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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 2001.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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UNIVERSAL COMPRESSION HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3989167
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4440 BRITTMOORE ROAD
HOUSTON, TEXAS 77041
(713) 335-7000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Agent of Service: Copies of Communications to:
STEPHEN A. SNIDER MARK L. CARLTON CHRISTINE B. LAFOLLETTE
PRESIDENT AND CHIEF EXECUTIVE SENIOR VICE PRESIDENT AND KING & SPALDING
OFFICER GENERAL COUNSEL 1100 LOUISIANA ST., SUITE 3300
UNIVERSAL COMPRESSION HOLDINGS, UNIVERSAL COMPRESSION HOLDINGS, HOUSTON, TEXAS 77002-5219
INC. INC. (713) 751-3239
4440 BRITTMOORE ROAD 4440 BRITTMOORE ROAD FAX: (713) 751-3290
HOUSTON, TEXAS 77041 HOUSTON, TEXAS 77041
(713) 335-7000 (713) 335-7454
(Name, address, including zip FAX: (713) 466-6720
code, and telephone number,
including area code, of agent for
service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after the effective date of this Registration Statement, as determined in
light of market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
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Common stock, par value $.01 per
share.......................... 694,927 shares $27.09 $18,825,572.43 $4,707
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c), based on the average of the high and low sales
prices on the New York Stock Exchange on August 9, 2001.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 10, 2001
PROSPECTUS
694,927 SHARES
UNIVERSAL COMPRESSION HOLDINGS, INC.
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COMMON STOCK
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This prospectus relates to the offering, from time to time, of up to
694,927 shares of common stock of Universal Compression Holdings, Inc. by
certain of our stockholders. We will not receive any of the proceeds from the
sale of the shares being offered. We are registering the resale of these shares,
but the registration of the shares does not necessarily mean that any of the
shares will be offered or sold by the selling stockholders.
The selling stockholders received these shares of common stock as part of
our acquisition of KCI Compression Company, L.P. Universal consummated this
acquisition on July 11, 2001. The selling stockholders from time to time may
offer and sell the shares directly to purchasers or through agents, underwriters
or dealers on terms to be determined at the time of sale. If required, the name
of any agents, underwriters or dealers and any other required information will
be set forth in a prospectus supplement.
Our common stock is listed on the New York Stock Exchange under the symbol
"UCO." On August 9, 2001, the last sale price of the common stock as reported on
the New York Stock Exchange was $26.75 per share. Shares of common stock offered
pursuant to this prospectus have been approved for trading on the New York Stock
Exchange.
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INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3 FOR A DISCUSSION OF THESE RISKS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is , 2001.
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TABLE OF CONTENTS
PAGE
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About this Prospectus....................................... 1
Where You Can Find More Information......................... 1
Our Company................................................. 2
Risk Factors................................................ 3
Disclosure Regarding Forward-Looking Statements............. 9
Use of Proceeds............................................. 11
Selling Stockholders........................................ 11
Plan of Distribution........................................ 14
Legal Matters............................................... 15
Experts..................................................... 15
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, certain of our stockholders (the "selling stockholders") may
sell up to an aggregate of 694,927 shares of common stock in one or more
offerings. This prospectus provides you with a general description of the common
stock. You should read this prospectus and any applicable prospectus supplement
provided to you together with the additional information described under the
heading "Where You Can Find More Information."
The registration statement that contains this prospectus (including the
exhibits to the registration statement) contains additional information about
our company and the securities offered under this prospectus. That registration
statement can be read at the SEC web site or at the SEC offices mentioned under
the heading "Where You Can Find More Information."
You should rely only on the information contained in this prospectus. We
have not, and the selling stockholders have not, authorized any other person to
provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the selling
stockholders are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.
The terms "Universal," "our company," "we," "our" and "us" when used in
this prospectus, refer to Universal Compression Holdings, Inc., its subsidiaries
(including Universal Compression, Inc.) and its predecessors as a combined
entity, except where it is made clear that such term means only the parent
company.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. These SEC filings are available to the public over the
Internet at the SEC's website at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549. You can obtain copies of the
documents at prescribed rates by writing to the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
facilities. Our SEC filings are also available at the office of the New York
Stock Exchange, Inc., 11 Wall Street, New York, New York 10005.
The SEC allows us to incorporate by reference into this prospectus the
information that we file with the SEC, which means that we disclose important
information to you by referring to those documents. The information incorporated
by reference is an important part of this prospectus. In addition, any
information that we file with the SEC after the date of this prospectus will
automatically update and supersede this prospectus. We incorporate by reference
the documents listed below and any filings that we make with the SEC under
sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the initial filing
of the registration statement that contains this prospectus and prior to the
time that the selling stockholders sell all of the common stock offered by this
prospectus:
- Annual Report on Form 10-K for the fiscal year ended March 31, 2001;
- Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001;
- Current Reports on Form 8-K filed on May 21, June 5 and July 23, 2001;
- The information contained on pages F-60 through F-115 of Amendment No. 3
to Registration Statement on Form S-4 (File No. 333-57302); and
- The description of our common stock included in our Registration
Statement on Form 8-A dated April 20, 2000, as amended on May 15, 2000.
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You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by writing to or telephoning us at Universal Compression Holdings,
Inc., 4440 Brittmoore Road, Houston, Texas 77041, (713) 335-7000.
OUR COMPANY
We are the second largest natural gas compression services company in the
world in terms of rental fleet horsepower, with a fleet of over 7,400 compressor
units comprising approximately 2.1 million horsepower. We provide a full range
of compression rental, sales, operations, maintenance and fabrication services
and products to the natural gas industry, both domestically and internationally.
These services and products are essential to the natural gas industry as gas
must be compressed to be delivered from the wellhead to end-users.
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Our principal executive offices are located at 4440 Brittmoore Road,
Houston, Texas 77041. Our telephone number at that address is (713) 335-7000.
Our website is located at www.universalcompression.com. Information contained on
our website is not a part of this prospectus.
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below and the other information
contained in this prospectus before deciding to invest in our common stock. The
risks described below are not the only ones facing our company. Additional risks
are discussed in our public reports filed with the SEC, which you should review,
and risks not presently known to us or which we currently consider immaterial
may also adversely affect our company. If any of the following risks actually
occur, our business, financial condition and operating results could be
materially adversely affected. In such case, the trading price of our common
stock could decline, and you could lose part or all of your investment.
RISKS INHERENT IN OUR INDUSTRY
We depend on strong demand for natural gas, and a prolonged, substantial
reduction in this demand could adversely affect the demand for our services
and products.
Gas compression operations are significantly dependent upon the demand for
natural gas. Demand may be affected by, among other factors, natural gas prices,
weather, demand for energy and availability of alternative energy sources. Any
prolonged, substantial reduction in the demand for natural gas would, in all
likelihood, depress the level of production, exploration and development
activity and result in a decline in the demand for our compression services and
products. Similarly, a decrease in capital spending by our customers could
result in reduced demand for our fabrication services or our parts sales and
service business. These events could materially adversely affect our business,
results of operations and financial condition.
We intend to continue to make substantial capital investments to implement our
business strategy, which may reduce funds available for other operations.
We anticipate that we will continue to make substantial capital investments
to expand our compressor rental fleet. For the quarter ended June 30, 2001, we
invested approximately $40.3 million in capital expenditures, excluding
acquisitions. We expect to spend between $180 and $200 million on capital
expenditures during the current fiscal year, excluding acquisitions.
