<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Global Compression Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Global
Compression Holdings, Inc. and subsidiaries as of February 2, 1999, and December
31, 1998 and 1997 and the related consolidated statements of operations,
stockholder's equity and cash flows for the period January 1, 1999 through
February 2, 1999 and years ended December 31, 1998 and 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Global
Compression Holdings, Inc. and subsidiaries as of February 2, 1999, and December
31, 1998 and 1997 and the results of their operations and their cash flows for
the period January 1, 1999 through February 2, 1999 and years ended December 31,
1998 and 1997 in conformity with accounting principles generally accepted in the
United States of America.
/s/ KPMG LLP
Dallas, Texas
April 2, 1999
181
<PAGE> 2
GLOBAL COMPRESSION HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FEBRUARY 2, 1999, AND DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 1,538 $ 578 $ 256
Trade accounts receivable, net of allowance of $3,810 in
1999, $4,194 in 1998 and $2,526 in 1997................ 12,363 16,581 11,732
Other current assets...................................... 1,261 1,161 1,323
-------- -------- --------
Total current assets.............................. 15,162 18,320 13,311
Property, plant and equipment, net (note 5)................. 228,787 227,417 219,156
Goodwill and other intangibles, net......................... 30,426 30,581 33,459
Other assets................................................ 3,608 3,604 2,093
-------- -------- --------
$277,983 $279,922 $268,019
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable.................................... $ 4,262 $ 3,565 $ 9,555
Accrued liabilities....................................... 6,025 5,109 5,624
Deferred revenue.......................................... 4,866 4,907 4,059
-------- -------- --------
Total current liabilities......................... 15,153 13,581 19,238
Due to Parent (note 6)...................................... 201,525 204,309 191,362
Deferred income taxes (note 7).............................. 25,797 25,444 20,647
-------- -------- --------
Total liabilities................................. 242,475 243,334 231,247
-------- -------- --------
Stockholder's equity:
Common stock: $.01 par value. Authorized, issued and
outstanding, 1,000 shares.............................. -- -- --
Additional paid-in capital................................ 70,518 69,871 62,020
Accumulated other comprehensive income.................... 286 299 --
Accumulated deficit....................................... (35,296) (33,582) (25,248)
-------- -------- --------
Total stockholder's equity........................ 35,508 36,588 36,772
Commitments (note 8)........................................
-------- -------- --------
$277,983 $279,922 $268,019
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
182
<PAGE> 3
GLOBAL COMPRESSION HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
PERIOD JANUARY 1, DECEMBER 31,
1999 THROUGH -------------------
FEBRUARY 2, 1999 1998 1997
----------------- -------- --------
<S> <C> <C> <C>
Revenues:
Equipment rentals and services......................... $ 4,491 $ 61,008 $ 46,168
Unit sales............................................. 1,606 12,490 10,531
------- -------- --------
Total revenues................................. 6,097 73,498 56,699
------- -------- --------
Costs and expenses:
Cost of equipment rentals and services................. 2,060 27,378 21,813
Cost of unit sales..................................... 1,220 10,909 11,005
Depreciation and amortization.......................... 1,686 19,916 15,910
Selling, general and administrative expenses (note
10)................................................. 2,852 16,058 15,292
------- -------- --------
Total costs and expenses....................... 7,818 74,261 64,020
------- -------- --------
Loss from operations........................... (1,721) (763) (7,321)
Interest expense (note 6)................................ (1,072) (12,424) (10,817)
------- -------- --------
Loss before income taxes....................... (2,793) (13,187) (18,138)
Income tax benefit (note 7).............................. 1,079 4,853 6,737
------- -------- --------
Net loss....................................... $(1,714) $ (8,334) $(11,401)
======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
183
<PAGE> 4
GLOBAL COMPRESSION HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1998
AND PERIOD FROM JANUARY 1, 1999 THROUGH FEBRUARY 2, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
