<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 6, 1997
(Date of earliest event reported)
EQUITY COMPRESSION SERVICES CORPORATION
(Exact name of Registrant as specified in its charter)
Oklahoma 0-18205 73-1345732
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
2501 Cedar Springs Road
Suite 600
Dallas, Texas
(Address of principal executive offices)
Registrant's Telephone Number, Including Area Code
(214) 953-9560
<PAGE>
TABLE OF CONTENTS
PAGE
----
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Ouachita Energy Corporation
and Affiliates
Report of Independent Accounts.................................. F-1
Combined Balance Sheet as of November 30, 1996 and 1995......... F-2
Combined Statement of Income
For the Year Ended November 30, 1996 and 1995................... F-4
Combined Statement of Retained Earnings
For the Year Ended November 30, 1996 and 1995.................. F-5
Combined Statement of Cash Flows
For the Year Ended November 30, 1996 and 1995.................. F-6
Notes to Financial Statements.................................. F-7
(b) Pro Forma Financial Information
Pro Forma Condensed Consolidated Balance Sheet
as of June 30 and May 31, 1997 (unaudited)..................... P-1
Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet.......................................................... P-2
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Six Months Ended June 30 and May 31, 1997.............. P-3
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Year Ended December 31 and November 30, 1996........... P-4
Notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations..................................................... P-5
Cautionary Statement........................................... P-6
<PAGE>
TABLE OF CONTENTS (continued)
(c) The following exhibits were included in the Registrant's Form 8-K to
which this Form 8-K/A is an amendment at the pages indicated on the
Exhibit Index thereto following the signature page thereof and are,
together with such Exhibit Index, incorporated by reference herein:
Agreement and Plan of Merger dated as of May 15, 1997 by and among
the Company, OEC Acquisition Corporation, Ouachita Energy Corporation,
and Dennis W. Estis.
First Amendment to Agreement and Plan of Merger dated as of July 30,
1997 by and among the Company, OEC Acquisition Corporation, Ouachita
Energy Corporation, and Dennis W. Estis.
Asset Purchase and Sales Agreement dated as of May 15, 1997 by and among
the Company, OEC Acquisition Corporation, Ouachita Energy Partners,
Ltd., Ouachita Compression Partners, L.L.C., and Dennis W. Estis.
First Amendment to Asset Purchase and Sales Agreement dated as of July
30, 1997 by and among the Company, OEC Acquisition Corporation, Ouachita
Energy Partners, Ltd., Ouachita Compression Partners, L.L.C. and Dennis
W. Estis.
Note Agreement dated July 31, 1997 by and between the Company and
Prudential Life Insurance Company of America.
Subordinated Note and Warrant Purchase Agreement dated July 31, 1997 by
and between the Company and Prudential Life Insurance Company of America.
Registration Rights Agreement dated as of July 31, 1997 by and between
the Company and Prudential Life Insurance Company of North America.
Participation Agreement dated July 31, 1997 by and among the Company,
Prudential Life Insurance Company of North America and certain
stockholders of the Company.
Registration Rights Agreement dated as of August 6, 1997 by and between
the Company and certain stockholders named therein.
Common Stock Purchase Warrant dated July 31, 1997 issued by the Company
to Prudential Life Insurance Company of America.
Fifth Amended Revolving Credit Facility dated as of July 31, 1997
between the Company, certain of its Subsidiaries and the Bank of
Oklahoma, N.A.
Employment Agreement dated as of August 6, 1997 among Ouachita Energy
Corporation, the Company and Dennis W. Estis.
Employment Agreement dated as of August 6, 1997 among Ouachita Energy
Corporation, the Company and Andy Payne.
Employment Agreement dated as of August 6, 1997 among Ouachita Energy
Corporation, the Company and Dan McCormick.
