's total revenues for the three months ended December 31,
2001 increased $117.4 million, or 196%, to $177.4 million, compared to $60.0
million for the three months ended December 31, 2000. Universal's contract
compression revenues increased by $49.7 million, or 138%, to $85.9 million
during the three months ended December 31, 2001 from $36.2 million during the
three months ended December 31, 2000. Domestic contract compression revenues
increased by $37.7 million, or 119%, to $69.4 million during the three months
ended December 31, 2001 from $31.7 million during the three months ended
December 31, 2000. Universal's international contract compression revenues
increased by $12.1 million, or 275%, to $16.5 million during the three months
ended December 31, 2001 from $4.4 million during the three months ended December
31, 2000. The increase in domestic contract compression revenues primarily
resulted from continued expansion of our contract compression fleet through
Universal's acquisitions and our capital expenditure program. The increase in
international contract compression revenues resulted from expansion of
Universal's international contract compression fleet, primarily through the
addition of horsepower from Universal's acquisitions, particularly the
Weatherford Global acquisition, and continued high utilization rates.

    Domestic average contracted horsepower for the three months ended December
31, 2001 increased by 145% to approximately 1,653,000 horsepower from
approximately 676,000 horsepower for the three months ended December 31, 2000.
The increase in domestic average contracted horsepower primarily resulted from
the expansion of Universal's domestic fleet through acquisitions and our capital
expenditure program. In addition, international average rented horsepower for
the three months ended December 31, 2001 increased by 436% to approximately
316,000 horsepower from approximately 59,000 horsepower for the three months
ended December 31, 2000, primarily through expansion of Universal's
international contract compression fleet through acquisitions and continued high
utilization rates. Average horsepower utilization rate for the three months
ended December 31, 2001 was approximately 89.4%, up from 88.6% in the three
months ended December 31, 2000. At the end of the quarter, Universal had
approximately 2.2 million horsepower. The horsepower utilization rate at
December 31, 2001 was approximately 88.4%.

    Universal's revenue from fabrication increased to $55.3 million for the
quarter from $17.3 million in the same quarter a year ago, an increase of 220%.
The increase in fabrication revenue, consisting mostly of equipment fabrication
was due primarily to Universal's acquisitions. Revenues from fabrication vary
quarter to quarter due to the time of completion of the equipment being sold.
Universal's backlog of fabrication projects at December 2001 was approximately
$101 million, compared with a backlog of $30.5 million at the same time a year
earlier. From September 30 to December 31, 2001, Universal's backlog of $101
million generally remained constant, primarily due to customer demand and the
continued expansion of our fabrication business.

    Universal's revenues from parts sales and service increased to $36.2 million
during the three months ended December 31, 2001 from $6.5 million during the
three months ended December 31, 2000, an increase of 457%. The increase was due
primarily to the acquisitions of Weatherford Global, IEW and TCSI, which have
made the parts sales and service segment a more significant part of Universal's
business.

    Gross Margin. Universal's gross margin (defined as total revenue less rental
expense, cost of sales (exclusive of depreciation and amortization), gain on
asset sales and interest income) for the three months ended December 31, 2001
increased $44.9 million, or 170%, to $71.3 million from $26.4 million for the
three months ended December 31, 2000. Universal's contract compression gross
margin for the three months ended December 31, 2001 increased $32.4 million, or
136%, to $56.3 million compared to a gross margin of $23.9 million for the three
months ended December 31, 2000. Contract compression gross margin increased
primarily as the result



                                       29


of Universal's contract compression revenue growth discussed above and operating
cost improvements. Universal's fabrication gross margin for the three months
ended December 31, 2001 increased $4.9 million, or 288%, to $6.6 million
compared to a gross margin of $1.7 million for the three months ended December
31, 2000. Fabrication gross margin increased primarily due to increased sales
resulting from acquisitions.

    Universal's parts sales and service gross margin for the three months ended
December 31, 2001 increased $7.5 million or 938%, to $8.3 million compared to a
gross margin of $0.8 million for the three months ended December 31, 2000. Parts
sales and service gross margin increased primarily due to acquisitions,
continued growth within the service industry and operating cost improvements.