--------------- PAID-IN COMPREHENSIVE ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL INCOME (LOSS) DEFICIT TOTAL INCOME (LOSS)
------ ------ ---------- ------------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997...... 1,000 $ -- $55,494 $ -- $(13,847) $ 41,647 $ --
Capital
contribution -- forgiveness
of accrued interest, net of
tax benefit ($4,291)(note
6).......................... -- -- 6,526 -- -- 6,526 --
Net loss...................... -- -- -- -- (11,401) (11,401) (11,401)
----- ---- ------- ---- -------- -------- --------
Balance, December 31, 1997.... 1,000 -- 62,020 -- (25,248) 36,772 (11,401)
========
Capital
contribution -- forgiveness
of accrued interest, net of
tax benefit ($4,989)(note
6).......................... -- -- 7,435 -- -- 7,435 --
Capital contribution -- GECC
payment of certain employee
severance costs, net of tax
benefit ($273)(note 9)...... -- -- 416 -- -- 416 --
Net loss...................... -- -- -- -- (8,334) (8,334) (8,334)
Foreign currency translation
adjustment.................. -- -- -- 299 -- 299 299
----- ---- ------- ---- -------- -------- --------
Balance, December 31, 1998.... 1,000 -- 69,871 299 (33,582) 36,588 (8,035)
========
Capital
contribution -- forgiveness
of accrued interest, net of
tax benefit ($425)(note
6).......................... -- -- 647 -- -- 647 --
Net loss...................... -- -- -- -- (1,714) (1,714) (1,714)
Foreign currency translation
adjustment.................. -- -- -- (13) -- (13) (13)
----- ---- ------- ---- -------- -------- --------
Balance, February 2, 1999..... 1,000 $ -- $70,518 $286 $(35,296) $ 35,508 $ (1,727)
===== ==== ======= ==== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
184
<PAGE> 5
GLOBAL COMPRESSION HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD JANUARY 1, YEARS ENDED
1999 THROUGH DECEMBER 31,
FEBRUARY 2, -------------------
1999 1998 1997
----------------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................... $(1,714) $ (8,334) $(11,401)
Adjustments to reconcile net loss to cash provided by
operating activities:
Depreciation and amortization....................... 1,686 19,916 15,910
Deferred income taxes............................... 353 4,797 9,857
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable........ 4,218 (4,849) (2,882)
(Increase) decrease in other assets............... (104) (1,349) (2,267)
Increase (decrease) in accounts payable and
accrued liabilities............................ 1,613 (6,505) 5,676
Increase (decrease) in deferred revenue........... (41) 848 430
------- -------- --------
Net cash provided by operating activities...... 6,011 4,524 15,323
Cash flows from investing activities -- net additions to
property, plant and equipment.......................... (2,901) (25,299) (84,410)
Cash flows from financing activities -- net change in due
to parent.............................................. (2,150) 21,097 69,094
------- -------- --------
Net increase in cash..................................... 960 322 7
Cash at beginning of period.............................. 578 256 249
------- -------- --------
Cash at end of period.................................... $ 1,538 $ 578 $ 256
======= ======== ========
Supplemental disclosure of noncash activities:
Forgiveness of accrued interest (net of tax benefit)
reflected as capital contribution................... $ 647 $ 7,435 $ 6,526
======= ======== ========
Payment of severance costs (net of tax benefit)
reflected as capital contribution................... $ -- $ 416 $ --
======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
185
<PAGE> 6
GLOBAL COMPRESSION HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 2, 1999, AND DECEMBER 31, 1998 AND 1997
(ALL DOLLAR AMOUNTS IN THOUSANDS)
(1) GENERAL INFORMATION
Global Compression Holdings, Inc. (the "Company") is a wholly owned
subsidiary of General Electric Capital Corporation ("GECC" or "Parent"). The
Company's primary business is the purchase, fabrication, sale, lease and
maintenance of natural gas compressor units and related oil field equipment.
Natural gas compressor units are leased at fixed monthly rentals over varying
periods (see notes 5 and 8). The Company is headquartered in Dallas, Texas and
primarily operates in North America, Argentina and Thailand.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Global
Compression Holdings, Inc., its wholly-owned subsidiaries and the related
compression business of GE Capital Thailand Ltd., a wholly-owned subsidiary of
GECC. All significant intercompany balances and transactions have been
eliminated in consolidation.