<PAGE>
DONALD, TUCKER AND BETTS
====================(A PROFESSIONAL ACCOUNTING CORPORATION)=====================
CERTIFIED PUBLIC ACCOUNTANTS
2806 KILPATRICK BOULEVARD
SAM DONALD JR., CPA (Retired) MONROE, LOUISIANA 71201 MAIL ADDRESS
BARNEY M. TUCKER, CPA P.O. BOX 4088
BRUCE W. BETTS, CPA MONROE, LOUISIANA 71211-4088
________ (318) 387-0376
DON S. MEARS, CPA FAX (318) 322-1911
STAN FULLER. CPA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Ouachita Energy Corporation,
Ouachita Energy Partners, Ltd. and
Ouachita Compression Group, LLC
West Monroe, Louisiana
We have audited the accompanying combined balance sheets of Ouachita
Energy Corporation, Ouachita Energy Partners, Ltd. and Ouachita Compression
Group, LLC as of November 30, 1996 and November 30, 1995, and the related
combined statements of income, retained earnings, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined 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 combined financial statements referred to above
present fairly, in all material respects, the financial position of Ouachita
Energy Corporation, Ouachita Energy Partners, Ltd. and Ouachita Compression
Group, LLC as of November 30, 1996 and November 30, 1995, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
/s/ DONALD, TUCKER & BETTS
DONALD, TUCKER & BETTS
Monroe, Louisiana
January 31, 1997
F-1
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
COMBINED BALANCE SHEETS
NOVEMBER 30, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1995
1996 (Restated)
------------ -----------
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 221,925 $ 99,381
Accounts and notes receivable 802,079 653,288
Income tax receivable 8,142 87,825
Prepaid expenses 43,915 27,646
Deferred income tax 380,199 48,219
Other current assets 66,028 0
------------ -----------
Total current assets 1,522,288 916,359
------------ -----------
PROPERTY AND EQUIPMENT
Compressor equipment 26,115,344 23,384,933
Land and buildings 277,458 29,107
Other equipment 827,894 877,190
------------ -----------
27,220,696 24,291,230
Less accumulated depreciation (11,475,730) (10,014,090)
------------ -----------
Net property and equipment 15,744,966 14,277,140
------------ -----------
OTHER ASSETS 644,368 613,508
------------ -----------
TOTAL ASSETS $ 17,911,622 $ 15,807,007
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995
1996 (Restated)
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable - trade $ 1,740,916 $ 351,609
Current maturities of long-term debt 1,874,696 1,988,420
Accrued liabilities and other payables 263,936 287,391
Income tax payable 40,306 0
------------ -----------
Total current liabilities 3,919,854 2,627,420
LONG-TERM LIABILITIES
Long-term debt, less current
maturities 8,937,947 8,366,214
Deferred income tax 529,106 533,421
Customer deposits 125,000 0
------------ -----------
Total liabilities 13,511,907 11,527,055
------------ -----------
STOCKHOLDERS' EQUITY
Capital stock, common - $1 par value;
250,000 shares authorized, 237,896
and 234,175 shares issued and out-
standing in 1996 and 1995,
respectively 237,896 234,175
Capital stock, common - $1 par value;
25,000 shares authorized, 950 shares
issued and outstanding 950 950
Contributed capital 500 500
Additional paid-in capital 190,223 52,947
Retained earnings 3,970,146 3,991,380
------------ -----------
Total stockholders' equity, 4,399,715 4,279,952
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $17,911,622 $15,807,007
------------ -----------
------------ -----------
</TABLE>
F-3
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
COMBINED STATEMENTS OF INCOME
YEARS ENDED NOVEMBER 30, 1996 AND 1995
1996 1995
----------- -----------
REVENUE
Contract revenue $ 9,188,602 $ 9,718,881
Other income 151,681 11,642
----------- -----------
Total revenue 9,340,283 9,730,523
----------- -----------
OPERATING EXPENSES AND COST
Cost of contract revenue 5,214,518 5,633,921
Selling, general and administrative
expenses 1,877,105 1,470,079
Depreciation and amortization 1,608,068 1,396,393
----------- -----------
Total operating expenses and cost 8,699,691 8,500,393
----------- -----------
INCOME FROM OPERATIONS 640,592 1,230,130
----------- -----------
OTHER INCOME (EXPENSES)
Interest income 39,298 0
Gain on sale of fixed assets 22,353 55,334
Interest expense (1,027,609) (992,231)
----------- -----------
Total other income (expenses) (965,958) (936,897)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (325,366) 293,233
INCOME TAX BENEFIT (EXPENSE) 304,132 (55,540)
----------- -----------
NET INCOME (LOSS) $ (21,234) $ 237,693
----------- -----------
----------- -----------
See accompanying notes to financial statements.
F-4
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
COMBINED STATEMENTS OF RETAINED EARNINGS
YEARS ENDED NOVEMBER 30, 1996 AND 1995
1995
1996 (Restated)
----------- -----------
BALANCE, beginning of year $ 3,991,380 $ 3,753,687
Net income (loss) (21,234) 237,693
----------- -----------
BALANCE, end of year $ 3,970,146 $ 3,991,380
----------- -----------
----------- -----------
See accompanying notes to financial statements.