    Selling, General and Administrative Expenses. Universal's selling, general
and administrative expenses for the three months ended December 31, 2001
increased $11.4 million, or 240%, compared to the three months ended December
31, 2000. Selling, general and administrative expenses represented approximately
9% of revenue for the three months ended December 31, 2001 compared to
approximately 8% of revenue for the three months ended December 31, 2000. The
percentage increase was primarily due to normal expenses associated with
Universal's continued growth in the industry.

    EBITDA, As Adjusted. Universal's EBITDA, as adjusted, for the three months
ended December 31, 2001 increased 154% to $55.1 million from $21.7 million for
the three months ended December 31, 2000, primarily due to increases in total
horsepower, continued expansion of its contract compression fleet, parts sales
and services division, improved utilization of its contract compression fleet,
gross margin contribution from fabrication and operating cost improvements
realized by contract compression operations, partially offset by increased
selling, general and administrative expenses as a percentage of revenues, as
discussed above. EBITDA, as adjusted, is defined as net income plus income
taxes, interest expense, leasing expense, management fees, depreciation and
amortization, excluding non-recurring items, minority interest and extraordinary
gains or losses. EBITDA, as adjusted, is not a measure of financial performance
under generally accepted accounting principles and should not be considered an
alternative to operating income or net income as an indicator of Universal's
operating performance or to net cash provided by operating activities as a
measure of its liquidity. Additionally, the EBITDA, as adjusted, computation
used herein may not be comparable to other similarly titled measures of other
companies. EBITDA, as adjusted, represents a measure upon which management
assesses financial performance, and certain covenants in Universal's borrowing
arrangements will be tied to similar measures. Universal believes that EBITDA,
as adjusted, is a standard measure of financial performance used for valuing
companies in the compression industry. EBITDA, as adjusted, is a useful
yardstick as it measures the capacity of companies to generate cash without
reference to how they are capitalized, how they account for significant non-cash
charges for depreciation and amortization associated with assets used in the
business (the majority of which are long-lived assets in the compression
industry), or what their tax attributes may be.

    Depreciation and Amortization. Depreciation and amortization increased by
$4.5 million to $12.2 million during the three months ended December 31, 2001,
compared to $7.7 million during the three months ended December 31, 2000. The
increase resulted primarily from the expansion of Universal's contract
compression fleet, offset partially by the compressor equipment sold and leased
back under Universal's operating lease facility. Included in depreciation and
amortization for the three months ended December 31, 2000 is $0.8 million of
amortization expense. As of April 1, 2001, Universal adopted SFAS 142, which
among other things, eliminated the amortization of goodwill.

    Operating Leases. Operating leases' expense increased by $11.3 million to
$14.8 million during the three months ended December 31, 2001 from $3.5 million
during the three months ended December 31, 2000. The increase is due to the
expense associated with increased balances on the operating lease facilities
entered into concurrently with the Weatherford Global acquisition and the
additional $122 million increase of the SSN Operating Lease Facility in October
2001. The outstanding balance under the operating lease facilities at December
31, 2001 was $708.5 million, consisting of $549.0 million under the SSN
Operating Lease Facility and $159.5 million under Universal's asset-backed
securitization operating lease facility.

    Interest Expense. Interest expense remained constant at $5.4 million for the
three months ended December 31, 2001 and for the three months ended December 31,
2000 because the primary component of interest expense is the accretion of the 9
7/8% senior discount notes, which remains fairly constant.

    Net Income. Universal had net income of $13.8 million for the three months
ended December 31, 2001 compared to net income of $3.1 million for the three
months ended December 31, 2000. The change was primarily due to an increase in
Universal's gross margins and contracted horsepower related to the continued
expansion of Universal's fleet, offset partially by increased depreciation,
increased leasing expense resulting from Universal's operating lease facilities,
increased selling, general and administrative expense resulting from increased
headcount due to growth and increased income tax expense resulting from positive
operating income.