(b) Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At February 2,
1999, and December 31, 1998 and 1997, the Company had no cash equivalents.
(c) Property, Plant, and Equipment
Property, plant, and equipment is depreciated on a straight-line basis over
the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
------------
<S> <C>
Buildings and improvements................................ 5-40
Rental equipment.......................................... 5-15
Machinery and equipment................................... 3-10
Office equipment.......................................... 3-10
Vehicles.................................................. 3
</TABLE>
Expenditures for major additions and improvements are capitalized while
minor replacements, maintenance and repairs are charged to expense as incurred.
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 operations.
(d) Goodwill and Other Intangibles
Goodwill represents the excess of the aggregate price paid by the Company
for acquisitions accounted for as purchases over the fair value of the net
assets acquired. Goodwill is amortized on a straight-line basis over a period of
20 years.
Amortization of goodwill and other intangible assets totaled $155, $2,877
and $2,541 for the period January 1, 1999 through February 2, 1999 and years
ended December 31, 1998 and 1997, respectively.
186
<PAGE> 7
GLOBAL COMPRESSION HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FEBRUARY 2, 1999, AND DECEMBER 31, 1998 AND 1997
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Accumulated amortization was $9,390, $9,235, and $6,358 at February 2, 1999, and
December 31, 1998, and December 31, 1997, respectively.
(e) Impairment of Long-Lived Assets
The Company evaluates potential impairment of property, plant and equipment
and goodwill on an ongoing basis as necessary whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable.
Recoverability of these assets is measured by a comparison of the carrying
amount of the assets to future net cash flows expected to be generated by the
assets or acquired business. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.
In April 1998, the Company closed a manufacturing and warehouse facility in
Houston, Texas. The facility ($1,900 carrying value at February 2, 1999) is for
sale and is currently being used for storage of certain inventory items. Based
on a recent appraisal of the facility, the Company does not consider the
facility to be impaired.
(f) Income Taxes
The Company is included in the consolidated federal income tax return of
GECC. Under the tax sharing arrangement, GECC pays the Company for net operating
losses utilized by GECC. The benefit is computed using enacted tax rates and is
reflected as a reduction in due to Parent.
The Company applies the asset and liability method of accounting for income
taxes. Accordingly, 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. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
operations in the period that includes the enactment date.
(g) Revenue Recognition
Lease billings in advance of services are recorded as deferred revenue in
the accompanying consolidated balance sheets. Unit sales are recognized when the
compressor is shipped to the customer.
(h) Comprehensive Income
On January 1, 1998, the Company adopted the provisions of SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for reporting
and presentation of comprehensive income and its components in a full set of
financial statements. Comprehensive income consists of net loss and foreign
currency translation adjustments and is presented in the consolidated statements
of stockholder's equity.
(i) Foreign Currency Translation
The functional currency for the Company's international operations in
Argentina and Thailand is the applicable local currency. Results of these
foreign operations are translated from the functional currency to the U.S.
Dollar 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 dates, and the resulting
187
<PAGE> 8
GLOBAL COMPRESSION HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FEBRUARY 2, 1999, AND DECEMBER 31, 1998 AND 1997
(ALL DOLLAR AMOUNTS IN THOUSANDS)
translation adjustments are included in accumulated other comprehensive income
(loss), a component of stockholder's equity.
(j) Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosures of contingent assets and liabilities at the balance sheet dates and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from these estimates.
(3) CONCENTRATION OF CREDIT RISK
The Company grants credit to its customers, which are primarily in the oil
and gas industry. Credit risk with respect to trade accounts receivable is
generally diversified due to the large number of entities comprising the
Company's customer base. During the period January 1, 1999 through February 2,
1999, one customer accounted for approximately 25% of total revenues. During
1998, two customers in the aggregate accounted for approximately 11% of total
revenues, and during 1997 three customers in the aggregate accounted for
approximately 14% of total revenues. At February 2, 1999, four customers in the
aggregate accounted for approximately 18% of gross trade receivables. At both
December 31, 1998 and 1997, four customers in the aggregate accounted for
approximately 31% of gross trade receivables.