F-5
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (21,234) $ 237,693
Adjustments to reconcile net income to
net cash provided operating activities:
Depreciation and amortization 1,608,068 1,396,393
Amortization of discount on non-
interest bearing financial
instrument 0 33,996
(Gain) loss on disposal of fixed assets (22,353) (55,334)
Deferred income tax expense (benefit) (336,295) 55,540
Correction of prior year profits 0 28,759
(Increase) decrease in:
Accounts and notes receivable (54,358) 63,716
Other current assets (82,296) 58,990
Income tax receivable 79,683 (87,825)
Other assets (980) 0
Increase (decrease) in:
Accounts payable 1,389,307 (82,015)
Accrued liabilities and other payable (23,456) 35,458
Income tax payable 40,306 0
----------- -----------
Net cash provided by operating
activities 2,576,392 1,685,371
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (3,218,483) (4,358,484)
Proceeds from disposal of fixed assets 166,990 80,800
----------- -----------
Net cash used by investing activities (3,051,493) (4,277,684)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Loans to stockholders (126,360) (497,529)
Proceeds from new loans 2,592,363 4,237,462
Principal payments on notes payable (2,134,355) (1,393,637)
Customer deposits 125,000 0
Capital stock issued 3,721 0
Additional paid-in capital 137,276 0
----------- -----------
Net cash provided by financing
activities 597,645 2,346,296
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 122,544 (246,017)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 99,381 345,398
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 221,925 $ 99,381
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Ouachita Energy Corporation provides natural gas compression services
on a contractual basis, utilizing compressors owned by it and by Ouachita
Energy Partners, Ltd. and Ouachita Compression Group, LLC.
Ouachita Compression Group, L.L.C. was organized May 23, 1994 as a
limited liability company pursuant to the provision of the L.L.C. law. No
member is liable as such for the liabilities of the Company. The Company
has a limited life to December 31, 2025.
PRINCIPLES OF COMBINATION
The accompanying combined financial statements include the accounts of
the above-named businesses. All material related-party balances 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 and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
CASH AND EQUIVALENTS
For purposes of reporting cash flows, the Companies include all cash
accounts which are not subject to withdrawal restrictions or penalties.
ACCOUNTS RECEIVABLE
Management feels all accounts receivable-trade are collectible,
therefore, no allowance for doubtful accounts has been established.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out
method) or market. Inventories consist principally of supplies used for
repairs and some units in progress.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is provided
principally on the straight-line method over the estimated useful lives of
the respective assets. Maintenance and repairs are charged to expense as
incurred; major renewals and betterments are capitalized. When items of
F-7
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
property and equipment are sold or retired, the related cost and
accumulated depreciation are removed from the accounts and any gain or loss
is included in the results of operations.
INCOME TAXES
OUACHITA ENERGY CORPORATION: Current income taxes are based on the
year's income taxable for federal and state reporting purposes.
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets
to the amount expected to be realized. Accelerated depreciation is used
for tax reporting, and straight-line depreciation is used for financial
statement reporting.
OUACHITA ENERGY PARTNERS LTD.: The Company has elected to be taxed
under the provision of Subchapter S of the Internal Revenue Code. Under
those provisions, the Company does not pay federal corporate income
taxes on its taxable income. Instead, the stockholders are liable for
individual federal income taxes on their respective shares of the
corporate income. Accordingly, no provision has been made for federal
income tax for the years ended November 30, 1996 and 1995, in the
accompanying financial statements.
OUACHITA COMPRESSION GROUP, L.L.C.: No provision for income taxes
is required for Ouachita Compression Group, L.L.C. since the members
report their proportionate share of taxable income or loss on their
respective income tax returns. Such income or losses are
proportionately allocated to the members based on their ownership
interests.
LONG-LIVED ASSETS
Long-lived assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the related
carrying amount may not be recoverable. When required, impairment losses
on assets to be held and used are recognized based on the excess of the
asset's carrying amount over the fair value of the asset. Long-lived
assets to be disposed of are reported at the lower of carrying amount or
fair value less cost to sell.
NOTE 2 - ACCOUNTS AND NOTES RECEIVABLE
1996 1995
-------- --------
Accounts receivable - trade $647,849 $638,952
Accounts receivable - employees 59,798 14,336
Notes receivable - stockholder 94,432 0
-------- --------
$802,079 $653.288
-------- --------
-------- --------
F-8
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 2 - ACCOUNTS AND NOTES RECEIVABLE (Continued)
Notes receivable consists of a series of demand notes from the
majority stockholder of Ouachita Energy Corporation. The notes specify
an interest rate that is .25% over Bank One's prime rate and they total
$450,574. Additionally, Ouachita Energy Corporation has certain accounts
payable owed to an entity that is solely owned by its majority
stockholder. The accounts payable total $356,142 and have been offset
against the notes receivable in the accompanying financial statements.
Notes receivable $ 450,574
Accounts payable (356,142)
---------
$ 94,432
---------
---------
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
November 30, 1996
--------------------------------------------------
Life In Accumulated Remaining
Years Cost Depreciation Balance
------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Land - $ 229,612 $ 0 $ 229,612
Buildings 5-31.5 47,846 7,831 40,015
Furniture and fixtures 5 - 12 67,005 27,884 39,121
Vehicles 3 - 5 115,851 102,647 13,204
Equipment 3 - 10 645,038 438,361 206,677
Compressor equipment 7 - 14 26,115,344 10,899,007 15,216,337
----------- ----------- -----------
$27,220,696 $11,475,730 $15,744,966
----------- ----------- -----------
----------- ----------- -----------
<CAPTION>
November 30, 1995
--------------------------------------------------
Life In Accumulated Remaining
Years Cost Depreciation Balance
------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Buildings 5-31.5 $ 29,107 $ 6,231 $ 22,876
Furniture and fixtures 5 - 12 25,562 23,641 1,921
Vehicles 3 - 5 115,851 96,679 19,172
Equipment 3 - 10 735,777 409,160 326,617
Compressor equipment 7 - 14 23,384,933 9,478,379 13,906,554
----------- ----------- -----------
$24,291,230 $10,014,090 $14,277,140
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Depreciation expense was $1,606,021 and $1,394,346 for the years ended
November 30, 1996 and 1995, respectively.
