<PAGE> 1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Weatherford International, Inc.:
We have audited the accompanying combined balance sheet of Weatherford
Compression as of December 31, 1997 and the related combined statements of
operations, equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Weatherford
Compression as of December 31, 1997, and the results of their operations and
their cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
November 17, 2000
167
<PAGE> 2
WEATHERFORD COMPRESSION
COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ --
Accounts Receivable, Net of Allowance for Uncollectible
Accounts of $88........................................ 28,970
Inventories............................................... 57,983
Other Current Assets...................................... 1,933
--------
88,886
--------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land...................................................... 2,182
Buildings and Leasehold Improvements...................... 11,498
Rental and Service Equipment.............................. 192,140
Machinery and Other Equipment............................. 12,221
--------
218,041
Less: Accumulated Depreciation.................... 46,898
--------
171,143
--------
GOODWILL, NET............................................... 179,845
OTHER ASSETS................................................ 1,153
--------
$441,027
========
LIABILITIES AND COMBINED EQUITY
CURRENT LIABILITIES:
Current Portion of Long-Term Debt......................... $ 1,433
Accounts Payable.......................................... 13,696
Accrued Liabilities....................................... 6,685
--------
21,814
--------
LONG-TERM DEBT.............................................. 2,216
DEFERRED INCOME TAXES....................................... 23,393
LONG-TERM PAYABLE DUE TO PARENT............................. 208,594
COMMITMENTS AND CONTINGENCIES
COMBINED EQUITY, Includes Accumulated Other Comprehensive
Loss of $1,869............................................ 185,010
--------
$441,027
========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
168
<PAGE> 3
WEATHERFORD COMPRESSION
COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
REVENUES:
Products.................................................. $ 78,225
Services and Rentals...................................... 100,671
--------
178,896
--------
COSTS AND EXPENSES:
Cost of Products.......................................... 72,808
Cost of Services and Rentals.............................. 67,079
Selling, General and Administrative....................... 26,351
Asset Impairment.......................................... 470
--------
166,708
--------
OPERATING INCOME............................................ 12,188
--------
OTHER INCOME (EXPENSE):
Interest Expense from Parent Company...................... (9,183)
Interest Expense.......................................... (754)
Interest Income........................................... 624
Other Income, Net......................................... 228
--------
INCOME BEFORE INCOME TAXES.................................. 3,103
INCOME TAX PROVISION........................................ 2,351
--------
NET INCOME.................................................. $ 752
========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
169
<PAGE> 4
WEATHERFORD COMPRESSION
COMBINED STATEMENT OF EQUITY
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance at December 31, 1996................................ $184,710
Comprehensive Income (Loss):
Net Income................................................ 752
Cumulative Translation Adjustment......................... (452)
--------
Total Comprehensive Income................................ 300
--------
Balance at December 31, 1997................................ $185,010
========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
170
<PAGE> 5
WEATHERFORD COMPRESSION
COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................ $ 752
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Depreciation and Amortization.......................... 21,666
Gain on Sale of Property, Plant and Equipment.......... (631)
Asset Impairment....................................... 470
Deferred Income Tax Provision.......................... 3,449
Provision for Uncollectible Accounts Receivable........ 142
Change in Assets and Liabilities:
Accounts Receivable.................................. (4,681)
Inventories.......................................... (16,606)
Other Current Assets................................. 1,098
Accounts Payable..................................... 1,997
Other Current Liabilities............................ (2,949)
Other Assets......................................... 671
--------
Net Cash Provided by Operating Activities......... 5,378
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures for Property, Plant and Equipment.... (35,611)
Proceeds from Sales of Property, Plant and Equipment...... 4,828
--------
Net Cash Used by Investing Activities............. (30,783)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on Debt........................................ 120
Repayments on Debt........................................ (3,463)
Borrowings from Parent Company, Net....................... 28,748
--------
Net Cash Provided by Financing Activities......... 25,405
--------
NET CHANGE IN CASH AND CASH EQUIVALENTS..................... --
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. --
--------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ --
========
INTEREST PAID............................................... $ 22
INCOME TAX REFUNDS, NET OF TAXES PAID....................... $ (106)
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
171
<PAGE> 6
WEATHERFORD COMPRESSION
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
The accompanying financial statements of Weatherford Compression (the
"Company") include the accounts of Enterra Compression Company, as well as
accounts related to compression product lines of Weatherford Canada Ltd. and
Weatherford Enterra S.A. These three companies are wholly owned subsidiaries of
Weatherford International, Inc. (the "Parent Company").