The accompanying consolidated statements of operations include $-0-,
$1,785, and $1,945 for bad debt expenses for the period January 1, 1999 through
February 2, 1999 and years ended December 31, 1998 and 1997, respectively.
(4) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of due to Parent cannot be determined without incurring
excessive costs due to the related party nature of the instrument.
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
FEBRUARY 2, -------------------
1999 1998 1997
----------- -------- --------
<S> <C> <C> <C>
Land................................................. $ 425 $ 425 $ 425
Buildings and improvements........................... 4,837 4,837 4,650
Rental equipment..................................... 224,446 223,171 195,285
Machinery and equipment.............................. 775 775 1,190
Office equipment..................................... 6,024 6,028 5,679
Vehicles............................................. 524 549 946
Equipment and parts inventory........................ 41,475 39,260 43,138
Reserve for obsolescence............................. (4,738) (4,319) (3,802)
-------- -------- --------
273,768 270,726 247,511
Accumulated depreciation............................. (44,981) (43,309) (28,355)
-------- -------- --------
$228,787 $227,417 $219,156
======== ======== ========
</TABLE>
188
<PAGE> 9
GLOBAL COMPRESSION HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FEBRUARY 2, 1999, AND DECEMBER 31, 1998 AND 1997
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Rental equipment consists of natural gas compressor units which are
generally leased under short-term operating leases ranging over periods from 6
to 60 months (see note 8). Equipment and parts inventory is primarily used in
the construction and refurbishment of rental equipment.
(6) DUE TO PARENT
Due to Parent represents advances from GECC. Advances bear interest at
varying rates based on current market rates and GECC's cost of capital (5.24%,
5.41%, and 5.88% at February 2, 1999, and December 31, 1998 and December 31,
1997, respectively). Repayments are made only to the extent of excess operating
cash flows (as defined) and no payments are required through February 2, 2000.
Accordingly, amounts Due to Parent are reflected as a noncurrent liability in
the accompanying consolidated balance sheets. Interest expense related to
advances from GECC totaled $1,072, $12,424 and $10,817 for the period January 1,
1999 through February 2, 1999 and years ended December 31, 1998 and 1997,
respectively. Accrued interest resulting from this liability is forgiven on an
annual basis by GECC and reflected as capital contributions, net of related tax
benefits, in the accompanying consolidated statements of stockholder's equity.
(7) INCOME TAXES
Income tax expense (benefit) consists of the following for the period
January 1, 1999 through February 2, 1999 and years ended December 31, 1998 and
1997:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- -------
<S> <C> <C> <C>
1999
U.S. federal............................................. $ (1,263) $ 311 $ (952)
State and local.......................................... (169) 42 (127)
-------- ------ -------
$ (1,432) $ 353 $(1,079)
======== ====== =======
1998
U.S. federal............................................. $ (8,514) $4,232 $(4,282)
State and local.......................................... (1,136) 565 (571)
-------- ------ -------
$ (9,650) $4,797 $(4,853)
======== ====== =======
1997
U.S. federal............................................. $(14,641) $8,697 $(5,944)
State and local.......................................... (1,953) 1,160 (793)
-------- ------ -------
$(16,594) $9,857 $(6,737)
======== ====== =======
</TABLE>
189
<PAGE> 10
GLOBAL COMPRESSION HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FEBRUARY 2, 1999, AND DECEMBER 31, 1998 AND 1997
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Income tax benefit differed from the amount computed by applying the U.S.