                                       30


Nine months ended December 31, 2001 compared to nine months ended December 31,
2000

    Revenues. Universal's total revenues for the nine months ended December 31,
2001 increased $358.7 million, or 269%, to $492.0 million, compared to $133.3
million for the nine months ended December 31, 2000. Universal's contract
compression revenues increased by $156.0 million, or 171%, to $247.1 million
during the nine months ended December 31, 2001 from $91.1 million during the
nine months ended December 31, 2000. Domestic contract compression revenues
increased by $121.9 million, or 156%, to $200.2 million during the nine months
ended December 31, 2001 from $78.3 million during the nine months ended December
31, 2000. Universal's international contract compression revenues increased by
$34.1 million, or 266%, to $46.9 million during the nine months ended December
31, 2001 from $12.8 million during the nine months ended December 31, 2000. The
increase in domestic contract compression revenues primarily resulted from
continued expansion of Universal's contract compression fleet through
acquisitions and our capital expenditure program. The increase in international
contract compression revenues resulted from expansion of Universal's
international contract compression fleet, primarily through the addition of
horsepower from acquisitions, particularly the Weatherford Global acquisition,
and continued high utilization rates.

    Domestic average contracted horsepower for the nine months ended December
31, 2001 increased by 178% to approximately 1,599,000 horsepower from
approximately 575,000 horsepower for the nine months ended December 31, 2000.
The increase in domestic average contracted horsepower primarily resulted from
the expansion of the domestic fleet through acquisitions and our capital
expenditure program. In addition, international average rented horsepower for
the nine months ended December 31, 2001 increased 449% to approximately 302,000
horsepower from approximately 55,000 horsepower for the nine months ended
December 31, 2000, primarily through expansion of the international contract
compression fleet, acquisitions and continued high utilization rates. Average
horsepower utilization rate for the nine months ended December 31, 2001 was
approximately 91.1%, up from approximately 86.6% in the nine months ended
December 31, 2000. At the end of the quarter, we had approximately 2.2 million
horsepower. The horsepower utilization rate at December 31, 2001 was
approximately 88.4%.

    Universal's revenue from fabrication increased to $144.3 million for the
nine-month period from $33.3 million for the comparable period last year, an
increase of 333%. The increase in fabrication revenue, consisting mostly of
equipment fabrication was due primarily to the acquisitions of Weatherford
Global, IEW and TCSI. Revenues from fabrication vary quarter to quarter due to
the time of completion of the equipment being sold. Universal's backlog of
fabrication projects at December 31, 2001 was approximately $101 million,
compared with a backlog of $30.5 million at the same time a year earlier. From
September 30 to December 31, 2001, Universal's backlog of $101 million generally
remained constant, primarily due to customer demand and the continued expansion
of our fabrication business.

    Universal's revenues from parts sales and service increased to $100.6
million during the nine months ended December 31, 2001 from $8.9 million during
the nine months ended December 31, 2000, an increase of 1,030%. The increase was
due primarily to Universal's acquisitions, which have made the parts sales and
service segment a more significant part of Universal's business, and operating
cost improvements.

    Gross Margin. Universal's gross margin (defined as total revenue less rental
expense, cost of sales (exclusive of depreciation and amortization), gain on
asset sales and interest income) for the nine months ended December 31, 2001
increased $133.1 million, or 202%, to $198.9 million from $65.8 million for the
nine months ended December 31, 2000. Universal's contract compression gross
margin for the nine months ended December 31, 2001 increased $100.2 million, or
167%, to $160.2 million compared to a gross margin of $60.0 million for the nine
months ended December 31, 2000. Contract compression gross margin increased
primarily as the result of Universal's contract compression revenue growth
discussed above and operating cost improvements. Universal's fabrication gross
margin for the nine months ended December 31, 2001 increased $12.2 million, or
265%, to $16.8 million compared to a gross margin of $4.6 million for the nine
months ended December 31, 2000. Fabrication gross margin increased primarily due
to increased sales resulting from Universal's acquisitions.

    Universal's parts sales and service gross margin for the nine months ended
December 31, 2001 increased $20.6 million or 1,585%, to $21.9 million compared
to a gross margin of $1.3 million for the nine months ended December 31, 2000.
Parts sales and service gross margin increased primarily due to acquisitions,
continued growth within the service industry and operating cost improvements.