F-9
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 4 - LONG-TERM DEBT
Long-term debt consisted of the following:
Due Within
November 30, 1996 Balance One Year
--------------------------------------------- ------- ----------
Notes payable to a bank in monthly install-
ments of principal, based on seven year
amortization, plus interest at .25% above
the bank's regional index rate (10.00% at
November 30, 1996) by:
Ouachita Energy Corporation $ 1,989,732 $ 272,732
Ouachita Energy Partners, Ltd. 5,921,320 945,131
Ouachita Compression Group, LLC 2,138,943 397,091
with maturity dates ranging from June 30,
1999, to June 15, 2000
Note payable by Ouachita Energy Corporation
to a former stockholder secured by farm
land, payable in monthly installments 218,392 47,488
including interest at 9% through November 1,
2000
Unsecured note payable by Ouachita Energy
Corporation to a former stockholder, payable
in monthly installments of interest only at
9% until November 1, 2000, and then monthly 208,452 0
installments of principal and interest
through August 31, 2003
Unsecured, non-interest bearing note payable
by Ouachita Compression Group, LLC to a
customer, generally payable by offset for 152,744 152,744
compression services rendered, with maturity
of March, 1997
Unsecured, non-interest bearing note payable
by Ouachita Compression Group, LLC to a
customer, payable only by offset for 59,510 59,510
compression services rendered, with
indefinite maturity date
Unsecured, non-interest bearing obligation
by Ouachita Energy Corporation to an entity 123,550 0
formerly affiliated with the Company, with ----------- ----------
no fixed maturity 10,812,643 $1,874,696
----------
Less current maturities 1,874,696 ----------
-----------
Long-term debt $ 8,937,947
-----------
-----------
F-10
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 4 - LONG-TERM DEBT (Continued)
Due Within
November 30, 1995 Balance One Year
--------------------------------------------- ------- ----------
Notes payable to a bank in monthly install-
ments of principal, based on seven or eight
year amortization, plus interest at .25%
above the bank's regional index rate (10.50%
at November 30, 1995) by:
Ouachita Energy Corporation $ 1,785,371 $ 284,990
Ouachita Energy Partners, Ltd. 5,667,102 826,774
Ouachita Compression Group, LLC 1,917,743 322,248
Unsecured note payable by Ouachita Energy
Corporation to a former stockholder, payable
in monthly installments including interest
at 9% through May, 1999 250,513 64,053
Unsecured, non-interest bearing note payable
by Ouachita Compression Group, LLC to a
customer, generally payable by offset for
compression services rendered, with maturity
of November, 1996 393,128 393,128
Unsecured, non-interest bearing note payable
by Ouachita Compression Group, LLC to a
customer, payable only by offset for
compression services rendered, with
indefinite maturity date 210,000 90,000
Unsecured, Non-interest bearing obligation
by Ouachita Energy Corporation to an entity
formerly affiliated with the Company, with
no fixed maturity 123,550 0
Other unsecured note payable by Ouachita
Energy Corporation bearing interest at 8% 7,227 7,227
----------- ----------
$10,354,634 $1,988,420
----------
Less current maturities 1,988,420 ----------
-----------
Long-term debt $ 8,366,214
-----------
-----------
F-11
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 4 - LONG-TERM DEBT (Continued)
The long-term debt that was payable to a bank at November 30, 1996
was originally subject to a loan agreement as amended June 17, 1996.
This agreement was replaced by a new loan agreement dated January 30,
1997. Current maturities of those notes and the principal payments due
in the next five years have been disclosed above based on the terms of
the subsequently executed loan agreement. The January 30, 1997 loan
agreement is secured by:
1. A continuing security interest in all compression units,
equipment and accounts receivable;
2. Continuing guaranty agreements of Ouachita Energy Corporation,
Ouachita Energy Partners, Ltd., and Ouachita Compression Group,
LLC, with the principal stockholder as guarantor and a continuing
guaranty of each of the other members of Ouachita Compression
Group, LLC; and
3. Pledge of a life insurance policy on the life the majority
stockholder in the amount of $1,250,000.