Historically, we have financed these investments through internally generated
funds, debt and equity offerings and our credit facility and lease financings.
These significant capital investments require cash that we could otherwise apply
to other business needs. However, if we do not incur these expenditures while
our competitors make substantial fleet investments, our market share may decline
and our business may be adversely affected. In addition, if we are unable to
generate sufficient cash internally or obtain alternative sources of capital, it
could materially adversely affect our results of operations, financial condition
and growth.
We may not be successful in implementing our business strategy, which may
adversely affect our ability to finance our future growth.
Our ability to implement our business strategy successfully depends upon a
number of factors including competition, availability of working capital and
general economic conditions. Significant elements of our business strategy
include growth of our market share and broader participation in the
international market for compression services. We cannot assure you that we will
succeed in implementing our strategy or be able to obtain financing for this
strategy on acceptable terms. The indenture governing our 9 7/8% senior discount
notes and our new revolving credit facility and operating lease facilities
substantially limit our ability to incur additional debt to finance our growth
strategy.
Most of our compressor leases have short initial terms, and we would not
recoup the costs of our investment if we were unable to subsequently lease the
compressors.
In most cases, the initial terms of our compressor leases with customers
are short, with the most common initial term being six months and continuing on
a month-to-month basis thereafter at the election
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of the customer. The initial terms of our leases are too short to enable us to
recoup the average cost of acquiring or fabricating compressors under currently
prevailing lease rates. As a result, we assume substantial risk of not
recovering our entire investment in the equipment we acquire or fabricate.
Although we historically have been successful in subsequently leasing our
compressors, we may not be able to continue to do so and a substantial number of
our rental customers could terminate their leases at approximately the same
time. Even if we are successful in re-leasing our compressors as we have been in
the past, we may not be able to obtain favorable rental rates. This would have
an adverse effect on our revenues.
We do not insure against all potential losses and could be seriously harmed by
unexpected liabilities.
Natural gas service operations are subject to inherent risks such as
equipment defects, malfunction and failures and natural disasters which can
result in uncontrollable flows of gas or well fluids, fires and explosions.
These risks could expose us to substantial liability for personal injury,
wrongful death, property damage, pollution and other environmental damages.
Although we have obtained insurance against many of these risks, there can be no
assurance that our insurance will be adequate to cover our liabilities. Further,
insurance covering the risks we face or in the amounts we desire may not be
available in the future or, if available, the premiums may not be commercially
justifiable. If we were to incur substantial liability and such damages were not
covered by insurance or were in excess of policy limits, or if we were to incur
liability at a time when we are not able to obtain liability insurance, our
business, results of operations and financial condition could be materially
adversely affected.
We are subject to substantial environmental regulation, and changes in these
regulations could increase our costs or liabilities.
We are subject to stringent and complex foreign, federal, state and local
laws and regulatory standards, including laws and regulations regarding the
discharge of materials into the environment, emission controls and other
environmental protection and occupational health and safety concerns.
Environmental laws and regulations may, in certain circumstances, impose strict
liability for environmental contamination, rendering us liable for remediation
costs, natural resource damages and other damages as a result of our conduct
that was lawful at the time it occurred or the conduct of, or conditions caused
by, prior owners or operators or other third parties. In addition, where
contamination may be present, it is not uncommon for neighboring landowners and
other third parties to file claims for personal injury, property damage and
recovery of response costs. Remediation costs and other damages arising as a
result of environmental laws and regulations, and costs associated with new
information, changes in existing environmental laws and regulations or the
adoption of new environmental laws and regulations could be substantial and
could have a material adverse effect on our business, financial condition or
results of operations. Moreover, failure to comply with these environmental laws
and regulations may result in the imposition of administrative, civil and
criminal penalties.
We currently are engaged in remediation and monitoring activities with
respect to some of our properties. The cost of these activities has not been,
and we currently do not expect it to be, material to us. We believe that former
owners and operators of some of these properties may be responsible under
environmental laws and contractual agreements to pay for or perform some of
these activities, or to indemnify us for some of our remediation costs. There
can be no assurance that these other entities will fulfill their legal or
contractual obligations, and their failure to do so could result in material
costs to us.
We routinely deal with natural gas, oil and other petroleum products. As a
result of our engineered products and overhaul and field operations, we
generate, manage and dispose of or recycle hazardous wastes and substances such
as solvents, thinner, waste paint, waste oil, washdown wastes and sandblast
material. Although it is our policy to use generally accepted operating and
disposal practices in accordance with applicable environmental laws and
regulations, hydrocarbons or other hazardous substances or wastes may have been
disposed or released on, under or from properties owned, leased or operated by
us or on or under other locations where such substances or wastes have been
taken for disposal. These properties may
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be subject to investigatory, remediation and monitoring requirements under
foreign, federal, state and local environmental laws and regulations.
We believe that our operations are in substantial compliance with
applicable environmental laws and regulations. Nevertheless, the modification or
interpretation of existing environmental laws or regulations, the more vigorous
enforcement of existing environmental laws or regulations, or the adoption of
new environmental laws or regulations may also negatively impact oil and natural
gas exploration and production companies, which in turn could have a material
adverse effect on us and other similarly situated service companies.
We face significant competition that may cause us to lose market share and
harm our financial performance.
The natural gas compression rental service, equipment fabrication, and
parts sales and service businesses are highly competitive. Many of our
competitors also offer a wide range of compressors for sale or lease, and there
are low barriers to entry for individual projects. In addition, we compete with
several large national and multinational companies which provide compression
services to third parties, many of which have greater financial and other
resources than we do. If our competitors substantially increase the resources
they devote to the development and marketing of competitive products and
services, we may not be able to compete effectively. In addition, in our
Weatherford Global acquisition, we acquired most, but not all, of the
compression operations of Weatherford International Inc. Weatherford retained
certain foreign compression assets that it acquired in a recent acquisition and
is not contractually restricted from competing with us.
RISKS SPECIFIC TO OUR COMPANY
We may not be able to successfully integrate the businesses that we acquire,
including Weatherford Global, into our business, which could cause us not to
realize all of the expected benefits of the acquisitions.
We have completed six acquisitions since our initial public offering in May
2000. Our Weatherford Global acquisition in February 2001 was significantly
larger than any of our previous acquisitions and doubled our size. Integrating
these businesses into ours is an ongoing process involving a number of potential
challenges and costs, including combining, reducing and relocating workforces,
facilities and offices and combining systems, processes, administrative
functions and corporate cultures. Management issues facing our company are
likely to be more complex and challenging than those faced by us prior to our
acquisition of Weatherford Global and these other businesses. In addition, we
acquired in that acquisition significant foreign operations in areas where we
have little or no prior operating experience. The integration process could
cause operational difficulties, divert the attention of our management away from
managing our business to the assimilation of the operations and personnel of the
acquired businesses and have adverse effects on our operating results.
Furthermore, if our integration of these acquired businesses is not successful,
we may lose personnel, not be able to retain our customer base to the extent
expected and experience increased costs and reduced revenues.
We may not achieve all of the cost savings and other synergies we expect to
result from our recent acquisitions, including our Weatherford Global
acquisition.