    Selling, General and Administrative Expenses. Universal's selling, general
and administrative expenses for the nine months ended December 31, 2001
increased $32.7 million, or 273%, compared to the nine months ended December 31,
2000. Selling, general and administrative expenses represented approximately 9%
of revenue for the nine months ended December 31, 2001 and December 31, 2000.
The percentage remained constant primarily due to the elimination of management
fees in connection with Holdings' initial public offering in May 2000, which was
partially offset by higher selling, general and administrative expenses
associated with the



                                       31


operations of Universal's acquired businesses and increases in certain expenses
related to Holdings operating as a publicly traded company.

    EBITDA, As Adjusted. Universal's EBITDA, as adjusted, for the nine months
ended December 31, 2001 increased 184% to $154.0 million from $54.2 million for
the nine months ended December 31, 2000, primarily due to increases in
horsepower from acquisitions, continued expansion of its contract compression
fleet and parts sales and services division, improved utilization of the
contract compression fleet, gross margin contribution from fabrication and
operating cost improvements realized by contract compression operations. EBITDA,
as adjusted, is defined as net income plus income taxes, interest expense,
leasing expense, management fees, depreciation and amortization, excluding
non-recurring items, minority interest and extraordinary gains or losses.
EBITDA, as adjusted, is not a measure of financial performance under generally
accepted accounting principles and should not be considered an alternative to
operating income or net income as an indicator of Universal's operating
performance or to net cash provided by operating activities as a measure of its
liquidity. Additionally, the EBITDA, as adjusted, computation used herein may
not be comparable to other similarly titled measures of other companies. EBITDA,
as adjusted, represents a measure upon which management assesses financial
performance, and certain covenants in Universal's borrowing arrangements will be
tied to similar measures. Universal believes that EBITDA, as adjusted, is a
standard measure of financial performance used for valuing companies in the
compression industry. EBITDA, as adjusted, is a useful yardstick as it measures
the capacity of companies to generate cash without reference to how they are
capitalized, how they account for significant non-cash charges for depreciation
and amortization associated with assets used in the business (the majority of
which are long-lived assets in the compression industry), or what their tax
attributes may be.

    Non-recurring Charges. During the nine months ended December 31, 2000,
Universal incurred non-recurring charges of $7.1 million related to the early
termination of a management agreement and a consulting agreement and other
related fees in connection with Holdings' initial public offering and concurrent
financing transactions.

    Depreciation and Amortization. Depreciation and amortization increased by
$13.4 million to $35.3 million during the nine months ended December 31, 2001,
compared to $21.9 million during the nine months ended December 31, 2000. The
increase resulted primarily from the expansion of Universal's contract
compression fleet, offset partially by the compressor equipment sold and leased
back under Universal's operating lease facility. Included in depreciation and
amortization for the nine months ended December 31, 2000 is $3.2 million of
amortization expense. As of April 1, 2001, Universal adopted SFAS 142, which
among other things, eliminated the amortization of goodwill.

    Operating Leases. Operating leases' expense increased by $34.2 million to
$40.4 million during the nine months ended December 31, 2001 from $6.2 million
during the nine months ended December 31, 2000. The increase is due to the
expense associated with an increased balance on the operating lease facilities
entered into concurrently with the Weatherford Global acquisition and the
additional $122 million increase of the SSN Operating Lease Facility in October
2001. The outstanding balance under the operating lease facilities at December
31, 2001 was $708.5 million, consisting of $549.0 million under the SSN
Operating Lease Facility and $159.5 million under Universal's ABS operating
lease facility.

    Interest Expense. Interest expense decreased $0.5 million to $17.5 million
for the nine months ended December 31, 2001 from $18.0 million for the nine
months ended December 31, 2000, primarily as a result of the reduction of debt
resulting from Holding's initial public offering and its related financing
restructurings.

    Extraordinary Loss. During the nine months ended December 31, 2000,
Universal incurred extraordinary losses of $5.4 million ($3.4 million net of
income tax) related to debt restructurings that occurred concurrently with
Holdings' initial public offering.