The Company is engaged in the business of renting, fabricating, selling,
and servicing natural gas compressor packages used in the oil and gas industry.
The Company is headquartered in Corpus Christi, Texas, and maintains
approximately 15 service and sales offices in the surrounding four-state area.
U.S. manufacturing is completed primarily in Texas. The Company also has
fabrication, service, and rental operations in Calgary, Canada, and rental
operations in Buenos Aires, Argentina. Compression equipment is utilized in the
production and transportation of natural gas. Factors influencing compressor
rental operations include the number and age of producing gas wells, the
ownership of these properties and natural gas prices.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The financial statements are presented on a combined basis because their
business activities are performed as one entity. All significant intercompany
accounts and transactions have been eliminated in combination.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expense during the reporting period. Actual results could differ from those
estimates.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
using the moving average method for parts inventories or by using standards
which approximates moving average.
Inventories at December 31, 1997 are summarized as follows (in thousands):
<TABLE>
<S> <C>
Raw materials........................................... $37,493
Work in process......................................... 12,696
Finished goods.......................................... 7,794
-------
$57,983
=======
</TABLE>
Work in process includes the costs of materials, labor and overhead.
Property, Plant and Equipment
Property, plant and equipment is carried at cost. Maintenance and repairs
are expensed as incurred. The costs of refurbishment (i.e. renewals,
replacements and betterments) are capitalized. Depreciation on
172
<PAGE> 7
WEATHERFORD COMPRESSION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
fixed assets is computed using the straight-line method over the estimated
useful lives for the respective categories. The useful lives of the major
classes of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
USEFUL LIVES
------------
<S> <C>
Buildings and leasehold improvements................... 10-40 years
Rental and service equipment........................... 5-15 years
Machinery and other equipment.......................... 3-7 years
</TABLE>
When property is retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the related accounts and any resulting gain or
loss is included in the combined statement of operations. The depreciation
expense for the year ended December 31, 1997 was $16.7 million.
Goodwill
The Company's goodwill represents the excess of the aggregate price paid by
the Company in acquisitions accounted for as purchases over the fair market
value of the net assets acquired. Goodwill is being amortized on a straight-line
basis over 40 years. The Company periodically evaluates goodwill and other
intangible assets, net of accumulated amortization, for impairment based on the
undiscounted cash flows associated with the asset compared to the carrying
amount of that asset. Management believes that there have been no events or
circumstances which warrant revision to the remaining useful life or which
affect the recoverability of goodwill. Amortization expense for the year ended
December 31, 1997 was $4.5 million. Accumulated amortization as of December 31,
1997 was $15.0 million.
Equipment Held for Lease
The Company leases certain equipment to customers under agreements that
contain an option to purchase the equipment at any time. The option amount is
computed based on the original purchase price, less payments received, plus
interest and insurance covering the period from the inception of the lease to
the date the option is exercised. The lease payments are generally computed to
payout the original purchase price plus interest over approximately 36 months.
Leases with noncancelable lease terms greater than 18 months are considered
sales-type leases because by the end of the original lease term, the option
price is expected to be lower than the equipment's fair market value.
Equipment Under Operating Leases
The Company also leases equipment under agreements with noncancelable lease
terms of less than 18 months and those which do not include a purchase option.
These types of leases are accounted for as operating leases and included in
property, plant and equipment. This equipment has a net book value of $152.5
million at December 31, 1997. Rental fleet depreciation expense totaled $14.2
million in 1997.
In 1997, the Company identified certain idle compression rental units and,
in accordance with Statement of Financial Accounting Standards No. 121
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of, wrote the units down to their estimated fair market value and
recognized an expense of $0.5 million. Fair market value was determined based on
the Company's recent sales history.
Accounting for Income Taxes
Under Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"),
Accounting for Income Taxes, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.
173
<PAGE> 8
WEATHERFORD COMPRESSION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Parent Company filed consolidated federal tax returns for the years
through December 31, 1997 and separate and consolidated state returns depending
on the state in question for the company and each of its subsidiaries. The
accompanying financial statements have been prepared in accordance with the
separate return methods of SFAS No. 109, whereby the allocation of tax expense
is based on what the Company's current and deferred tax expense would have been
had the Company filed a federal income tax return outside its consolidated
group.