In many instances, we expect the integration of acquired businesses into
our business to result in cost savings. However, our success in realizing these
cost savings, and the timing of this realization, depend on the quality and
speed of our integration of these businesses. Although we have realized the
benefit of some of the expected costs savings from our Weatherford Global and
other acquisitions, we may not realize the
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remaining cost savings that we anticipate from integrating our operations as
quickly or as fully as we expect for a number of reasons, including:
- the large size, broad geographic presence and complexity of our company;
- our lack of operating experience in certain international areas,
including some of the areas added in our Weatherford Global acquisition;
- errors in our planning or integration;
- loss of key personnel;
- information technology systems failure;
- unexpected events such as major changes in the markets in which we
operate; and
- costs associated with the acquisition and integration of acquired
businesses into our business may exceed our expectations.
Further, our ability to realize cost savings could be affected by a number
of factors beyond our control, such as general economic conditions and
regulatory developments.
We are highly leveraged and vulnerable to interest rate increases.
As of July 31, 2001, we had approximately $865 million in outstanding
indebtedness, including capital leases and operating lease facilities. Of this
amount, approximately $155 million bears interest at floating rates. As of that
date, we also had unused availability of approximately $106.5 million ($47
million under our revolving credit facility, subject to commitment of the
additional $15 million, and approximately $59.5 million under our asset-backed
securitization operating lease facility). Both the interest payments under our
credit facility and a portion of the lease payments under our operating lease
facilities bear interest at a floating rate (based on a base rate or LIBOR, at
our option, in the case of the credit facility, and based on LIBOR, in the case
of the operating lease facility), plus a variable amount depending on our
operating results. Changes in economic conditions could result in higher
interest and lease payment rates, thereby increasing our interest expense and
lease payments and reducing our funds available for capital investment,
operations or other purposes. If, during the term of the operating lease
facilities, the realizable value of the equipment under the facilities is
insufficient to satisfy the obligations under the facilities, we may be required
to record a loss for our residual value guarantees and may have insufficient
funds to provide for repayment of our obligations. Our significant leverage
increases our vulnerability to general adverse economic and industry conditions.
In addition, a substantial portion of our cash flow must be used to service our
debt and lease obligations, which may affect our ability to make acquisitions or
capital expenditures.
Our financing arrangements contain restrictions that may limit our ability to
finance future operations or engage in attractive business transactions.
Substantially all of our assets are pledged as collateral under our credit
facility and operating lease facilities, each of which contains covenants that
restrict our operations. The indenture governing our 9 7/8% senior discount
notes also contains restrictive covenants. These covenants place limitations on,
among other things, our ability to enter into acquisitions, asset sales and
operating lease transactions, and to incur additional indebtedness and create
liens. These covenants could hinder our flexibility and restrict our ability to
take advantage of market opportunities or respond to changing market conditions.
In addition, the completion of our recent equity offering resulted in a change
of control under the indenture governing our 9 7/8% senior discount notes,
giving each holder of the 9 7/8% senior discount notes the right to require us
to repurchase their notes at a price equal to 101% of the accreted value, plus
accrued and unpaid interest, if any, to the date of the repurchase. To the
extent that holders of the 9 7/8% senior discount notes require us to repurchase
the notes, we currently intend to finance the repurchase through our revolving
credit facility and operating lease facilities, which may reduce our funds
available for our other business needs.
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Our international operations, which increased significantly as a result of our
Weatherford Global acquisition, subject us to risks that are difficult to
predict.
For the year ended March 31, 2001, we derived approximately 16.0% of our
revenues from international operations. We have limited operating experience in
some of the international regions we acquired through our Weatherford Global
acquisition, including Canada and Thailand. We intend to continue to expand our
business in Canada, Latin America and Southeast Asia and, ultimately, into other
international markets.
Our international operations are affected by global economic and political
conditions, and we may encounter difficulties managing our international
operations. Changes in economic or political conditions and in legal or
regulatory requirements in any of the countries in which we operate could result
in exchange rate movement, new currency or exchange controls, expropriation or
other trade restrictions, including tariffs, being imposed on our operations.
Many of these factors are outside of our control. In addition, the financial
condition of foreign customers may not be as strong as that of our current
domestic customers.
Weatherford's voting power may give it the ability to control the outcome of
matters submitted to a vote of our stockholders, and thus limit the rights of
our other stockholders to influence our affairs.
Currently, an affiliate of Weatherford beneficially owns approximately 45%
of our outstanding common stock. Pursuant to a voting agreement entered into
concurrently with our acquisition of Weatherford Global, Weatherford has agreed
to limit its voting power to 33 1/3% of our outstanding common stock, until the
earlier of two years from the closing of that acquisition or the date that
Castle Harlan and its affiliates own less than 5% of our outstanding common
stock. Currently, Castle Harlan and its affiliates own approximately 6% of our
outstanding common stock. In addition to its voting control, Weatherford and its
affiliates are entitled to designate three persons to serve on our board of
directors for so long as they own at least 20% of our outstanding common stock.
If Weatherford's ownership falls below 20%, Weatherford may designate only two
directors. If Weatherford's ownership falls below 10%, it will no longer have
the right to designate directors to our board. Currently, Bernard J.
Duroc-Danner, Curtis W. Huff and Uriel E. Dutton are serving as Weatherford's
designees to our board. Although Castle Harlan no longer has the right to
designate any persons to our board of directors, its former designees, John K.
Castle and William M. Pruellage, are serving terms that do not expire until our
2003 annual meeting of stockholders.
This voting power, significant stock ownership and board representation
gives Weatherford the ability to exercise substantial influence over our
ownership, policies, management and affairs and significant control over actions
requiring approval of our stockholders. Weatherford's interests could conflict
with our other stockholders.
Sales of a significant number of shares of our common stock could depress our
stock price.
Sales of substantial amounts of our common stock in the public market could
adversely affect the market price of our common stock, particularly as our stock
is thinly traded. As of August 3, 2001, we had 30,517,343 shares of common stock
outstanding, all of which are freely tradeable without restriction or, except as
described below, further registration under the Securities Act unless they are
held by persons deemed to be our "affiliates" or acting as "underwriters," as
those terms are defined in the Securities Act. We, our executive officers and
directors, and some of our other significant stockholders agreed in connection
with our recent equity offering not to sell any shares of common stock for a
period of 90 days from June 29, 2001 without the consent of Merrill Lynch. We
had reserved 3,012,421 shares of our common stock for issuance under our
incentive stock option plan, and options covering 1,749,377 of these shares were
outstanding as of June 1, 2001. In addition, the 13,750,000 shares of our common
stock issued to a subsidiary of Weatherford in our acquisition of Weatherford
Global and shares issued to some of our other stockholders are subject to demand
and piggyback registration rights and may be resold at anytime. The sale of a
substantial number of shares within a short period of time could cause our stock
price to
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decrease, making it more difficult for us to raise funds through future
offerings of our common stock and to acquire businesses using our stock as
consideration.
The market price of our common stock is volatile.
Historically, the market price of common stock of companies engaged in the
natural gas industry has been highly volatile. Similarly, the market price of
our common stock has varied significantly since our initial public offering in
May 2000. In particular, changes in natural gas prices or in the demand for
natural gas could affect the price of our common stock.
We may not be successful in identifying potential acquisition candidates and
it may be more difficult or expensive to complete future acquisitions using
our stock as consideration if our stock price decreases.
In accordance with our business strategy, we intend to pursue the
acquisition of other companies, assets and product lines that either complement
or expand our existing business. We are unable to predict whether or when any
suitable candidate will become available or the likelihood of a material
acquisition being completed.
Even if we are able to identify acceptable acquisition candidates, the
acquisition of a business involves a number of potential risks, including the
diversion of management's attention away from managing our business to the
assimilation of the operations and personnel of the acquired business and
possible short-term adverse effects on our operating results during the
integration process. In addition, we may seek to finance any such acquisition
through the issuance of new debt and/or equity securities. Alternatively, a
substantial portion of our financial resources could be used to complete any
large acquisition for cash, which would reduce our funds available for capital
investment, operations or other activities.