    Net Income (Loss). Universal had net income of $37.1 million for the nine
months ended December 31, 2001 compared to a net loss of $2.8 million for the
nine months ended December 31, 2000. The change was primarily related to
extraordinary and non-recurring charges incurred during the nine months ended
December 31, 2000, as well as an increase in Universal's gross margins and a
decrease in interest expense, offset partially by increased depreciation and
amortization related to the continued expansion of Universal's fleet, leasing
expense resulting from Universal's operating lease facilities, selling, general
and administrative expense resulting from Universal's increased headcount due to
growth, and income tax expense resulting from Universal's positive operating
income.




                                       32

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    We are exposed to some market risk due to the floating or variable interest
rates under our financing arrangements. A portion of the interest and lease
payments under our financing arrangements are based on a floating rate (a base
rate or LIBOR, at our option, in the case of our revolving credit facility, and
LIBOR, in the case of our operating lease facilities) plus a variable amount
based on our operating results. The one-month LIBOR rate at December 31, 2001
was 1.9%. A 1.0% increase in interest rates would result in an annual increase
of approximately $1.0 million of interest and operating lease expense. As of
December 31, 2001, approximately $99 million of our indebtedness and other
obligations outstanding bear interest at floating rates.

    In order to minimize any significant foreign currency credit risk, we
generally contractually require that payment by our customers be made in U.S.
dollars. If payment is not made in U.S. dollars, we generally utilize the
exchange rate into U.S. dollars on the payment date or balance payments in local
currency against local expenses. As a result of the financial situation in
Argentina we are involved in negotiations with our customers in Argentina as to
the currency in which contract amounts are to be paid, as mandated by the
Argentine government. We are currently evaluating the full impact of the
measures taken by the Argentine government and do not believe the financial
situation in Argentina will have a material adverse effect on our cash flows.

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

    Effective January 2002 following the previously announced resignations of
two directors, the Company's Board of Directors changed the composition of its
Audit and Compensation Committees. The Audit Committee now is comprised of Uriel
E. Dutton, Thomas C. Case and Samuel Urcis, with Mr. Dutton serving as Chairman.
Edmund P. Segner III, Bernard J. Duroc-Danner and Curtis W. Huff now serve on
the Compensation Committee, which is chaired by Mr. Duroc-Danner.




                                       33


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

The following documents have been included as Exhibits to this report:

       EXHIBIT    DESCRIPTION
       -------    -----------

         4.1      First Supplemental Indenture, dated as of September 11, 2001,
                  among BRL Universal Equipment 2001 A, L.P. and BRL Universal
                  Equipment Corp., as Issuers, and The Bank of New York, as
                  Trustee, with Respect to the 8 7/8% Senior Secured Notes due
                  2008 (incorporated by reference to Exhibit 4.1 to Universal
                  Compression Holdings, Inc.'s Current Report on Form 8-K dated
                  October 24, 2001).

         4.2*     Amendment No. 1 to Indenture, dated as of October 1, 2001,
                  between BRL Universal Compression Funding I, L.P., as Issuer,
                  and Wells Fargo Bank Minnesota, N.A., as Indenture Trustee.

         4.3*     Amendment No. 2 to the Indenture, dated as of February 8,
                  2002, between BRL Universal Compression Funding I, L.P., as
                  Issuer, and Wells Fargo Bank Minnesota, N.A., as Indenture
                  Trustee.

         10.1     Registration Rights Agreement, dated as of October 23, 2001,
                  among BRL Universal Equipment 2001 A, L.P., and BRL Universal
                  Equipment Corp., as Issuers, Universal Compression Holdings,
                  Inc. and Universal Compression, Inc., Deutsche Banc Alex.
                  Brown Inc., First Union Securities, Inc., Banc One Capital
                  Markets, Inc. and Scotia Capital (USA), Inc. as Initial
                  Purchasers (incorporated by reference to Exhibit 4.2 to
                  Universal Compression Holdings, Inc.'s Current Report on Form
                  8-K dated October 24, 2001).