The notes payable by Ouachita Compression Group, LLC to customers
result from the purchase of compression equipment from such customers,
simultaneously with the deployment of the same or similar equipment under
contract by Ouachita Energy Corporation to provide compression services to
such customers.
Principal maturities of long-term debt of the Corporations for the
next five years are as follows:
Ouachita
Ouachita Energy Ouachita
Energy Partners Compression
Corp. Ltd. Group, LLC Combined
---------- ---------- ----------- -----------
1997 $ 320,220 $ 945,131 $ 609,345 $ 1,874,696
1998 693,815 980,795 422,039 2,096,649
1999 703,522 3,326,700 895,704 4,925,926
2000 496,004 668,694 424,109 1,588,807
2001 68,509 0 0 68,509
After 2001 258,056 0 0 258,056
---------- ---------- ----------- -----------
$2,540,126 $5,921,320 $2,351,197 $10,812,643
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
In connection with the notes payable to a bank, the Companies have
agreed to comply with certain loan covenants as specified in the loan
agreement with the bank.
F-12
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 5 - INCOME TAXES
Components of deferred tax assets and liabilities of Ouachita Energy
Corporation were as follows:
November 30, 1996 Benefits Liabilities Net
------------------------- ---------- ----------- ---------
Current -
Temporary differences $ 581,828 $ (201,629) $ 380,199
---------- -----------
Non-current -
Temporary differences 0 (957,478)
ITC credits 83,160 0
AMT credits 345,212 0
---------- -----------
428,372 (957,478) (529,106)
---------- ----------- ----------
Total deferred tax assets
(liabilities) $1,010,200 $(1,159,107) $ (148,907)
---------- ----------- ----------
---------- ----------- ----------
November 30, 1995 Benefits Liabilities Net
------------------------- ---------- ----------- ---------
Current -
Temporary differences $193,199 $ (153,521)
Net operating loss carryover 8,541 -
---------- -----------
201,740 (153,521) $ 48,219
Non-current -
Temporary differences - (998,148)
ITC credits 119,515 -
AMT credits 345,212 -
---------- -----------
464,727 (998,148) (533,421)
---------- ----------- ----------
Total deferred tax assets
(liabilities) $666,467 $(1,151,669) $ (485,202)
---------- ----------- ----------
---------- ----------- ----------
Income tax expense (benefit) is comprised of the following:
Ouachita
Ouachita Energy Ouachita
Energy Partners Compression
November 30, 1996 Corp. Ltd. Group, LLC Combined
-------------------- --------- --------- ----------- --------
Current income tax
expense $ 32,164 $ 0 $ 0 $ 32,164
Deferred income tax
(benefit) (336,296) 0 0 (336,296)
--------- ----- ----- ---------
$(304,132) $ 0 $ 0 $(304,132)
--------- ----- ----- ---------
--------- ----- ----- ---------
F-13
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 5 - INCOME TAXES (Continued)
Ouachita
Ouachita Energy Ouachita
Energy Partners Compression
November 30, 1995 Corp. Ltd. Group, LLC Combined
-------------------- --------- --------- ----------- --------
Current income tax
(benefit) $(18,656) $ - $ - $(18,656)
Deferred income tax
(expense) 74,196 - - 74,196
-------- -------- -------- --------
$ 55,540 $ - $ - $ 55,540
-------- -------- -------- --------
-------- -------- -------- --------
As of November 30, 1996, Ouachita Energy Corporation has
approximately $83,160 in unused investment credits to directly offset
future federal income tax liabilities. These credits expire in varying
amounts in the years 2000-2001.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Companies incurred the following transactions with related
individuals and entities for the years ended November 30, 1996 and 1995:
November 30, 1996:
D. Estis $231,200 Rent expense on office building, shop
and yard, condominium and town house
B. Estis 12,000 Rent expense on condominium
T. Nicar 14,037 Leasing expense-vehicles
DWE, LLC 564,179 Leasing expense-vehicles
L. Ivy 12,844 Rent expense on computers
D. McCormick 21,240 Aircraft rental
November 30, 1995:
D. Estis $ 91,200 Rent expense on office building, shop
and yard, condominium and town house
B. Estis 14,000 Rent expense on condominium
T. Nicar 101,717 Leasing expense-vehicles
DWE, LLC 366,877 Leasing expense-vehicles
L. Ivy 31,289 Rent expense on computers
D. McCormick 21,240 Aircraft rental
F-14
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 6 - RELATED PARTY TRANSACTIONS (Continued)
As of November 30, 1996, Ouachita Energy Corporation had the following
account balances with related individuals and corporations:
Dennis Estis $ 38,891 Accounts receivable
Dennis W. Estis 450,574 Notes receivable
DWE, L.L.C. 129,374 Accounts payable - vehicle leases
Dennis Estis 43,200 Accounts payable
Tommy Nicar 300 Accounts payable
Andy Payne 10,383 Accounts payable
Ouachita Compression
Service, Inc. 123,550 Notes payable, non-interest bearing
DWE, L.L.C. 356,142 Deferred accounts payable
Ouachita Energy Partners, Ltd. had the following account balances with
related parties as of November 30, 1996 and 1995:
1996 1995
-------- --------
Dennis Estis $428,054 $424,486 Notes receivable
Barbara Estis 179,825 146,851 Notes receivable
Lavelle Ivy 31,745 36,359 Notes receivable
During 1995 the Corporation advanced monies to its shareholders that were
recorded as distributions to shareholders. These were actually loans to the
shareholders and are recorded as such in the restated financial statement
for 1995. The restatement does not affect the net income reported for the
year ended November 30, 1995.