We are dependent on particular suppliers and are vulnerable to product
shortages and price increases.
As a consequence of having a highly standardized fleet, some of the
components used in our products are obtained from a single source or a limited
group of suppliers. Our reliance on these suppliers involves several risks,
including price increases, inferior component quality and a potential inability
to obtain an adequate supply of required components in a timely manner. The
partial or complete loss of certain of these sources could have at least a
temporary material adverse effect on our results of operations and could damage
our customer relationships. Further, a significant increase in the price of one
or more of these components could have a material adverse effect on our results
of operations.
Our operations may be adversely affected by significant fluctuations in the
value of the U.S. dollar.
Our revenues from international operations and, as a result, our exposure
to currency exchange rate fluctuations, increased as a result of our Weatherford
Global acquisition. Although we attempt to match costs and revenues in local
currencies, we anticipate that as we continue our expansion on a global basis,
there may be many instances in which costs and revenues will not be matched with
respect to currency denomination. As a result, we expect that increasing
portions of our revenues, costs, assets and liabilities will be subject to
fluctuations in foreign currency valuations. Although we may use foreign
currency forward contracts or other currency hedging mechanisms from time to
time to minimize our exposure to currency exchange rate fluctuations, we may not
elect or have the ability to implement hedges or, if we do implement them, that
they will achieve the desired effect. We may experience economic losses and a
negative impact on earnings or net assets solely as a result of foreign currency
exchange rate fluctuations. Further, the markets in which we operate could
restrict the removal or conversion of the local or foreign currency, resulting
in our inability to hedge against these risks.
We are a holding company and rely on our subsidiaries for operating income.
We are a holding company and, as such, we derive all of our operating
income from our operating subsidiary and its subsidiaries. We do not have any
significant assets other than the stock of our operating subsidiary.
Consequently, we are dependent on the earnings and cash flow of our subsidiaries
to meet our
8
12
obligations and pay dividends. Our subsidiaries are separate legal entities that
are not legally obligated to make funds available to us, and in some cases may
be contractually restricted from doing so. We cannot assure you that our
subsidiaries will be able to, or be permitted to, pay to us amounts necessary to
meet our obligations or to pay dividends.
A third party could be prevented from acquiring control of us because of the
anti-takeover provisions in our charter and bylaws.
There are provisions in our restated certificate of incorporation and
bylaws that may make it more difficult for a third party to acquire control of
us, even if a change in control would result in the purchase of your shares at a
premium to the market price or would otherwise be beneficial to you. For
example, our restated certificate of incorporation authorizes our board of
directors to issue preferred stock without stockholder approval. If our board of
directors elects to issue preferred stock, it could be more difficult for a
third party to acquire us. In addition, provisions of our restated certificate
of incorporation, such as a staggered board of directors and limitations on the
removal of directors, no stockholder action by written consent and limitations
on stockholder proposals at meetings of stockholders, could make it more
difficult for a third party to acquire control of us. Delaware corporation law
may also discourage takeover attempts that have not been approved by our board
of directors.
We do not expect to pay dividends.
We have never paid cash dividends on our common stock and we do not
anticipate paying any cash dividends in the foreseeable future. In addition, our
ability to pay dividends is restricted by our credit facility, the indenture
governing our 9 7/8% senior discount notes and our operating lease facilities
and other financing arrangements.
You should not place undue reliance on forward-looking statements, as our
actual results may differ materially from those anticipated in our
forward-looking statements.
This prospectus contains forward-looking statements about our operations,
economic performances and financial condition. These statements are based on a
number of assumptions and estimates which are inherently subject to significant
uncertainties and contingencies, many of which are beyond our control, and
reflect future business decisions which are subject to change. Some of these
assumptions inevitably will not materialize, and unanticipated events will occur
which will affect our results of operations.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the filings incorporated herein by reference contain
"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
prospectus are forward-looking statements, including, without limitation,
statements regarding future financial position, business strategy, proposed
acquisitions, budgets, litigation, projected costs and plans and objectives of
management for future operations. 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.
Forward-looking statements in this prospectus and other filings
incorporated by reference include, without limitation:
- anticipated cost savings and other synergies resulting from our
acquisition of Weatherford Global and other businesses;
- the sufficiency of our available cash flows to fund our continuing
operations;
9
13
- anticipated synergies, future revenues and EBITDA, as adjusted, resulting
from our acquisitions, including Weatherford Global, Gas Compression
Services, Inc., IEW Compression, Inc., KCI Compression Company, L.P.,
Louisiana Compressor Maintenance Co., Inc. and other businesses;
- capital improvements;
- the expected amount of capital expenditures;
- our future financial position;
- the future value of our equipment;
- our growth strategy and projected costs; and
- plans and objectives of our management for our future operations.
These forward-looking statements are subject to various risks and
uncertainties that could cause our actual results to differ materially from
those anticipated as of the date of this prospectus. The risks related to our
business described under "Risk Factors" and elsewhere in this prospectus could
cause our 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, no assurance can be given that these expectations will
prove to be correct. Important factors that could cause our actual results to
differ materially from the expectations reflected in these forward-looking
statements include, among other things:
- our inability to successfully integrate the business of Weatherford
Global, KCI Compression Company, L.P., Louisiana Compressor Maintenance
Co., Inc. and other businesses that we have acquired or may acquire in
the future;
- conditions in the oil and gas industry, including the demand for natural
gas and the impact of the price of natural gas;
- competition among the various providers of compression services and
products;
- changes in safety and environmental regulations pertaining to the
production and transportation of natural gas;
- changes in economic or political conditions in operating markets;
- introduction of competing technologies by other companies;
- our ability to retain and grow our customer base;
- employment workforce factors, including loss of key employees; and
- liability claims related to the use of our products and services.
All subsequent written and oral forward-looking statements made by us or on
our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. The forward-looking
statements included in this prospectus are only made as of the date of this
prospectus and we undertake no obligation to publicly update such
forward-looking statements to reflect new information, subsequent events or
otherwise.
10
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USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock offered by the selling stockholders under this prospectus. However,
we have agreed to bear certain expenses associated with registering such shares
under federal and state securities laws. We are registering the shares for sale
to provide the selling stockholders with freely tradeable securities (subject to
the contractual limitations discussed below), but the registration of such
shares does not necessarily mean that any of such shares will be offered or sold
by the selling stockholders. We have a right to a portion of the shares or the
proceeds from the sale of such shares held in escrow to the extent of any
indemnification claims we may have pursuant to an agreement we entered into with
the selling stockholders.
SELLING STOCKHOLDERS
The following table sets forth, as of the date of this prospectus:
- the names of the selling stockholders;
- the number of shares of common stock owned by each selling stockholder
prior to offering any shares under this prospectus; and
- the maximum number of shares of common stock that may be offered by each
selling stockholder under this prospectus.
The selling stockholders are the former stockholders of KCI, Inc., which is
the managing general partner of KCI Compression Company, L.P., and MCNIC
Compression GP, Inc. and MCNIC Compression LP, Inc., the other partners of KCI
Compression Company, L.P. We acquired KCI Compression Company, L.P. by merging a
subsidiary that we formed for the merger into KCI, Inc. and by purchasing the
partnership interests held by MCNIC Compression LP, Inc. and MCNIC Compression
GP, Inc.