         10.2     First Amendment to Equipment Lease Agreement, with respect to
                  the Senior Secured Notes Operating Lease Facility, dated as of
                  October 15, 2001, between BRL Universal Equipment 2001 A,
                  L.P., as Lessor, and Universal Compression, Inc., as Lessee
                  (incorporated by Reference to Exhibit 10.1 to Universal
                  Compression Holdings, Inc.'s Current Report on Form 8-K dated
                  October 24, 2001).

         10.3     First Amended and Restated Participation Agreement, dated as
                  of October 15, 2001, among Universal Compression, Inc., as
                  Lessee, Universal Compression Holdings, Inc., as Guarantor,
                  BRL Universal Compression Equipment 2001 A, L.P., as Lessor,
                  the 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 the 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 10.2 to Universal Compression Holdings, Inc.'s Current
                  Report on Form 8-K dated October 24, 2001).

         10.4     Participation Agreement Supplement No. 1, dated as of October
                  23, 2001, among Universal Compression, Inc., as Lessee,
                  Universal Compression Holdings, Inc., as Guarantor, BRL
                  Universal Equipment 2001 A, L.P., as Lessor, The Bank of New
                  York, not in its individual capacity but as Indenture Trustee
                  for the Tranche A Noteholders (incorporated by reference to
                  Exhibit 10.3 to Universal Compression Holdings, Inc.'s Current
                  Report on Form 8-K dated October 24, 2001).

         10.5     First Amendment to Tranche B Loan Agreement, dated as of
                  October 15, 2001, among BRL Universal Equipment 2001 A, L.P.,
                  Bankers Trust Company, as Administrative Agent for Tranche B
                  Lenders and as Collateral Agent (incorporated by reference to
                  Exhibit 10.4 to Universal Compression Holdings, Inc.'s Current
                  Report on Form 8-K dated October 24, 2001).



                                       34

         10.6     Amendment No. 2 to Management Agreement, dated as of July 16,
                  2001, among Universal Compression, Inc., UCO Compression LLC
                  and BRL Universal Compression Funding I, L.P. (incorporated
                  by reference to Exhibit 10.15 of Universal Compression
                  Holdings, Inc. Registration Statement on Form S-4 filed with
                  the Securities and Exchange Commission on November 30, 2001
                  (File No. 333-74342)).

         10.7     Amendment No. 3 to Management Agreement, dated as of September
                  14, 2001, among Universal Compression, Inc., UCO Compression
                  LLC and BRL Universal Compression Funding I, L.P.
                  (incorporated by reference to Exhibit 10.16 of Universal
                  Compression Holdings, Inc. Registration Statement on Form S-4
                  filed with the Securities and Exchange Commission on November
                  30, 2001 (File No. 333-74342)).

         10.8*    Amendment No. 4 to Management Agreement, dated as of November
                  8, 2001, among Universal Compression, Inc., UCO Compression
                  LLC and BRL Universal Compression Funding I, L.P.

         10.9*    Amendment No. 5 to the Management Agreement, dated as of
                  February 8, 2002, among Universal Compression, Inc., UCO
                  Compression LLC and BRL Universal Compression Funding I, L.P.

         10.10*   Back-up Management Agreement, dated as of February 1, 2002,
                  among Caterpillar Inc., UCO Compression LLC, BRL Universal
                  Compression Funding I, L.P. and Universal Compression, Inc.

         10.11*   Amendment No. 1 to the Master Equipment Lease Agreement, dated
                  February 8, 2002, between BRL Universal Compression Funding I,
                  L.P. and UCO Compression LLC.

-------------
    *      Filed herewith


(b) Reports on Form 8-K.

The Company and Universal filed the following Current Reports on Form 8-K during
the third quarter of fiscal 2002:

     -    The Company and Universal filed a Current Report on Form 8-K on
          October 9, 2001 to report under Item 5 the retirement of Jack B.
          Hilburn, Senior Vice President, and to report under Item 9 the
          Company's participation in a conference and the reaffirmation of
          certain earnings guidance at such conference.




