<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 (date of earliest event reported): August 31, 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 audited historical combined balance sheet of Dresser-Rand
Compression Services Rental and Packaging Division (a Division of
Dresser-Rand Company) at December 31, 1999 and combined statements of
operations and cash flows for the year then ended and the unaudited
historical combined balance sheet for Dresser-Rand Compression Services
Rental and Packaging Division at June 30, 2000 and the combined
statements of operations and cash flows for the six months ended June
30, 2000 and 1999 are set forth as ATTACHMENT A and are included herein.
(b) Pro Forma Financial Information
Pro forma financial information for the business acquired subsequent to
December 31, 1999 is set for as ATTACHMENT B and are included herein.
(c) Exhibits
23.1
Consent of Independent Accountants
<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 13, 2000
Hanover Compressor Company
By: /s/ Michael J. McGhan
--------------------------
Michael J. McGhan
President and Chief Executive Officer
<PAGE>
ATTACHMENT A
DRESSER-RAND
COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
COMBINED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1999 AND JUNE 30, 2000 AND FOR THE
YEAR ENDED DECEMBER 31, 1999 AND THE SIX MONTHS
ENDED JUNE 30, 1999 AND 2000
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A DIVISION OF DRESSER-RAND COMPANY)
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants 1
Combined Financial Statements:
Combined Balance Sheet as of December 31, 1999 and
June 30, 2000 (unaudited) 2
Combined Statement of Operations for the year ended
December 31, 1999 and the six months ended June 30,
1999 and 2000 (unaudited) 3
Combined Statement of Cash Flows for the year ended
December 31, 1999 and the six months ended June 30,
1999 and 2000 (unaudited) 4
Combined Statement of Changes in Dresser-Rand Company Investment
for the year ended December 31, 1999 5
Notes to Combined Financial Statements 6
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners and Management of Dresser-Rand Company:
In our opinion, the accompanying combined balance sheet and the related combined
statements of operations, changes in Dresser-Rand Company investment and cash
flows present fairly, in all material respects, the financial position of the
Dresser-Rand Compression Services Rental and Packaging Division (the
"Business"), a division of Dresser-Rand Company, at December 31, 1999, and the
results of its operations and its cash flows for the year ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
management of the Business; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Tulsa, Oklahoma
November 3, 2000
1
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Combined Balance Sheet
(In thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
--------------- ---------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 793 $ 1,122
Accounts and notes receivable, less allowance for
doubtful accounts of $1,278 at June 30, 2000
and $1,274 at December 31, 1999 25,495 22,715
Inventories 26,616 33,036
Prepaid expenses 1,351 1,382
----------- -----------
54,255 58,255
----------- -----------
Due from affiliates 147,544 146,939
Property, plant and equipment:
Land, buildings and improvements 5,263 5,237
Machinery and equipment 119,077 124,706
----------- -----------
124,340 129,943
Less accumulated depreciation (78,548) (80,144)
----------- -----------
45,792 49,799
----------- -----------
Other assets 12,860 71,840
----------- -----------
Total assets $ 260,451 $ 326,833
=========== ===========
Liabilities and Business Equity
Current liabilities:
Accounts payable and accruals $ 37,759 $ 32,395
Due to affiliates 7,455 19,635
Noncurrent liabilities 7,925 7,962
----------- -----------
Total liabilities 53,139 59,992
----------- -----------
Commitments and contingencies (Note 9)
Business Equity:
Dresser-Rand Company investment 207,312 266,841
----------- -----------
Total liabilities and Business Equity $ 260,451 $ 326,833
=========== ===========
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
2
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Combined Statement of Operations
(In thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months For the
Ended June 30, Year Ended
----------------------------- December 31,
1999 2000 1999
------------- ------------ ----------------
(Unaudited)
<S> <C> <C> <C>
Net sales, third parties (including leasing and
service revenues) $ 102,064 $ 44,716 $153,792
Sales to DR affiliates 8,366 2,716 13,628
--------- --------- --------
Total net sales 110,430 47,432 167,420
Cost of goods sold and operating costs 92,157 40,865 129,108
Administrative, selling and service engineering expense 5,099 5,755 13,483
Allocated DR costs 1,968 1,584 3,801
--------- --------- --------
Operating income 11,206 (772) 21,028
Interest expense from affiliates (1,368) (478) (1,953)
Other income (expense), net 276 (272) 213
--------- --------- --------
Earnings before income taxes 10,114 (1,522) 19,288
Provision for income taxes 1,671 200 6,779
--------- --------- --------
Net earnings $ 8,443 $ (1,722) $ 12,509
========= ========= ========
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
3
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Combined Statement of Cash Flows
(In thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months For the
Ended June 30, Year Ended
--------------------------- December 31,
1999 2000 1999
---------- ------- ------------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 8,443 $(1,722) $ 12,509
Adjustments to arrive at net cash provided by operating activities:
Depreciation and amortization 2,773 3,273 5,023
Net book value of leased assets sold 20,029 - 22,336
Deferred income taxes 2,502 (246) 2,984
Changes in assets and liabilities:
Decrease (increase) in:
Accounts and notes receivable (47,045) 2,780 181
Inventories (17,384) (6,420) 7,556
Other current and noncurrent assets 14,772 1,518 10,594
Increase (decrease) in:
Accounts payable and accruals 23,438 (5,364) (7,820)
Other current and noncurrent liabilities (47) 37 (282)
-------- ------- --------
Net cash provided by (used in) operating activities 7,481 (6,144) 53,081
-------- ------- --------
Cash flows from investing activities:
Capital expenditures (2,251) (6,562) (13,581)
-------- ------- --------
Cash flows from financing activities:
Changes in due to (from) DR affiliates (471) 13,035 (40,285)
-------- ------- --------
Net increase (decrease) in cash and cash equivalents 4,759 329 (785)
Cash and cash equivalents - beginning of the period 1,578 793 1,578
-------- ------- --------
Cash and cash equivalents - end of the period $ 6,337 $ 1,122 $ 793
======== ======= ========
The accompanying notes are an integral part of these combined financial statements.