Prior to the merger of KCI, Inc., Jacques J. Capelluto was KCI's Chairman,
Chief Executive Officer and President, Neal Cartwright was KCI's Vice Chairman,
J. Michael Redding was KCI's Senior Vice President -- Technical Services and a
director, James E. Swenke was KCI's Vice President -- Marketing & Contract Field
Services and a director, and Charles L. Rogers was KCI's Senior Vice
President -- Finance and Administration. Each of these individuals received
certain payments in connection with the acquisition of KCI. We entered into
two-year employment agreements with Mr. Redding and Mr. Swenke in connection
with the acquisition that provided for an annual base salary of $170,000, with a
pro-rated guaranteed bonus of 30% of the base salary for the first year. In
addition, each of these employment agreements provided for the grant of options
to purchase 20,000 shares of our common stock. As of the date of this
prospectus, Mr. Rogers is a consultant to Universal Compression, Inc., our
operating subsidiary. Other than the affiliations described above and the
ownership of our common stock, no selling stockholder has any position, office
or other material relationship with our company.
Concurrently with our acquisition of KCI, we entered into registration
rights agreements with the selling stockholders. Copies of these registration
rights agreements have been filed previously and are incorporated by reference
into the registration statement that includes this prospectus. Under these
registration rights agreements, we agreed to file a registration statement
within 30 days of the acquisition covering all 694,927 shares of our common
stock received by the selling stockholders in the acquisition. See "Plan of
Distribution." Under the registration rights agreements, we are required to
maintain the effectiveness of the registration statement until the earlier of
(1) July 11, 2002 (the first anniversary of the acquisition) plus any length of
time that we may have suspended the selling stockholders from selling our common
stock pursuant to the registration rights agreements and (2) the date on which
the selling stockholders have disposed of all their shares. The registration
rights are assignable by the selling stockholders to one permitted transferee,
subject to certain conditions. The registration rights agreements
11
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provide that we and the selling stockholders will indemnify each other for
certain liabilities, including liabilities under the Securities Act.
We also entered into an indemnification and escrow agreement with the
selling stockholders in connection with the acquisition. Pursuant to this
agreement, 118,833 shares of our common stock issued in the acquisition are
being held in escrow to indemnify us against any losses we may incur as a result
of:
- a breach by KCI, Inc., KCI Compression Company, L.P. or the selling
stockholders of their representations and warranties;
- KCI, Inc.'s, KCI Compression Company, L.P.'s or the selling stockholders'
failure to perform their obligations under the acquisition agreement; or
- contingencies and matters identified in the acquisition agreement and the
indemnification and escrow agreement.
The shares held in escrow may be returned to us to satisfy claims for
indemnification that we may have. One-half of the shares still held in escrow
and not subject to any claims by us will be released to the selling stockholders
on the first anniversary of the acquisition, and any remaining shares held in
escrow and not subject to any claims by us will be released on the second
anniversary of the acquisition. In addition, the indemnification and escrow
agreement permits shares to be sold by the selling stockholders under this
prospectus while the shares are in escrow. If this occurs, the proceeds from
such sales would be held in escrow pursuant to the terms of the indemnification
and escrow agreement.
The following table shows the number of shares of our common stock
beneficially owned by each selling stockholder prior to any offering of shares.
Because the selling stockholders may sell all, some or none of the common stock
offered under this prospectus, we do not know how many shares of our common
stock will be held by the selling stockholders upon termination of this
offering. However, for purposes of the following table, we have assumed that all
of the shares offered under this prospectus will be sold by the selling
stockholders. See "Plan of Distribution."
NUMBER OF
SHARES
BENEFICIALLY MAXIMUM NUMBER NUMBER OF SHARES
OWNED PRIOR TO OF SHARES BEING BENEFICIALLY OWNED
NAME OF SELLING STOCKHOLDER THE OFFERING (1) OFFERED (1) AFTER THE OFFERING
--------------------------- ---------------- --------------- ------------------
MCNIC Compression LP, Inc. ............. 298,124 298,124 --
MCNIC Compression GP, Inc. ............. 695 695 --
Albermuna, S.L. ........................ 3,311 3,311 --
Bruce Equities, Inc. ................... 22,830 22,830 --
Juan S. Hernandez Rodriquez............. 5,057 5,057 --
Jenanca, S.A. .......................... 14,952 14,952 --
Richmont Finance Corp. ................. 80,117 80,117 --
Sertipa, S.A. .......................... 19,423 19,423 --
Tecnologia, Industria & Comercio,
S.A. ................................. 3,298 3,298 --
Zumajo, S.A. ........................... 8,649 8,649 --
Sarah Astor IRA......................... 676 676 --
Stephen Astor IRA....................... 706 706 --
Kotler Family Trust (2)................. 5,524 5,524 --
Aaron Kotler............................ 10,261 10,261 --
Stella Salzmann......................... 1,794 1,794 --
Trengrove Investments................... 2,566 2,566 --
Jacques J. Capelluto (3)................ 145,703 145,703 --
Neal Cartwright Revocable Trust (2)..... 14,952 14,952 --
Charles L. Rogers Revocable Trust (2)... 15,831 15,831 --
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NUMBER OF
SHARES
BENEFICIALLY MAXIMUM NUMBER NUMBER OF SHARES
OWNED PRIOR TO OF SHARES BEING BENEFICIALLY OWNED
NAME OF SELLING STOCKHOLDER THE OFFERING (1) OFFERED (1) AFTER THE OFFERING
--------------------------- ---------------- --------------- ------------------
J. Michael Redding...................... 19,496 19,496 --
James E. Swenke......................... 20,962 20,962 --
------- ------- ---
Total......................... 694,927 694,927 --
======= ======= ===
---------------
(1) Includes 118,833 shares held in escrow on behalf of the selling stockholders
(other than MCNIC Compression GP, Inc. and MCNIC Compression LP, Inc.) on a
pro rata basis.
(2) The Kotler Family Trust is an irrevocable trust, the Charles L. Rogers
Revocable Trust is a revocable trust that was formed by Charles L. Rogers,
as settlor, and the Neal Cartwright Revocable Trust is a revocable trust
that was formed by Neal Cartwright, as settlor. The term "selling
stockholder" may also include the beneficiaries of each of those Trusts that
may receive shares of common stock pursuant to the terms of those Trusts.
(3) Includes 70,651 shares held by Jacques J. Capelluto and Karen Capelluto, as
joint tenants with right of survivorship.
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PLAN OF DISTRIBUTION
Subject to the restrictions found in the registration rights agreements,
the selling stockholders may sell shares of common stock pursuant to this
prospectus from time to time in one or more transactions at a fixed price or
prices, which may be changed, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices, or at negotiated prices. The
term "selling stockholders" includes donees, pledgees, permitted transferees or
other successors-in-interest selling shares received after the date of this
prospectus from a named selling stockholder as a gift, pledge, partnership
distribution or other non-sale related transfer. The shares of common stock
offered pursuant to this prospectus have been approved for listing on the New
York Stock Exchange.
The registration rights agreements provide that a maximum of 50% of the
shares covered by this prospectus may be sold by the selling stockholders
beginning on October 10, 2001, the 91st day after the completion of the
acquisition. On January 7, 2002, 180 days after the completion of the
acquisition, all of the shares will be available for resale. The registration
rights agreements also provide that in the event of an underwritten offering of
our common stock, the managing underwriter in that offering may require that the
selling stockholders not sell any shares for a period of 25 days before, and 90
days after, the effectiveness of the registration statement relating to that
underwritten offering.