                                       35


     -    The Company and Universal filed a Current Report on Form 8-K on
          October 24, 2001 to report under Item 5 the sale of an additional $122
          million of equipment under its SSN Operating Lease Facility and to
          file under Item 7 certain exhibits relating thereto.

     -    The Company and Universal filed a Current Report on Form 8-K on
          October 29, 2001 to report under Item 5 the issuance of a press
          release announcing earnings for its second fiscal quarter and to
          report under Item 9 certain matters discussed on a conference call
          broadcast to investors over the Internet with respect to the results
          of the quarter.

     -    The Company and Universal filed a Current Report on Form 8-K on
          December 7, 2001 to report under Item 5 among other things, (1) the
          filing of a Registration Statement on Form S-4 to register the
          issuance by the unaffiliated issuers of $100 million aggregate
          principal amount of the new additional 8 7/8% senior secured notes due
          2008 and our related lease and guarantee obligations and (2) the
          termination of voting agreements and to file under Item 7 certain
          exhibits relating thereto.

In addition, the Company and Universal filed the following Current Reports on
Form 8-K subsequent to December 31, 2001:

     -    The Company and Universal filed a Current Report on Form 8-K on
          January 7, 2002 to report under Item 5 the effectiveness of the
          Registration Statement on Form S-4 with respect to the registration of
          $100 million aggregate principal amount of the unaffiliated issuers'
          new additional 8 7/8% senior secured notes due 2008 and our related
          lease and guarantee obligations.

     -    The Company and Universal filed a Current Report on Form 8-K on
          January 23, 2002 to report under Item 5 the announcement of its
          scheduled third fiscal quarter earning release and conference call and
          the retirement of two members of the Company's Board of Directors,
          John K. Castle and C. Kent May, and to file under Item 7 a related
          press release and to report under Item 9 the timing of the release of
          financial results and the conference call broadcast to investors over
          the Internet with respect to the results of the quarter.

     -    The Company and Universal filed a Current Report on Form 8-K on
          February 4, 2002 to report under Item 5 the issuance of a press
          release announcing earnings for its third fiscal quarter and other
          corporate matters regarding the new composition of the Company's Audit
          and Compensation Committees, and to report under Item 9 certain
          matters discussed on a conference call broadcast to investors over the
          Internet with respect to the results of the quarter and other
          corporate matters.




                                       36

                                   SIGNATURES

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, thereunto duly authorized.

                                           UNIVERSAL COMPRESSION HOLDINGS, INC.

Date: February 14, 2002                    By: /s/ RICHARD W. FITZGERALD
                                               -------------------------
                                                    Richard W. FitzGerald,
                                                    Senior Vice President and
                                                    Chief Financial Officer

                                           UNIVERSAL COMPRESSION, INC.

                                           By: /s/ RICHARD W. FITZGERALD
                                               -------------------------
                                                    Richard W. FitzGerald,
                                                    Senior Vice President and
                                                    Chief Financial Officer




                                       37

                                INDEX TO EXHIBITS

       EXHIBIT    DESCRIPTION
       -------    -----------

         4.1      First Supplemental Indenture, dated as of September 11, 2001,
                  among BRL Universal Equipment 2001 A, L.P. and BRL Universal
                  Equipment Corp., as Issuers, and The Bank of New York, as
                  Trustee, with Respect to the 8 7/8% Senior Secured Notes due
                  2008 (incorporated by reference to Exhibit 4.1 to Universal
                  Compression Holdings, Inc.'s Current Report on Form 8-K dated
                  October 24, 2001).

         4.2*     Amendment No. 1 to Indenture, dated as of October 1, 2001,
                  between BRL Universal Compression Funding I, L.P., as Issuer,
                  and Wells Fargo Bank Minnesota, N.A., as Indenture Trustee.

         4.3*     Amendment No. 2 to the Indenture, dated as of February 8,
                  2002, between BRL Universal Compression Funding I, L.P., as
                  Issuer, and Wells Fargo Bank Minnesota, N.A., as Indenture
                  Trustee.