NOTE 7 - SIGNIFICANT CONCENTRATION OF CREDIT RISK
Cash on deposit with financial institutions at November 30, 1996 was at
risk to the extent that the deposits exceeded the FDIC insured amounts. The
amounts at risk were as follows:
Ouachita Energy Corporation $66,035
Ouachita Energy Partners, Ltd. 13,596
-------
$79,631
-------
-------
Most of the business activity of the Companies is with companies involved
in the oil and gas industry and, therefore, a majority of its revenue is
derived from that source. As of November 30, 1996, the receivables from
companies involved in the oil and gas industry were $649,849.
NOTE 8 - NON-MONETARY TRANSACTIONS
As disclosed in Note 4, Ouachita Compression Group, LLC exchanged
compression services as payment on its debt. The amounts exchanged were
$150,490 and $64,494 during the years ended November 30, 1996 and 1995,
respectively.
F-15
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 9 - COMMITMENTS AND CONTINGENCIES
GUARANTOR OF DEBT
Ouachita Energy Corporation was contingently liable at November 30, 1996 as
a guarantor of a note payable by an employee to a Bank dated August 9, 1993 in
the amount of $63,626, secured by a first security interest on an airplane.
STOCK OPTIONS
The Companies have agreed to grant an option whereby their chief financial
officer may acquire a ten percent (10%) interest in each of the Companies.
The option may be exercised by his payment of an amount that equals ten
percent (10%) of an estimated fair market value of the Companies, inclusive
of its option price, as of his date of employment (which value is
substantially in excess of book value). The option becomes exercisable
annually in three equal installments on his employment anniversary dates,
and remains exercisable for a period of ten years.
LONG-TERM LEASE OF PREMISES
Ouachita Energy Corporation leases its offices and facilities from the
majority stockholder. The lease requires monthly payments of $20,000 and is
classified as an operating lease. In addition, the Company is responsible
for all taxes, insurance, maintenance and utilities. The primary term of the
lease expires January 31, 2006 and may be renewed for two additional terms of
five years each with increases of the lease payments based on changes in the
U. S. Department of Labor Cost of Living Index. Minimum future lease
payments on this lease at November 30, 1996, are as follows:
1997 $ 240,000
1998 240,000
1999 240,000
2000 240,000
2001 240,000
Thereafter 1,020,000
----------
$2,220,000
----------
----------
Rent expenses under this lease were $200,000 for the year ended November 30,
1996, plus taxes, insurance, maintenance and utilities.
LONG-TERM LEASE OF AIRCRAFT
Ouachita Energy Corporation leases an airplane from an employee. The lease
requires monthly payments of $1,770 and is classified as an operating lease.
The lease expires February 15, 1998. Minimum future lease payments on this
lease at November 30, 1996, are as follows:
F-16
<PAGE>
OUACHITA ENERGY CORPORATION,
OUACHITA ENERGY PARTNERS, LTD. AND
OUACHITA COMPRESSION GROUP, LLC
West Monroe, Louisiana
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
1997 $21,240
1998 3,540
-------
$24,780
-------
-------
Rent expenses under this lease were $21,240 for the year ended November 30,
1996.
NOTE 10 - SUBSEQUENT EVENTS
LOAN AGREEMENT
All of the Companies entered into a Loan Agreement with a bank at January
30, 1997, as disclosed in Note 4 above. In connection with the notes payable
to the bank, the Companies have agreed to comply with certain loan covenants
as specified in the Loan Agreement.
