<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): September 30, 2000
Hanover Compressor Company
(Exact name of registrant as specified in its charter)
Delaware 1-3071 76-0625124
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification Number)
12001 N. Houston Rosslyn
Houston, Texas 77086
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 447-8787
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
The historical financial statements of Dresser-Rand Compression
Services Rental and Packaging Division (a Division of Dresser-Rand
Company) were included in the Company's Current Report on Form 8-K/A
dated November 13, 2000.
(b) Pro Forma Financial Information
Pro forma financial information giving effect to the purchase of the
Dresser-Rand Compression Services Rental and Packaging Division for
the nine months ended September 30, 2000 and the year ended
December 31, 1999 is set forth as ATTACHMENT A and are included
herein.
(c) Selected Financial Data
Selected historical financial data and pro forma combined condensed
financial data of the Company is set forth as Attachment B and are
included herein.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 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.
Dated: November 21, 2000
Hanover Compressor Company
By: /s/ Michael J. McGhan
--------------------------
Michael J. McGhan
President and Chief Executive Officer
<PAGE>
ATTACHMENT A
HANOVER COMPRESSOR COMPANY
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
On August 31, 2000, Hanover Compressor Company (the "Company") acquired the
compression services division of Dresser-Rand Company ("CSD-DR") from Ingersoll-
Rand Company for approximately $177 million of the Company's common stock and
cash. The transaction was accounted for as a purchase and the results of
operations for the acquired business have been included in the Company's
historical financial statements commencing September 1, 2000.
The accompanying pro forma combined condensed statements of operations for the
nine months ended September 30, 2000 and for the year ended December 31, 1999
present the pro forma results of operations of the Company as if the acquisition
had occurred on January 1, 1999. A pro forma combined condensed balance sheet
has not been provided because the impact of the acquisition of CSD-DR is already
reflected in the Company's historical consolidated balance sheet at September
30, 2000. The accompanying pro forma combined condensed statements of operations
should be read in conjunction with the Company's Consolidated Financial
Statements and related notes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 and the Company's Quarterly
Report on Form 10-Q for the nine months ended September 30, 2000.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ---------
HCC DR Adjustments Combined
--- -- ----------- --------
<S> <C> <C> <C> <C>
Revenues $ 370,222 $ 61,056 $ (4,592) (a) $ 426,686
------------ ----------- --------- ----------
Expenses:
Operating 196,326 52,263 (5,368) (a) 238,675
(3,418) (b)
(1,128) (c)
Selling, general and administrative 34,481 7,578 (957) (b) 41,102
Depreciation and amortization 36,830 4,375 (b) 42,036
(4,375) (d)
4,606 (e)
600 (f)
Leasing expense 29,596 29,596
Interest expense 5,560 1,774 (1,774) (d) 10,310
4,750 (g)
Distributions on mandatorily redeemable
convertible preferred securities 4,776 4,776
------------ ----------- --------- ----------
307,569 61,615 (2,689) 366,495
------------ ----------- --------- ----------
Income before income taxes 62,653 (559) (1,903) 60,191
Provision for income taxes 23,305 200 (1,116) (h) 22,389
------------ ----------- --------- ----------
Net income $ 39,348 $ (759) $ (787) $ 37,802
============ =========== ========= ==========
Weighted average common
equivalent shares outstanding:
Basic 60,324 2,613 (i) 62,937
Diluted 64,619 2,613 (i) 67,232
Earnings per common share
Basic $ 0.65 $ 0.60
Diluted $ 0.61 $ 0.56
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ---------
HCC DR Adjustments Combined
--- -- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $ 317,028 $ 167,633 $ (8,527) (a) $ 476,134
------------ ------------ --------- ----------
Expenses:
Operating 151,169 132,909 (7,667) (a) 269,943
(4,863) (b)
(1,605) (c)
Selling, general and administrative 33,782 13,483 (160) (b) 47,105
Depreciation and amortization 37,337 5,023 (b) 44,932
(5,023) (d)
6,695 (e)
900 (f)
Leasing expense 22,090 22,090
Interest expense 8,786 1,953 (1,953) (d) 15,911
7,125 (g)
Distributions on mandatorily redeemable
convertible preferred securities 278 278
------------ ------------ --------- ----------
253,442 148,345 (1,528) 400,259