Foreign Currency Translation
Results of operations for foreign subsidiaries with functional currencies
other than the U.S. dollar are translated using average exchange rates during
the period. Assets and liabilities of these foreign subsidiaries are translated
using the exchange rates in effect at the balance sheet date and the resulting
translation adjustments are included as a separate component of combined equity.
Currency transaction gains and losses are reflected in income for the period.
Concentration of Credit Risk
The Company sells, leases, and rents gas compressors to customers in the
oil and gas industry. The Company generally does not require collateral.
However, cash prepayments and security deposits are required for accounts with
indicated credit risks. The Company also bills for progress payments from time
to time on large dollar, long-term construction projects. The Company maintains
reserves for potential losses, and credit losses have historically been within
management's expectations.
Revenue Recognition
Revenues are recognized as rental equipment is provided, as services are
performed, or as parts or equipment deliveries are made. Most rental contracts
have an initial contract term of six to twelve months and then continue on a
month-to-month basis. The Company provides a limited warranty on certain
equipment and services. The warranty period varies depending on the equipment
sold or service performed. A liability for performance under warranty
obligations is accrued based upon the nature of the warranty and historical
experience.
The Company provides management services under various gas compressor
system fleet rental agency agreements with four limited partnerships and two
Subchapter S corporations. An employee of the Company owns an interest in one of
the limited partnerships and also serves as an officer in two of the Subchapter
S Corporations. During the year ended December 31, 1997, management fee income
of $0.7 million was recognized under the agency agreements.
New Reporting Requirements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"), Reporting
Comprehensive Income. SFAS No. 130 establishes standards for the reporting of
comprehensive income and its components in a full set of general-purpose
financial statements and is effective for years beginning after December 15,
1997. Comprehensive income as defined by SFAS No. 130 is net income plus direct
adjustments to stockholder's equity. The cumulative translation adjustment of
certain foreign entities is the only such direct adjustment applicable to the
Company.
174
<PAGE> 9
WEATHERFORD COMPRESSION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. ACCRUED LIABILITIES
Accrued liabilities as of December 31, 1997 are summarized as follows (in
thousands):
<TABLE>
<S> <C>
Income taxes............................................... $(2,052)
Other taxes................................................ 1,524
Customer deposits.......................................... 2,114
Accrued freight............................................ 174
Wages and benefits......................................... 3,042
Accrued warranty........................................... 1,208
Other accrued liabilities.................................. 675
-------
$ 6,685
=======
</TABLE>
4. DEBT
The components of debt as of December 31, 1997 are summarized as follows
(in thousands):
<TABLE>
<S> <C>
Bonds....................................................... $2,485
Promissory notes with Caterpillar Financial Services
Corporation, interest ranging from 8.5% to 9.25%.......... 986
Savings and Retirement Plan promissory notes, interest
ranging from 4.65% through 7.55%.......................... 178
------
3,649
Less: amounts due in one year............................... (1,433)
------
Long-term debt.............................................. $2,216
======
</TABLE>
The Industrial Development Corporation of Port of Corpus Christi
Variable/Fixed Rate Demand Industrial Development Revenue Refunding Bonds,
Series 2002 (Lantana Corporation Project) (the "Bonds") require annual payment
of principal and interest with the final payment due on July, 2002. The Bonds
are secured by a letter of credit. Interest is variable and determined to be the
lowest rate which will permit the Bonds to be sold at par. The rate was 3.5% at
December 31, 1997. Accordingly, the estimated fair value of the Bonds
approximates book value.
Maturities of the Company's long-term debt at December 31, 1997 are as
follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $1,433
1999........................................................ 531
2000........................................................ 500
2001........................................................ 575
2002........................................................ 610
------
$3,649
======
</TABLE>
5. COMBINED EQUITY
Combined equity caption on the accompanying financial statements represents
the Parent Company's interest in the Company. Changes represent net income
(loss) of the Company, net contributions from/to the Parent Company and
accumulated other comprehensive income (loss).