LONG-TERM LEASE OF COMPRESSOR
Ouachita Compression Group, LLC, entered into a long-term lease of
compressor equipment located in Rusk Co., Texas at December 30, 1996. The
lease is non-cancelable, is classified as an operating lease, and requires
monthly payments of $8,065.09. The lease expires December 15, 2003. Minimum
future lease payments on this lease are as follows:
1997 $ 96,781
1998 96,781
1999 96,781
2000 96,781
2001 96,781
Thereafter 193,563
--------
$677,468
--------
--------
NOTE 10 - CASH FLOW INFORMATION
Supplemental cash flow information for the years ended November 30, 1996
and 1995 is as follows:
1996 1995
-------- --------
Cash payments for interest $986,509 $941,002
Cash payments for income taxes 0 110,046
F-17
<PAGE>
EQUITY COMPRESSION SERVICES CORPORATION AND SUBSIDIARIES
---------------------------------------------------------------------
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS-UNAUDITED
For the Six Months Ended June 30 and May 31, 1997
and the Year Ended December 31 and November 30, 1996
<PAGE>
EQUITY COMPRESSION SERVICES CORPORATION
PRO FORMA FINANCIAL STATEMENTS
<TABLE>
JUNE 30, 1997 MAY 31, 1997
(In thousands)
BALANCE SHEET ECSC OEC ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 6 $ 304 $ $ 310
Accounts receivable 1,282 549 1,831
Notes receivable 4 616 620
Compressors and compressor
parts inventory 2,761 195 2,956
Other 153 73 226
------- -------- -------- -------
Total current assets 4,206 1,737 - 5,943
------- -------- -------- -------
Property and equipment, net 26,149 16,205 27,264 (a) 69,618
------- -------- -------- -------
Goodwill and other
intangibles net 754 - 754
Other assets, net 2 - 2
------- -------- -------- -------
Total Assets $31,111 $17,942 $ 27,264 $76,317
------- -------- -------- -------
------- -------- -------- -------
Current Liabilities:
Current portion of
long-term debt $ 10 $ - $ $ 10
Accounts payable and
accrued liabilities 2,016 1,727 3,743
Income tax payable 100 5 105
------- -------- -------- -------
Total Current Liabilities 2,126 1,732 - 3,858
Long-term debt 10,549 11,307 11,528 (b) 33,384
Deferred income taxes 3,489 143 7,956 (a) 11,588
Other 89 - 89
------- -------- -------- -------
Total Liabilities 16,253 13,182 19,484 48,919
------- -------- -------- -------
Stockholders' equity 14,858 4,760 12,540 (b) 27,398
(4,760)(c)
------- -------- -------- -------
Total Liabilities and
Stockholders' Equity $31,111 $17,942 $ 27,264 $76,317
------- -------- -------- -------
------- -------- -------- -------
</TABLE>
SEE ACCOMPANYING NOTES.
P-1
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
The pro forma condensed consolidated balance sheet, which has been prepared
utilizing the historical balance sheet of Equity Compression Services
Corporation and subsidiaries and Ouachita Energy Corporation and affiliates
as of June 30 and May 31, 1997, is based upon the assumption that the
acquisition by Equity Compression Services accounted for under the purchase
method, occurred as of June 30, 1997 and includes the following pro forma
adjustments.
(a) Adjustment to reflect the allocation of the total purchase price for
Ouachita Energy Corporation and affiliates of $36,305,000 in cash, debt
assumption and the issuance of 7,600,000 shares of common stock to the assets
acquired and liabilities assumed and the recording of deferred tax associated
with the acquisition.
The final allocation of the purchase price is contingent upon the receipt
of final information on the acquired assets, but is not expected to differ
materially from the preliminary allocation herein.
(b) To reflect additional net borrowings and 7,600,000 shares of newly issued
common stock of Equity Compression Services Corporation associated with the
acquisition.
(c) To eliminate Ouachita Energy Corporation and affiliates shareholders'
equity.
The pro forma balance sheet should be read in conjunction with the
financial statements and notes of Equity Compression Services Corporation and
Ouachita Energy Corporation as of June 30 and May 31, 1997 and December 31
and November 30, 1996.
P-2
<PAGE>
EQUITY COMPRESSION SERVICES CORPORATION
PRO FORMA FINANCIAL STATEMENTS
<TABLE>
SIX MONTHS ENDED
JUNE 30, 1997 MAY 31, 1997
(In thousands except
per share amounts)
STATEMENT OF OPERATIONS ECSC OEC ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 1,188 $ - $ $ 1,188
Compressor sales and re-manufacturing 528 - 528
Compressor rentals and service fees 3,427 5,478 8,905
Other - 156 156
---------- ---------- ----------- ----------
Total revenues 5,143 5,634 - 10,777
---------- ---------- ----------- ----------
Expenses:
Operating costs - oil and gas 376 - 376
Cost of compressor sales and
re-manufacturing 464 - 464
Operating costs - compressors 1,337 2,778 4,115
Depreciation, depletion and
amortization 1,229 943 534 (a) 2,706
General and administrative 1,350 1,094 2,444
---------- ---------- ----------- ----------
Total expenses 4,756 4,815 (534) 10,105
---------- ---------- ----------- ----------
Income (loss) from operations 387 819 (534) 672
Other income (expense):
Interest income and other 1 14 15
Interest expense (338) (549) (398)(b) (1,285)
---------- ---------- ----------- ----------
(337) (535) (398) (1,270)
---------- ---------- ----------- ----------
Income (loss) before income taxes 50 284 (932) (598)
Income tax benefit (expense) (19) 4 219 (c) 204
---------- ---------- ----------- ----------
Net income (loss) $ 31 $ 288 $ (713) $ (394)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Loss per common share $ - $ (0.01)
---------- ----------
---------- ----------
Weighted average number of
shares outstanding 21,088 7,600 (d) 28,688
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
See accompanying notes.