------------ ------------ --------- ----------
Income before income taxes 63,586 19,288 (6,999) 75,875
Provision for income taxes 23,145 6,779 (2,306) (h) 27,618
------------ ------------ --------- ----------
Net income $ 40,441 $ 12,509 $ (4,693) $ 48,257
============ ============ ========= ==========
Weighted average common
equivalent shares outstanding:
Basic 57,048 2,920 (i) 59,968
Diluted 61,054 2,920 (i) 63,974
Earnings per common share
Basic $ 0.71 $ 0.80
Diluted $ 0.66 $ 0.75
</TABLE>
<PAGE>
Notes To Unaudited Pro Forma Combined Condensed Statements of Operations
The accompanying unaudited pro forma combined condensed statements of operations
for Hanover Compressor Company (the "Company") have been prepared based upon
certain pro forma adjustments to the historical consolidated financial
statements of the Company set forth in its previously filed Annual Report on
Form 10-K for the year ended December 31, 1999 and Quarterly Report on Form 10-Q
for the nine months ended September 30, 2000. The historical information for
CSD-DR is for the eight months ended August 31, 2000 and the year ended
December 31, 1999. Historical financial statements for CSD-DR as of June 30,
2000 and December 31, 1999 have been included in the Company's Current Report on
Form 8-K/A dated November 13, 2000.
The Pro Forma Statements of Operations are based on certain assumptions and
preliminary estimates that are subject to change. The Pro Forma Statements of
Operations do not purport to be indicative of the results which would actually
have been obtained had the acquisition been completed on the date indicated or
which may be obtained in the future.
The pro forma adjustments which have been made to the accompanying Pro Forma
Statements of Operations are described below:
a) Reflects the adjustment to CSD-DR's historical revenue and operating
expenses to conform to the Company's accounting policy to recognize revenue
from compressor fabrication utilizing the percentage-of-completion method.
CSD-DR recognized revenue from compressor fabrication when the compressor
was shipped to the customer.
b) Reflects reclassification of CSD-DR's depreciation expense to conform to
the Company's financial statement presentation.
c) Reflects the reversal of certain CSD-DR's historical operating expenses to
conform to the Company's accounting policies for capitalization of fixed
assets.
d) Reflects the elimination of CSD-DR's historical depreciation and
amortization expense and interest expense.
e) Reflects the depreciation expense on the fair value of CSD-DR's property,
plant and equipment that is estimated to be approximately $121 million. For
the purposes of this adjustment, the Company utilized a fifteen-year
average depreciable life and a twenty-percent salvage value. This estimate
is consistent with the Company's current estimates for similar equipment
and facilities.
f) Reflects the amortization of approximately $18 million of goodwill recorded
by the Company in its preliminary purchase price allocation. The goodwill
is being amortized over a 20-year period on a straight-line basis.
g) Reflects the interest expense resulting from approximately $95 million of
debt incurred in connection with the acquisition. The interest rate in
effect at the date of acquisition was approximately 7.5% and is utilized in
the calculation of this adjustment.
h) Reflects the adjustment to the pro forma combined provision for income
taxes to reflect the Company's effective income tax rate of 37.2% and 36.4%
for the nine months ended September 30, 2000 and the year ended December
31, 1999, respectively.
i) Reflects the additional weighted average common and common equivalent
shares outstanding as if the common stock had been issued for the
acquisition on January 1, 1999.
<PAGE>
ATTACHMENT B
SELECTED FINANCIAL DATA - HANOVER COMPRESSOR COMPANY
The following table presents certain selected historical consolidated
financial data and pro forma combined condensed financial data of Hanover
Compressor Company ("Company"). The data for the Company was derived as of the
dates indicated and for each of the fiscal years in the five-year period ended
December 31, 1999 from audited consolidated financial statements filed in the
Company's Annual Reports on Form 10-K. The data as of and for the nine months
ended September 30, 2000 and 1999 was derived from unaudited condensed
consolidated financial statements filed in the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 2000. In the opinion of the
Company's management, such unaudited financial statements contain all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position and results of operations of such interim
periods.