The selling stockholders may from time to time offer and sell the shares
directly to purchasers or through agents, underwriters or dealers. The sales may
be in the form of secondary distributions, exchange distributions, block trades,
ordinary brokerage transactions, put or call options transactions, short sales
or a combination of these methods of sale. Agents or underwriters acting on
behalf of any selling stockholder may receive compensation from the selling
stockholder or from purchasers of the common stock for whom they act as agent in
the form of discounts, concessions or commissions. Underwriters may sell the
common stock to or through dealers, and those dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agents. The
selling stockholders and any agents, underwriters and dealers that participate
in the distribution of common stock may be deemed to be underwriters for
purposes of the Securities Act of 1933, and any discounts, concessions or
commissions received by them and any profit on the resale of common stock by
them may be deemed to be underwriting discounts and commissions under the
Securities Act. Selling stockholders who are deemed underwriters within the
specific meaning of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act.
If, from time to time, the selling stockholders decide to offer and sell
the shares pursuant to an underwritten offering, they have the right to select
the investment banker, manager and underwriter, subject to our prior approval.
The terms of any underwritten offering would be determined at the time of sale.
Sales may be in the form of secondary distributions, exchange distributions,
block trades, ordinary brokerage transactions or a combination of those methods
of sale. Under the registration rights agreements, a firm commitment
underwritten offering by the selling stockholders must include at least 500,000
shares. The selected underwriter may receive compensation from the selling
stockholder or from purchasers of the common stock for whom they act as agent in
the form of discounts, concessions or commissions. The selected underwriter may
be deemed to be an underwriter for purposes of the Securities Act, and any
discounts, concessions or commissions received by them from any selling
stockholder and any profit on the resale of common stock by them may be deemed
to be underwriting discounts and commissions under the Securities Act.
At a time a particular offer of shares is made, upon our notification by a
selling stockholder, a prospectus supplement, if required, will be distributed
setting forth any additional material information, including if a donee,
pledgee, permitted transferee or other successor-in-interest intends to sell
more than 500 shares.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in some states, the shares may not be sold unless they
have been registered or qualified for sale in such state or an exemption from
such registration or qualification requirement is available and is complied
with.
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Selling stockholders also may resell all or a portion of the shares in
accordance with the limitations imposed by Rule 144 under the Securities Act,
including ownership of the shares for at least one year.
Under the registration rights agreements, we have agreed to indemnify the
selling stockholders and each underwriter, if any, against certain liabilities,
including certain liabilities under the Securities Act, or will contribute to
payments the selling stockholders or underwriters may be required to make in
respect of those liabilities.
We have agreed to pay certain of the expenses in connection with the
registration, offering and sale of the shares covered by this prospectus, other
than commissions, fees and discounts of underwriters, brokers, dealers and
agents.
We estimate that we will spend approximately $100,000 for expenses in
connection with the offering of shares by the selling stockholders.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will
be passed upon for us by King & Spalding, Houston, Texas.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from Universal Compression Holdings, Inc.'s annual report on Form 10-K
for the years ended March 31, 1999, 2000 and 2001 have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Enterra Compression Company and
subsidiaries as of December 31, 1999 and 2000 and for the years then ended
incorporated by reference herein have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report incorporated by
reference herein, and are incorporated by reference in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
The combined financial statements of Weatherford Compression as of December
31, 1998 and for the year then ended incorporated by reference herein have been
audited by Arthur Andersen LLP, as indicated in their report incorporated by
reference herein, and are incorporated by reference in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Global Compression Holdings, Inc.
and subsidiaries as of February 2, 1999, and December 31, 1998 and 1997 and for
the period January 1, 1999 through February 2, 1999 and the years ended December
31, 1998 and 1997 have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS
PAGE
----
UNIVERSAL COMPRESSION HOLDINGS, INC.
Unaudited Pro Forma Combined Condensed Statements of
Operations for the three months ended June 30, 2000 and
for the year ended March 31, 2001......................... F-2
Notes to Unaudited Pro Forma Combined Condensed Statements
of Operations............................................. F-5
F-1
20
UNIVERSAL COMPRESSION HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
The following unaudited pro forma combined condensed statements of
operations are based on the historical consolidated financial statements and the
notes thereto of Universal and Weatherford Global (or "Enterra") and have been
prepared to illustrate the effect of Universal's acquisition of Weatherford
Global and the related financing transactions as if those transactions had
occurred on April 1, 2000 for the three months ended June 30, 2000 and the year
ended March 31, 2001. The unaudited pro forma combined condensed statements of
operations should be read in conjunction with the historical financial
statements and accompanying disclosures contained or incorporated by reference
in this prospectus.
The unaudited pro forma combined condensed statements of operations give
effect to:
- the initial public offering of Universal's common stock and concurrent
debt restructuring and operating lease facility, which occurred in May
2000, as well as its common stock split and conversion of preferred stock
and non-voting common stock that occurred concurrently with the initial
public offering;
- the transfer of certain assets not included in the Weatherford Global
acquisition to Weatherford entities other than Enterra and its
subsidiaries prior to the acquisition; and
- completion of the Weatherford Global acquisition, accounted for using the
purchase method of accounting, and the related financing transactions.
The unaudited pro forma condensed statements of operations for the three
month period ended June 30, 2000 do not give effect to (1) our acquisition of
GCSI in September 2000 or any other subsequent acquisitions other than the
Weatherford Global acquisition or (2) the cost savings and synergies that we
have realized as a result of the Weatherford Global acquisition. The unaudited
pro forma condensed statement of operations for the year ended March 31, 2001
does not give effect to (1) our acquisitions of Louisiana Compressor
Maintenance, Inc. in July 2001, KCI, Inc. in July 2001, the international
operations of Compressor Systems, Inc. in April 2001, IEW in February 2001 or
GCSI in September 2000, other than the historical information since the date of
those acquisitions, or related cost savings or (2) the remaining cost savings
and synergies that we have realized as a result of the Weatherford Global
acquisition.
The accompanying unaudited pro forma combined condensed statements of
operations should be read in conjunction with the historical financial
statements of Universal and Weatherford Global and the notes thereto, which are
incorporated by reference in this prospectus. The unaudited pro forma statements
of operations are provided for informational purposes only and do not purport to
represent what Universal's financial position or results of operations would
actually have been had the Weatherford Global acquisition and related financing
transactions occurred on such date or to project Universal's results of
operations or financial position for any future period.