P-3
<PAGE>
EQUITY COMPRESSION SERVICES CORPORATION
PRO FORMA FINANCIAL STATEMENTS
<TABLE>
TWELVE MONTHS ENDED
DECEMBER 31, 1996 NOVEMBER 30, 1996
(In thousands except per share amounts)
STATEMENT OF OPERATIONS ESCS OEC ADJUSTMENTS CONSOLIDATED
$0,000,000 $0,000,000 $ 0,000,000)(m) $0,000,000
<S> <C> <C> <C> <C>
Revenues:
$0,000,000 $0,000,000 $ 0,000,000)(m) $0,000,000
Oil and gas sales $ 1,821 $ - $ $ 1,821
Compressor sales and re-manufacturing 1,177 - 1,177
Compressor rentals and service fees 6,445 9,188 15,633
Other - 152 152
---------- ---------- ----------- ----------
Total revenues 9,443 9,340 - 18,783
---------- ---------- ----------- ----------
Expenses:
Operating costs - oil and gas 516 - 516
Cost of compressor sales and
re-manufacturing 894 - 894
Operating costs - compressor 2,643 5,214 7,857
Depreciation, depletion and
amortization 2,201 1,608 1,347 (a) 5,156
General and administrative 2,080 1,877 3,957
Loss On Sale of Assets 437 437
---------- ---------- ----------- ----------
Total expenses 8,771 8,699 1,347 18,817
---------- ---------- ----------- ----------
Income (loss) from operations 672 641 (1,347) (34)
Other income (expense):
Interest income and other 26 62 88
Interest expense (927) (1,028) (795)(b) (2,750)
---------- ---------- ----------- ----------
(901) (966) (795) (2,662)
---------- ---------- ----------- ----------
Loss before income taxes (229) (325) (2,142) (2,696)
Income tax benefit 69 304 605 (c) 978
---------- ---------- ----------- ----------
Net loss $ (160) $ (21) $ (1,537) $ (1,718)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Loss per common share $ (0.01) $ $ (0.08)
---------- ----------
---------- ----------
Weighted average number of
shares outstanding 13,687 7,600 (d) 21,287
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
See accompanying notes.
P-4
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
The pro forma condensed statement of operations, which have been prepared
utilizing the historical statements of operations of Equity Compression
Services Corporation and subsidiaries and Ouachita Energy Corporation and
affiliates for the year ended December 31 and November 30, 1996 and the six
months ended June 30 and May 31, 1997, are based upon the assumption that the
acquisition by Equity Compression Services Corporation, accounted for under
the purchase method, occurred as of January 1, 1996 and include the following
pro forma adjustments.
(a) Adjustment to depreciation expense due to increase in value of fixed
assets acquired associated with the acquisition.
(b) Adjustment to reflect increase in interest expense on debt issued
associated with the acquisition.
(c) Adjustment to income tax expense recognized to reflect expense associated
with consolidated results of operations.
(d) To reflect issuance of shares of common stock of Equity Compression
Services Corporation associated with the acquisition.
The pro forma financial statements should be read in conjunction with the
financial statements and notes of Equity Compression Services Corporation and
Ouachita Energy Corporation for the year ended December 31 and November 30,
1996 and the six months ended June 30 and May 31, 1997. These pro forma
statements may not be indicative of the results that actually would have
occurred if the combination had been in effect on the dates indicated or
which may be obtained in the future.
P-5
<PAGE>
CAUTIONARY STATEMENT
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. This press release or any other written or
oral statements made by or on behalf of the Company may include
forward-looking statements which reflect the Company's current views with
respect to future events and financial performance. These forward-looking
statements are subject to certain uncertainties and other factors that could
cause actual results to differ materially from such statements. These
uncertainties and other factors (which are described in more detail elsewhere
in documents filed by the Company with the Securities and Exchange
Commission) include, but are not limited to, uncertainties relating to
general economic conditions and cyclical industry conditions, uncertainties
relating to government and regulatory policies, volatile and unpredictable
developments (including storms and catastrophes), the legal environment, the
uncertainties of the reserving process and the competitive environment in
which the Company operates. The words "believe", "expect", "anticipate",
"project", "plan", and similar expressions, identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements whether as a result of new information, future events or otherwise.
P-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EQUITY COMPRESSION SERVICES CORPORATION
JACK D. BRANNON
---------------------------------------------
By: /s/ Jack Brannon
Jack Brannon, Senior Vice President
Chief Financial Officer and Treasurer
Date: October 20, 1997