175
<PAGE> 10
WEATHERFORD COMPRESSION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. INCOME TAXES
The domestic and foreign components of Income before Income Taxes consisted
of the following for the year ended December 31, 1997 (in thousands):
<TABLE>
<S> <C>
Domestic.................................................... $ 943
Foreign..................................................... 2,160
------
$3,103
======
</TABLE>
The Company's provision for income taxes for the year ended December 31,
1997, consisted of (in thousands):
<TABLE>
<S> <C>
Current
U.S. Federal and State................................... $(1,448)
Foreign.................................................. 350
-------
(1,098)
-------
Deferred
U.S. Federal and State................................... 3,010
Foreign.................................................. 439
-------
3,449
-------
$ 2,351
=======
</TABLE>
The actual income tax provision for the year ended December 31, 1997,
differed from the income tax provision calculated using the statutory federal
income rate of 35%, as follows (in thousands):
<TABLE>
<S> <C>
Tax provision at statutory rate............................. $1,086
Increase (reduction) in taxes resulting from:
Nondeductible goodwill.................................... 1,189
Other..................................................... 76
------
$2,351
======
</TABLE>
Deferred tax assets and liabilities are recognized for the estimated future
tax effects of temporary differences between the tax basis of an asset or
liability and its reported amount in the financial statements. The measurement
of deferred tax assets and liabilities is based on enacted tax laws and rates
currently in effect in each of the jurisdictions in which the Company has
operations.
176
<PAGE> 11
WEATHERFORD COMPRESSION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Generally, deferred tax assets and liabilities are classified as current or
noncurrent according to the classification of the related asset or liability for
financial reporting. The components of the net deferred tax (asset) liability
were as follows as of December 31, 1997 (in thousands):
<TABLE>
<S> <C>
Net Current Deferred Tax Asset:
Inventories.............................................. $ (31)
Other.................................................... (334)
-------
$ (365)
=======
Net Noncurrent Deferred Tax Liability:
Property, plant and equipment............................ $18,877
Goodwill................................................. 1,306
Other.................................................... 3,004
-------
$23,187
=======
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Sales-Type Lease Receivables
The Company provides a capital lease financing option to its customers.
Future minimum lease payments receivable resulting from the sale of compression
packages under sales-type leases are due as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 894
1999........................................................ 558
2000........................................................ 165
------
$1,617
======
</TABLE>
Operating Leases Payable
The Company leases certain buildings and service equipment under
noncancelable operating leases. Aggregate minimum rental commitments under
noncancelable operating leases with lease terms in excess of one year as of
December 31, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $251
1999........................................................ 176
2000........................................................ 70
2001........................................................ 36
----
$533
====
</TABLE>
Rental expenses for operating leases were $1.4 million for the year ended
December 31, 1997.
Savings and Retirement Plan
Weatherford Enterra Compression Company, L.P. Savings and Retirement Plan
is a defined contribution benefit plan. Effective October 16, 1995 the plan was
frozen and no additional contributions were made. When the plan was frozen
participants had the option to cash out their accounts and receive payment over
five years. The liability due to participants is recorded as debt in the
accompanying balance sheet (See Note 4).
177
<PAGE> 12
WEATHERFORD COMPRESSION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Claims and Litigation
The Company is defending various claims and litigation arising in the
normal course of business. In the opinion of management, uninsured losses, if
any, resulting from these matters will not have a material adverse effect on the
Company's results of operations, financial position or liquidity.
8. RELATED PARTY TRANSACTIONS
Overhead Allocation
The Parent Company provides certain administrative services for the
Company, primarily including 1) state, federal and property tax preparation and
management 2) legal services 3) administration of employee benefit plans and
risk management programs and 4) marketing services. The Parent Company
determines the overhead allocation by multiplying the consolidated direct and
indirect costs of providing these services to its subsidiaries by each
subsidiary's percentage of consolidated revenues. For the year ended December
31, 1997, the Company expensed approximately $3.6 million related to these
overhead charges.
Insurance
The Company participates with the Parent Company for the partial
self-insurance of its general, product, property, and workers' compensation
liabilities. During the year ended December 31, 1997 the Company expensed
approximately $1.6 million related to such self-insurance.
Benefit Plans
The Company participates in the Parent Company's 401(k) and partial
self-insured health and welfare plan. The Company expensed $0.5 million and $2.9
million related to the 401(k) and health and welfare plans, respectively, in
1997.
Due to Parent Company
The Parent Company provides funding of certain activities of the Company.
Payment of the resulting liability occurs only when surplus cash is available.
The balance accrues interest at a variable rate based on prime, approximately
6.5% at December 31, 1997.