F-2
21
UNIVERSAL COMPRESSION HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000
---------------------------------------------------------------------------------------
ENTERRA ACTUAL
UCH THREE MONTHS
IPO/DEBT ENDED ADJUSTMENTS FOR ENTERRA
UCH RESTRUCTURE JUNE 30, OPERATIONS NOT MERGER PRO FORMA
ACTUAL ADJUSTMENTS 2000 ACQUIRED(1) ADJUSTMENTS AS ADJUSTED
------- ----------- -------------- --------------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues............................ $34,760 $ -- $64,321 $10,233 $ -- $88,848
Rentals and cost of sales........... 15,518 -- 39,850 8,986 -- 46,382
------- ------- ------- ------- ------- -------
Gross margin...................... 19,242 -- 24,471 1,247 -- 42,466
Selling, general and
administrative.................... 3,455 -- 9,210 1,037 -- 11,628
------- ------- ------- ------- ------- -------
Operating profit.................. 15,787 -- 15,261 210 -- 30,838
Depreciation and amortization....... 7,498 (382)(2) 9,521 327 (1,475)(7) 14,835
Operating lease..................... 689 924(3) 5,131 -- 1,100(8) 7,844
Interest expense, net............... 8,004 (2,793)(4) 85 3 (2,273)(9) 3,021
Other, net.......................... 7,059 (7,059)(5) (163) 9 -- (172)
------- ------- ------- ------- ------- -------
Income (loss) before income taxes
and minority interest........... (7,463) 9,310 687 (129) 2,648 5,311
Income taxes (benefit).............. (2,799) 3,491(6) 283 -- 937(6) 2,098
Minority interest expense, net of
taxes............................. -- -- 152 -- (152)(10) --
------- ------- ------- ------- ------- -------
Income (loss) before extraordinary
items........................... $(4,664) $ 5,819 $ 252 $ (129) $ 1,863 $ 3,212
======= ======= ======= ======= ======= =======
Weighted average common and common
equivalent shares outstanding:
Basic............................. 8,817 2,166 -- -- 13,750 24,733(11)
------- ------- ------- ------- ------- -------
Diluted........................... 8,817 2,331 -- -- 13,750 24,898(11)
------- ------- ------- ------- ------- -------
Earnings per share:
Basic............................. $ (0.53) $ -- $ 0.13
======= ======= =======
Diluted........................... $ (0.53) $ -- $ 0.13
======= ======= =======
See accompanying Notes to Unaudited Pro Forma Combined Condensed Statements of
Operations.
F-3
22
UNIVERSAL COMPRESSION HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2001
------------------------------------------------------------------------------------------------------
ENTERRA ACTUAL
FOR THE PERIOD
ENTERRA ACTUAL FROM
UCH NINE MONTHS JANUARY 1,
IPO/DEBT ENDED 2001 THROUGH ADJUSTMENTS FOR ENTERRA
UCH RESTRUCTURE DECEMBER 31, FEBRUARY 9, OPERATIONS NOT MERGER PRO FORMA
ACTUAL ADJUSTMENTS 2000 2001 ACQUIRED(1) ADJUSTMENTS AS ADJUSTED
-------- ----------- -------------- -------------- --------------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues................. $232,761 $ -- $212,626 $31,600 $ 36,922 $ -- $440,065
Rentals and cost of
sales.................. 123,059 -- 135,759 21,172 32,407 -- 247,583
-------- ------- -------- ------- -------- ------- --------
Gross margin........... 109,702 -- 76,867 10,428 4,515 -- 192,482
Selling, general and
administrative......... 21,092 -- 26,503 4,052 3,395 -- 48,252
-------- ------- -------- ------- -------- ------- --------
Operating profit....... 88,610 -- 50,364 6,376 1,120 -- 144,230
Depreciation and
amortization........... 33,491 (382)(2) 29,791 4,370 1,409 (5,900)(12) 59,961
Operating lease.......... 14,443 924(3) 16,756 2,501 -- 4,400(13) 39,024
Interest expense, net.... 23,220 (2,793)(4) 8,944 136 13 (9,090)(14) 20,404
Other, net............... 8,699 (7,059)(5) 15,925 (265) 12,323 (5,435)(15) (458)
-------- ------- -------- ------- -------- ------- --------
Income (loss) before
income taxes and
minority interest.... 8,757 9,310 (21,052) (366) (12,625) 16,025 25,299
Income taxes (benefit)... 3,645 3,491(6) (3,834) (142) (872) 5,511(6) 10,041
Minority interest
expense, net of
taxes.................. -- -- (22) (77) -- 99(10) --
-------- ------- -------- ------- -------- ------- --------
Income (loss) before
extraordinary
items................ $ 5,112 $ 5,819 $(17,196) $ (147) $(11,753) $ 9,917 $ 15,258
======== ======= ======== ======= ======== ======= ========
Weighted average common
and common equivalent
shares outstanding:
Basic.................. 14,760 2,166 -- -- -- 13,750 30,676(11)
-------- ------- -------- ------- -------- ------- --------
Diluted................ 15,079 2,331 -- -- -- 13,750 31,160(11)
-------- ------- -------- ------- -------- ------- --------
Earnings per share:
Basic.................. $ 0.35 $ -- $ -- $ 0.50
======== ======== ======= ========
Diluted................ $ 0.34 $ -- $ -- $ 0.49
======== ======== ======= ========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Statements of
Operations.
F-4
23
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
(1) Reflects the exclusion of Weatherford Global's Singapore-based
operations (other than Australia and Thailand) which were not included in the
Weatherford Global acquisition.
(2) Reflects the elimination of depreciation expense associated with the
sale of compression equipment pursuant to Universal's prior operating lease
facility, with initial funding under that facility of $62.6 million.
(3) Reflects the expenses associated with Universal's prior operating lease
facility, including the related commitment fee.
(4) Reflects the adjustment of interest expense related to the redemption
of certain indebtedness at the beginning of the period and incremental borrowing
during the period with the proceeds of Universal's initial public offering and
Universal's prior operating lease facility. Also includes the commitment fees
associated with the new revolving credit facility.
(5) Represents the non-recurring charges related to the elimination of a
management agreement and a consulting agreement and other related fees in
connection with Universal's initial public offering and concurrent financing
transactions in May 2000.
(6) An estimated statutory tax rate of 39.5% is assumed for pro forma
adjustments. The effective tax rate may differ.
(7) Reflects (a) the decrease of goodwill amortization in the amount of
$0.6 million due to the decrease of goodwill recorded on Enterra's historical
financial statements, (b) the decrease in depreciation expense of $0.3 million
due to the devaluation of Enterra's other property, plant and equipment by $7
million, and (c) the reduction of depreciation expense in the amount of $0.6
million resulting from the additional funding of $63 million on the operating
lease facilities at the beginning of the period.
(8) Reflects the increase of operating lease expense of $1.1 million due to
the additional funding of the operating lease at the beginning of the period.
(9) Reflects (a) the adjustment of interest expense related to the
retirement of Weatherford Global's indebtedness at the beginning of the period
of $2.2 million and (b) the net adjustment for the amortization of deferred
financing costs and commitment fees associated with the new revolving credit
facility of $50 thousand.
(10) Reflects the elimination of Enterra's minority interest expense as a
result of the purchase of GE Capital's interest in Weatherford Global by Enterra
concurrently with the Weatherford Global acquisition.
(11) Includes the effect of the 7,275,000 shares of common stock offered
in, and the stock split and conversion that occurred concurrently with,
Universal's initial public offering and the 13,750,000 shares of Universal's
common stock issued to an affiliate of Weatherford in the Weatherford Global
acquisition as if these transactions had occurred at April 1, 2000. Also
includes the weighted average effect of the 1,400,726 shares of Universal's
common stock issued as partial consideration for the GCSI acquisition that
occurred on September 15, 2000. For the three months ended June 30, 2000,
excludes options to purchase up to 318,000 shares of Universal's common stock by
former Weatherford Global employees in connection with the Weatherford Global
acquisition.
(12) Reflects (a) the decrease of goodwill amortization in the amount of
$2.2 million due to the decrease of goodwill recorded on Enterra's historical
financial statements, (b) the decrease in depreciation expense of $1.2 million
due to the devaluation of Enterra's other property, plant and equipment by $7
million, and (c) the reduction of depreciation expense in the amount of $2.5
million resulting from the additional funding of $63 million on the operating
lease facilities at the beginning of the period.