On August 31, 2000, the Company acquired the compression services division of
Dresser-Rand Company for approximately $177 million in cash and Company common
stock. The pro forma combined condensed financial data present the pro forma
results of operations of the Company as if the acquisition had occurred on
January 1, 1999. This pro forma financial data was derived from the pro forma
combined condensed statements of operations for the nine months ended September
30, 2000 and the year ended December 31, 1999 included in this Current Report on
Form 8-K. The pro forma financial data does not purport to be indicative of the
results which would actually have been obtained had the acquisition been
completed on the date indicated or which may be obtained in the future.
The information in this section should be read along with the Company's
consolidated financial statements, accompanying notes and other financial
information included in the Company's Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q (in thousands, except per share amounts).
<TABLE>
<CAPTION>
Year end December 31,
---------------------------------------------------------
1995(1) 1996 1997 1998 1999 1999
-------- -------- --------- -------- -------- ---------
Pro Forma
---------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Total Revenues: $ 95,964 $136,011 $ 198,798 $281,957 $317,028 $476,134
-------- -------- --------- -------- -------- --------
Expenses:
Operating....................................... 56,256 75,031 109,432 150,652 151,169 269,943
Selling, general and administrative............. 12,542 16,439 20,782 26,626 33,782 47,105
Depreciation and amortization(2)................ 13,494 20,722 28,439 37,154 37,337 44,932
Lease expense................................... 6,173 22,090 22,090
Interest expense................................ 4,560 6,594 10,728 11,716 8,786 15,911
Distributions on mandatorily redeemable 278 278
convertible preferred securities..............
-------- -------- --------- -------- -------- --------
Total Costs and Expenses................... 86,852 118,786 169,381 232,321 253,442 400,259
-------- -------- --------- -------- -------- --------
Income before income taxes........................ 9,112 17,225 29,417 49,636 63,586 75,875
Provision for income taxes........................ 3,498 6,844 11,314 19,259 23,145 27,618
-------- -------- --------- -------- -------- --------
Net income........................................ 5,614 $ 10,381 $ 18,103 $ 30,377 $ 40,441 48,257
======== ======== ========= ======== ======== ========
Net income available to common stockholders:
Net Income...................................... 5,614 10,381 18,103 30,377 40,441 48,257
Dividends on Series A and Series B
preferred stock................................ (832) (1,773)
Series A preferred stock exchange............... (3,794)
Series B preferred stock conversion............. (1,400)
-------- -------- --------- -------- -------- --------
Net income available to common stockholders....... $ 4,782 $ 3,414 $ 18,103 $ 30,377 $ 40,441 $ 48,257
======== ======== ========= ======== ======== ========
Weighted average common and common
equivalent shares:
Basic (3)................................... 28,746 40,996 51,246 56,936 57,048 59,968
-------- -------- --------- -------- -------- --------
Diluted (3)................................. 30,716 44,046 54,690 60,182 61,054 63,974
-------- -------- --------- -------- -------- --------
Earnings per common share:
Basic (3)................................... $.17 $.08 $.35 $.53 $.71 $.80
======== ======== ========= ======== ======== ========
Diluted (3)(4).............................. $.16 $.08 $.33 $.50 $.66 $.75
======== ======== ========= ======== ======== ========
OTHER DATA:
EBITDA (5)...................................... $ 27,166 $ 44,541 $ 68,584 $104,679 $132,077 $159,086
======== ======== ========= ======== ======== ========
CASHFLOWS PROVIDED BY (USED IN):
Operating activities............................ $ 9,088 $ 20,276 $ 32,219 $ 31,147 $ 68,222
Investing activities............................ (68,474) (87,683) (164,490) (14,699) (92,114)
Financing activities............................ 62,206 71,740 129,510 (9,328) 18,218
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents....................... $ 2,989 $ 7,322 $ 4,561 $ 11,503 $ 5,756
Working capital................................. 23,270 41,513 58,027 113,264 107,966
Net property, plant and equipment.............. 198,074 266,406 394,070 392,498 497,465
Total assets.................................... 252,313 341,387 506,452 614,590 756,510
Long-term debt.................................. 50,451 122,756 158,838 156,943 69,681
Mandatorily redeemable convertible
preferred securities......................... 86,250
Preferred stockholders' equity.................. 28,894
Common stockholders' equity..................... 139,302 176,895 288,271 316,713 369,157
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------------
1999 2000 2000
-------- ---------- --------
Pro forma
---------
<S> <C> <C> <C>
Income Statement Data:
Total Revenues: $227,838 $ 370,222 $426,686
-------- ---------- --------
Expenses:
Operating....................................... 108,837 196,326 238,675
Selling, general and administrative............. 24,232 34,481 41,102
Depreciation and amortization(2)................ 28,536 36,830 42,036
Lease expense................................... 14,727 29,596 29,596
Interest expense................................ 7,841 5,560 10,310
Distributions on mandatorily redeemable 4,776 4,776
convertible preferred securities..............