9. SEGMENT INFORMATION
Foreign Operation
Financial information by geographic segment for the year ended December 31,
1997 is summarized below. Revenues are attributable to countries based on the
location of the entity selling the products or performing the services.
Long-lived assets are long-term assets excluding deferred tax assets of $0.2
million.
<TABLE>
<CAPTION>
UNITED
STATES CANADA TOTAL
-------- ------- --------
<S> <C> <C> <C>
Revenues from Unaffiliated Customers.................. $137,017 $41,879 $178,896
Long-lived Assets..................................... 336,199 15,735 351,934
</TABLE>
178
<PAGE> 13
WEATHERFORD COMPRESSION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following sets forth unaudited quarterly financial data for 1997.
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues......................... $44,836 $37,992 $46,571 $49,497 $178,896
Gross Profit..................... 9,617 9,116 9,816 10,460 39,009
Net Income (Loss)................ 317 275 516 (356) 752
</TABLE>
11. SUBSEQUENT EVENTS (UNAUDITED)
Sale and Lease Back of Equipment
The Company entered into a sale and leaseback arrangement in December 1998
where it was provided with the right to sell up to $200.0 million of compression
units through December 1999 and lease them back over a five year period under an
operating lease. Payments under the lease are calculated based on a rate of
return on the purchase price and an agreed valuation of the leased compressors.
Under the terms of the lease, the Company may repurchase the equipment for fair
market value at any time. The Parent Company has provided for a residual value
guarantee at the end of the term of the lease equal to approximately 85.5% of
the appraised value of the compression units under lease.
As of December 31, 1998, the Company had sold compressors under this
arrangement, having an appraised value of $119.6 million, and received cash of
$100.0 million and a receivable of $19.6 million, which is due on demand. The
net book value of the equipment sold was approximately $77.4 million, resulting
in a pre-tax gain of $42.2 million, which may be deferred until the end of the
lease.
This arrangement calls for quarterly rental payments. The following table
provides future minimum lease payments (in thousands) under the aforementioned
lease exclusive of any guarantee payments:
<TABLE>
<S> <C>
1999...................................................... $ 7,491
2000...................................................... 7,491
2001...................................................... 7,491
2002...................................................... 7,491
2003...................................................... 6,867
-------
$36,831
=======
</TABLE>
Partnership Formation
In February 1999, the Parent Company completed a joint venture with GE
Capital Corporation ("GE Capital") in which the Company's compression services
operations were combined with GE Capital's Global Compression's Services
operations. The joint venture is known as Weatherford Global Compression. The
Parent Company owns 64% of the joint venture and GE Capital owns 36%. The
Company has the right to acquire GE Capital's interest at anytime at a price
equal to the greater of a market determined third party valuation or book value.
GE Capital also has the right to require the Company to purchase its interest
anytime after February 2001 at a market determined third party valuation as well
as request a public offering of its interest after that date, if the Parent
Company has not purchased its interest by that date.
Universal Compression
On October 24, 2000, the Parent Company announced the proposed acquisition
of 13.75 million shares of common stock (a 48% interest) of Universal
Compression Holdings, Inc. ("Universal") in exchange for the contribution of
substantially all of the assets of the Company into a subsidiary of
179
<PAGE> 14
WEATHERFORD COMPRESSION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Universal. The Parent Company will retain approximately $40 million of the
assets of the Company, including Singapore-based GSI and the Company's Asia
Pacific compressor rental operations, other than those in Thailand and
Australia. The Parent Company will, however, continue to operate compressor
rentals in those regions either alone or in conjunction with Universal. The
Parent Company will value the transaction based on the stock price of Universal
as of the closing date of the transaction. Closing of the transaction is
conditioned upon the average closing price of Universal's common stock during
the 20 consecutive trading days prior to the transaction being not less than $25
per share.
In connection with this investment the Parent Company has entered into an
agreement to purchase GE Capital's 36% interest in the joint venture in which
its Compression Division is operated for $206.5 million, subject to the
concurrent closing of our investment in Universal. The transactions are subject
to various conditions, including governmental approvals, approval of Universal's
stockholders, and the refinancing of its joint venture's and Universal's debt
and compressor sale leaseback arrangements. Although there can be no assurance
the merger and purchase will close, the Parent Company anticipates that the
transactions will be consummated by the end of the year, or early in the first
quarter of 2001.
180