         10.1     Registration Rights Agreement, dated as of October 23, 2001,
                  among BRL Universal Equipment 2001 A, L.P., and BRL Universal
                  Equipment Corp., as Issuers, Universal Compression Holdings,
                  Inc. and Universal Compression, Inc., Deutsche Banc Alex.
                  Brown Inc., First Union Securities, Inc., Banc One Capital
                  Markets, Inc. and Scotia Capital (USA), Inc. as Initial
                  Purchasers (incorporated by reference to Exhibit 4.2 to
                  Universal Compression Holdings, Inc.'s Current Report on Form
                  8-K dated October 24, 2001).

         10.2     First Amendment to Equipment Lease Agreement, with respect to
                  the Senior Secured Notes Operating Lease Facility, dated as of
                  October 15, 2001, between BRL Universal Equipment 2001 A,
                  L.P., as Lessor, and Universal Compression, Inc., as Lessee
                  (incorporated by Reference to Exhibit 10.1 to Universal
                  Compression Holdings, Inc.'s Current Report on Form 8-K dated
                  October 24, 2001).

         10.3     First Amended and Restated Participation Agreement, dated as
                  of October 15, 2001, among Universal Compression, Inc., as
                  Lessee, Universal Compression Holdings, Inc., as Guarantor,
                  BRL Universal Compression Equipment 2001 A, L.P., as Lessor,
                  the 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 the 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 10.2 to Universal Compression Holdings, Inc.'s Current
                  Report on Form 8-K dated October 24, 2001).

         10.4     Participation Agreement Supplement No. 1, dated as of October
                  23, 2001, among Universal Compression, Inc., as Lessee,
                  Universal Compression Holdings, Inc., as Guarantor, BRL
                  Universal Equipment 2001 A, L.P., as Lessor, The Bank of New
                  York, not in its individual capacity but as Indenture Trustee
                  for the Tranche A Noteholders (incorporated by reference to
                  Exhibit 10.3 to Universal Compression Holdings, Inc.'s Current
                  Report on Form 8-K dated October 24, 2001).

         10.5     First Amendment to Tranche B Loan Agreement, dated as of
                  October 15, 2001, among BRL Universal Equipment 2001 A, L.P.,
                  Bankers Trust Company, as Administrative Agent for Tranche B
                  Lenders and as Collateral Agent (incorporated by reference to
                  Exhibit 10.4 to Universal Compression Holdings, Inc.'s Current
                  Report on Form 8-K dated October 24, 2001).





                                       38

         10.6     Amendment No. 2 to Management Agreement, dated as of July 16,
                  2001, among Universal Compression, Inc., UCO Compression LLC
                  and BRL Universal Compression Funding I, L.P. (incorporated
                  by reference to Exhibit 10.15 of Universal Compression
                  Holdings, Inc. Registration Statement on Form S-4 filed with
                  the Securities and Exchange Commission on November 30, 2001
                  (File No. 333-74342)).

         10.7     Amendment No. 3 to Management Agreement, dated as of September
                  14, 2001, among Universal Compression, Inc., UCO Compression
                  LLC and BRL Universal Compression Funding I, L.P.
                  (incorporated by reference to Exhibit 10.16 of Universal
                  Compression Holdings, Inc. Registration Statement on Form S-4
                  filed with the Securities and Exchange Commission on November
                  30, 2001 (File No. 333-74342)).

         10.8*    Amendment No. 4 to Management Agreement, dated as of November
                  8, 2001, among Universal Compression, Inc., UCO Compression
                  LLC and BRL Universal Compression Funding I, L.P.

         10.9*    Amendment No. 5 to the Management Agreement, dated as of
                  February 8, 2002, among Universal Compression, Inc., UCO
                  Compression LLC and BRL Universal Compression Funding I, L.P.

         10.10*   Back-up Management Agreement, dated as of February 1, 2002,
                  among Caterpillar Inc., UCO Compression LLC, BRL Universal
                  Compression Funding I, L.P. and Universal Compression, Inc.

         10.11*   Amendment No. 1 to the Master Equipment Lease Agreement, dated
                  February 8, 2002, between BRL Universal Compression Funding I,
                  L.P. and UCO Compression LLC.

-------------
    *      Filed herewith






                                       39