federal income tax rate of 35 percent to loss before income taxes as a result of
the following:
<TABLE>
<CAPTION>
PERIOD
JANUARY 1, YEARS ENDED
1999 THROUGH DECEMBER 31,
FEBRUARY 2, -----------------
1999 1998 1997
------------ ------- -------
<S> <C> <C> <C>
Computed "expected" tax benefit....................... $ (977) $(4,615) $(6,348)
State tax benefit..................................... (82) (371) (515)
Other................................................. (20) 133 126
------- ------- -------
$(1,079) $(4,853) $(6,737)
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
FEBRUARY 2, -----------------
1999 1998 1997
----------- ------- -------
<S> <C> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts...................... $ 1,824 $ 1,976 $ 1,002
Noncompete agreement................................. 813 799 619
Other................................................ 1,026 859 492
------- ------- -------
Gross deferred tax assets.................... 3,663 3,634 2,113
------- ------- -------
Deferred tax liabilities:
Property, plant and equipment........................ 27,832 27,461 22,338
Other................................................ 1,628 1,617 422
------- ------- -------
Gross deferred tax liabilities............... 29,460 29,078 22,760
------- ------- -------
Net deferred tax liability................... $25,797 $25,444 $20,647
======= ======= =======
</TABLE>
(8) RENTAL COMMITMENTS
As Lessee:
The Company has noncancelable operating leases, primarily for warehouse and
office space, that expire over the next 5 years. These leases generally contain
renewal options for periods ranging from one to five years. Future minimum lease
payments under noncancelable operating leases (with initial or remaining lease
terms in excess of one year) as of February 2, 1999 are as follows:
<TABLE>
<S> <C>
Period from February 3, 1999 through December 31, 1999...... $1,275
Year ending December 31:
2000...................................................... 1,027
2001...................................................... 459
2002...................................................... 30
------
$2,791
======
</TABLE>
Operating lease expense for the period January 1, 1999 through February 2,
1999 and years ended December 31, 1998 and 1997 was $328, $2,080 and $1,773,
respectively.
190
<PAGE> 11
GLOBAL COMPRESSION HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FEBRUARY 2, 1999, AND DECEMBER 31, 1998 AND 1997
(ALL DOLLAR AMOUNTS IN THOUSANDS)
As Lessor:
The Company leases compressor units to customers under agreements with
varying terms. Typically, such leases are accounted for as operating leases. The
lessee pays taxes, licenses, and insurance on such equipment. Future minimum
lease rentals under noncancelable operating leases (with initial or remaining
lease terms in excess of one year) as of February 2, 1999 are as follows:
<TABLE>
<S> <C>
Period from February 3, 1999 through December 31, 1999..... $26,457
Year ending December 31:
2000..................................................... 12,249
2001..................................................... 8,152
2002..................................................... 5,558
2003..................................................... 1,236
2004 and thereafter...................................... 1,053
-------
$54,705
=======
</TABLE>
(9) RELATED PARTY TRANSACTIONS
Certain administrative services are provided to the Company by GECC. The
accompanying consolidated statements of operations include $231, $2,169 and
$1,452 for administrative services provided by GECC for the period January 1,
1999 through February 2, 1999 and years ended December 31, 1998 and 1997,
respectively.
The Company closed its Houston facility in April 1998. The accompanying
1998 consolidated statement of operations includes $1,195 for closing costs that
were charged to operations and paid during 1998. Of this amount, GECC paid $416
(increase to additional paid in capital, net of tax benefit) on behalf of the
Company related to severance costs associated with termination of 48 employees
at the Houston facility.
(10) JOINT VENTURE AGREEMENT
On February 2, 1999, GECC and the Company formed a joint venture with
Weatherford International, Inc., in which the Company's compression services
operations were combined with Weatherford's International Inc.'s compression
services operations. The joint venture is known as Weatherford Global
Compression. GECC owns 36% of the joint venture and Weatherford International,
Inc. owns 64%. Weatherford International, Inc., has the right to acquire GECC's
interest at any time at a price equal to the greater of a market value
determined by a third party valuation or book value. GECC also has the right to
require Weatherford International, Inc. to purchase its interest at any time
after February 2001 based on a third party valuation or can request a public
offering of its interest after that date, if Weatherford International, Inc. has
not purchased the Company's interest by that date.
Accrued liabilities on the accompanying consolidated balance sheet at
February 2, 1999 includes a provision of $2,414 for transaction costs including
investment banking fees, legal, accounting and other costs related to formation
of the joint venture. The Company charged $1,750 and $880 of transaction costs
to selling, general and administrative expenses for the period January 1, 1999
through February 2, 1999 and the year ended December 31, 1998, respectively.
191