-------- ---------- --------
Total Costs and Expenses................... 184,173 307,569 366,495
-------- ---------- --------
Income before income taxes........................ 43,665 62,653 60,191
Provision for income taxes........................ 16,156 23,305 22,389
-------- ---------- --------
Net income........................................ $ 27,509 $ 39,348 $ 37,802
-------- ---------- --------
Net income available to common stockholders:
Net Income...................................... 27,509 39,348 37,802
Dividends on Series A and Series B
preferred stock................................
Series A preferred stock exchange...............
Series B preferred stock conversion.............
Net income available to common stockholders....... $ 27,509 $ 39,348 $ 37,802
======== ========== ========
Weighted average common and common
equivalent shares:
Basic (3)................................... 56,966 60,324 62,937
-------- ---------- --------
Diluted (3)................................. 60,974 64,619 67,232
-------- ---------- --------
Earnings per common share:
Basic (3)................................... $.48 $.65 $.60
======== ========== ========
Diluted (3)(4).............................. $.45 $.61 $.56
======== ========== ========
OTHER DATA:
EBITDA (5)...................................... $ 94,769 $ 139,415 $146,909
======== ========== ========
CASHFLOWS PROVIDED BY (USED IN):
Operating activities............................ $ 41,427 $ 7,491
Investing activities............................ (12,386) (162,614)
Financing activities............................ (31,376) 162,453
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents....................... $ 9,090 $ 13,042
Working capital................................. 129,866 224,684
Net property, plant and equipment.............. 426,527 688,588
Total assets.................................... 683,980 1,271,468
Long-term debt.................................. 124,540 173,835
Mandatorily redeemable convertible
preferred securities......................... 86,250
Preferred stockholders' equity..................
Common stockholders' equity..................... 348,814 619,838
</TABLE>
(1) The selected historical financial information includes the results of
operations of the Company and its wholly owned subsidiaries. During 1995,
the Company acquired Astra Resources Compression, Inc., a significant
subsidiary.
(2) In order to more accurately reflect the estimated useful lives of natural
gas compressor units in the rental fleet; effective January 1, 1996 the
Company changed the lives over which these units are depreciated from 12 to
15 years. The effect of this change was a decrease in depreciation expense
of $2.6 million and an increase in net income of $1.5 million ($.03 per
diluted common share) for the year ended December 31, 1996.
(3) In June 2000, the Company completed a 2 for 1 stock split effected in the
form of a 100% stock dividend. All weighted average and common equivalent
shares and earnings per common share information have been restated for all
periods presented to reflect this stock split.
(4) Diluted earnings per share in 1996 was $.24 per share before the effects of
charging retained earnings for $1.8 million relating to dividends on
redeemable preferred stock and one time charges to retained earnings for
(i) $3.8 million related to the exchange of all Series A preferred stock
for subordinated notes and (ii) $1.4 million related to the conversion of
all Series B preferred stock to Common Stock.
(5) EBITDA consists of the sum of consolidated net income before interest
expense, lease expense, distributions on mandatorily redeemable convertible
preferred securities, income tax, and depreciation and amortization. The
Company believes that EBITDA is a meaningful measure of its operating
performance and is also used to measure the Company's ability to meet debt
service requirements. EBITDA should not be considered as an alternative
performance measure prescribed by generally accepted accounting principles.