F-5
24
UNIVERSAL COMPRESSION HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS -- (CONTINUED)
(13) Reflects the increase of operating lease expense of $4.4 million due
to the additional funding of the operating lease at the beginning of the period.
(14) Reflects (a) the adjustment of interest expense related to the
retirement of Weatherford Global's indebtedness at the beginning of the period
of $8.9 million and (b) the net adjustment for the amortization of deferred
financing costs and commitment fees associated with the new revolving credit
facility of $0.2 million.
(15) Reflects the elimination of non-recurring charges related to
severance, taxes and transaction costs that arose due to our acquisition of
Weatherford Global.
F-6
25
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
694,927 SHARES
UNIVERSAL COMPRESSION HOLDINGS, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 2001
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
26
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder, all of
which will be borne by the registrant. Except for the SEC registration fee, all
amounts are estimates.
SEC registration fee........................................ $ 4,707
Legal fees and expenses..................................... 30,000
Blue sky fees and expenses.................................. 2,000
Accounting fees and expenses................................ 40,000
Printing expenses........................................... 15,000
Miscellaneous............................................... 8,293
--------
Total............................................. $100,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to some statutory limitations, the liability of directors to
the corporation or its stockholders for monetary damages for breaches of
fiduciary duty, except for liability (a) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the DGCL, or (d) for any transaction from which
the director derived an improper personal benefit. The registrant's Restated
Certificate of Incorporation provides that the personal liability of directors
of the registrant is eliminated to the fullest extent permitted by Section
102(b)(7) of the DGCL.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of being a director or officer of the
corporation if it is determined that the director or officer acted in accordance
with the applicable standard of conduct set forth in such statutory provision.
The registrant's Bylaws provide that the registrant will indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the fact that he is
or was a director or officer of the registrant, or is or was serving at the
request of the registrant as a director, officer, employee or agent of another
entity, against certain liabilities, costs and expenses. The Bylaws further
permit the registrant to maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the registrant, or is or was
serving at the request of the registrant as a director, officer, employee or
agent of another entity, against any liability asserted against such person and
incurred by such person in any such capacity or arising out of his status as
such, whether or not the registrant would have the power to indemnify such
person against such liability under the DGCL. The registrant expects to maintain
directors' and officers' liability insurance. In addition, the registrant has
entered into indemnification agreements with each of its officers and directors,
as well as officers of its operating subsidiary. The form of these
indemnification agreements is incorporated by reference to Exhibit 10.27 to
Amendment No. 1 to the registrant's Registration Statement on Form S-1, File No.
333-34090. The registrant has entered into a separate indemnification agreement
with Bernard J. Duroc-Danner, one of its directors, which agreement is
incorporated by reference to Exhibit 10.8 to the registrant's Current Report on
Form 8-K filed March 23, 2001.
II-1
27
ITEM 16. EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
3.1 -- Restated Certificate of Incorporation of Universal
Compression Holdings, Inc. (incorporated by reference to
Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 2000).
3.2 -- Restated Bylaws of Universal Compression Holdings, Inc.
(incorporated by reference to Exhibit 3.2 to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2000).
5.1* -- Opinion of King & Spalding as to the legality of the
common stock being registered.
10.1 -- Registration Rights Agreement dated July 11, 2001, by and
among Universal Compression Holdings, Inc. and the former
stockholders of KCI, Inc. (incorporated by reference to
Exhibit 10.1 to Registrant's Current Report on Form 8-K
dated July 23, 2001).
10.2 -- Registration Rights Agreement dated July 11, 2001, by and
among Universal Compression Holdings, Inc., MCNIC
Compression GP, Inc. and MCNIC Compression LP, Inc.
(incorporated by reference to Exhibit 10.2 to
Registrant's Current Report on Form 8-K dated July 23,
2001).
23.1* -- Consent of King & Spalding (included as part of its
opinion filed as Exhibit 5.1).
23.2* -- Consent of Deloitte & Touche LLP.
23.3* -- Consent of KPMG LLP.
23.4* -- Consent of Arthur Andersen LLP.
---------------
* Filed herewith.
ITEM 17. UNDERTAKINGS
A. Undertaking to Update
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-2
28
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. Undertaking with Respect to Documents Incorporated by Reference
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Undertaking with Respect to Indemnification
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
D. Undertaking with Respect to Rule 430A Under the Securities Act of 1933
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
29
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on August 9, 2001.
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ STEPHEN A. SNIDER
-------------------------------------
Stephen A. Snider
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Stephen A. Snider, Ernie L. Danner, Richard W.
FitzGerald and Mark L. Carlton, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done as fully
to all said attorneys-in-fact and agents, or any of them, may lawfully do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ STEPHEN A. SNIDER President, Chief Executive August 9, 2001
----------------------------------------------------- Officer and Director
Stephen A. Snider (Principal Executive
Officer)
/s/ RICHARD W. FITZGERALD Senior Vice President and August 9, 2001
----------------------------------------------------- Chief Financial Officer
Richard W. FitzGerald (Principal Financial Officer
and Accounting Officer)
/s/ THOMAS C. CASE Director August 9, 2001
-----------------------------------------------------
Thomas C. Case
/s/ JOHN K. CASTLE Director August 9, 2001
-----------------------------------------------------
John K. Castle
/s/ ERNIE L. DANNER Executive Vice President and August 9, 2001
----------------------------------------------------- Director
Ernie L. Danner
/s/ BERNARD J. DUROC-DANNER Director August 9, 2001
-----------------------------------------------------
Bernard J. Duroc-Danner
II-4
30
SIGNATURE TITLE DATE
--------- ----- ----
/s/ URIEL E. DUTTON Director August 9, 2001
-----------------------------------------------------
Uriel E. Dutton
/s/ CURTIS W. HUFF Director August 9, 2001
-----------------------------------------------------
Curtis W. Huff
/s/ C. KENT MAY Director August 9, 2001
-----------------------------------------------------
C. Kent May
/s/ WILLIAM M. PRUELLAGE Director August 9, 2001
-----------------------------------------------------
William M. Pruellage
/s/ EDMUND P. SEGNER, III Director August 9, 2001
-----------------------------------------------------
Edmund P. Segner, III
/s/ SAMUEL URCIS Director August 9, 2001
-----------------------------------------------------
Samuel Urcis
II-5
31
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
3.1 -- Restated Certificate of Incorporation of Universal
Compression Holdings, Inc. (incorporated by reference to
Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 2000).
3.2 -- Restated Bylaws of Universal Compression Holdings, Inc.
(incorporated by reference to Exhibit 3.2 to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2000).
5.1* -- Opinion of King & Spalding as to the legality of the
common stock being registered.
10.1 -- Registration Rights Agreement dated July 11, 2001, by and
among Universal Compression Holdings, Inc. and the former
stockholders of KCI, Inc. (incorporated by reference to
Exhibit 10.1 to Registrant's Current Report on Form 8-K
dated July 23, 2001).
10.2 -- Registration Rights Agreement dated July 11, 2001, by and
among Universal Compression Holdings, Inc., MCNIC
Compression GP, Inc. and MCNIC Compression LP, Inc.
(incorporated by reference to Exhibit 10.2 to
Registrant's Current Report on Form 8-K dated July 23,
2001).
23.1* -- Consent of King & Spalding (included as part of its
opinion filed as Exhibit 5.1).
23.2* -- Consent of Deloitte & Touche LLP.
23.3* -- Consent of KPMG LLP.
23.4* -- Consent of Arthur Andersen LLP.
---------------
* Filed herewith.