</TABLE>
4
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Combined Statement of Changes in
Dresser-Rand Company Investment
For the Year Ended December 31, 1999
(In thousands)
--------------------------------------------------------------------------------
Dresser
Rand
Company
Investment
----------
December 31, 1998 $194,803
Net earnings 12,509
--------
December 31, 1999 $207,312
--------
The accompanying notes are an integral part
of these combined financial statements.
5
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Notes to Combined Financial Statements
(All amounts in thousands)
--------------------------------------------------------------------------------
1. BUSINESS ACTIVITIES AND BASIS OF PRESENTATION
The Dresser-Rand Compression Services - Rental and Packaging Division (the
"Business") designs and assembles compressor units for sale or lease. The
Business principally serves the natural gas industry on a worldwide basis.
Dresser-Rand Company ("DR") is a general partnership owned 49% by
Ingersoll-Rand Company ("IR") and 51% by Dresser Industries, Inc., which
was acquired by Halliburton Company ("Halliburton") (the "Partners"). In
February 2000, IR acquired the remaining partnership interest from
Halliburton, resulting in the "push-down" to the Business of $61,300 of
goodwill, which is included in other assets and is being amortized over a
period of 40 years.
The Business is a wholly-owned operating division of DR. The accompanying
combined financial statements were prepared to show the historical
operating results of the entities comprising the Business. Historically,
separate financial statements had not been prepared for the Business. The
combined financial statements of the Business include the results of the
compressor rental and packaging operations of the following entities:
LEGAL ENTITIES COUNTRY OF INCORPORATION
Southwest Industries, Inc. United States
Dresser-Rand Argentina, S.A. Argentina
Dresser-Rand Compression Services S.A. Switzerland
DIVISIONS OF DRESSER-RAND ENTITIES COUNTRY OF OPERATIONS
Compressor Rental and Packaging Division of
Dresser-Rand United States
Compressor Rental and Packaging Division of
Dresser-Rand Venezuela
The combined financial statements were prepared using DR's historical basis
in the assets and liabilities of the Business. Changes in indebtedness
between the Business and DR are reflected as part of due to affiliates and
due from affiliates in the accompanying combined balance sheets.
6
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Notes to Combined Financial Statements
(All amounts in thousands)
--------------------------------------------------------------------------------
1. BUSINESS ACTIVITIES AND BASIS OF PRESENTATION, Continued
The combined financial statements include all revenues, costs, assets and
liabilities directly attributable to the Business. Allocation of costs for
facilities, functions and certain services performed by DR organizations
for the Business, including risk management, internal audit, administration
of benefit and insurance programs and certain tax, legal, accounting and
treasury functions have been made on the basis described in Note 3. All of
the allocations and estimates in the combined financial statements are
based on assumptions that the management of the Business and DR believe are
reasonable in the circumstances. The Business' financial information
included herein is not necessarily indicative of the financial position,
results of operations and cash flows of the Business in the future or
indicative of the results that would have been reported if the Business had
operated as an unaffiliated enterprise.
2. SUMMARY OF ACCOUNTING PRINCIPLES
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts and activities of
the Business. All material intercompany transactions between operations
included in the combined financial statements have been eliminated in
combination. Transactions between the Business and DR and its affiliates
are herein referred to as "related party" or "affiliated" transactions.
Such transactions have not been eliminated.
The preparation of combined 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 the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS
Cash equivalents are stated at cost, which approximates market. The
Business considers all highly liquid investments with a maturity of three
months or less at the date of purchase to be cash equivalents.
INVENTORIES
Inventories are stated at cost, which is not in excess of net realizable
value, and are valued principally using the first-in, first-out ("FIFO")
method.
7
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Notes to Combined Financial Statements
(All amounts in thousands)
--------------------------------------------------------------------------------
2. SUMMARY OF ACCOUNTING PRINCIPLES, Continued
PROPERTY AND DEPRECIATION
Property, plant and equipment is recorded at cost and is depreciated over
the estimated useful lives of the various classes of assets. Depreciation
is computed principally using straight-line methods. Estimates of useful
lives by asset class are as follows:
<TABLE>
<S> <C>
New machinery and equipment (including rental equipment) 12 years
Used machinery and equipment (including rental equipment) 5-8 years
Computer equipment and software 3-5 years
Buildings 30 years
Furniture, fixtures and office equipment 5-10 years
Leasehold improvements shorter of 10 years or
term of the lease
</TABLE>
Depreciation expense for the six months ended June 30, 1999 and 2000 was
$2,693 and $2,555, respectively, and $4,863 for the year ended December 31,
1999.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, accounts receivable and
accounts payable are a reasonable estimate of their fair value due to the
short-term maturities of these instruments.
INCOME TAXES
DR is a partnership and generally does not provide for U.S. income taxes
since all partnership income and losses are allocated to the Partners for
inclusion in their respective income tax returns. Certain legal entities
owned by DR are however subject to U.S. or foreign income taxes. Deferred
taxes are provided on temporary differences between assets and liabilities
for financial reporting and tax purposes as measured by enacted tax rates
expected to apply when temporary differences are settled or realized.
FOREIGN CURRENCY
Assets and liabilities of foreign entities, where the local currency is the
functional currency, have been translated at year-end exchange rates and
income and expenses have been translated using weighted average-for-the-
year exchange rates. Adjustments resulting from translation, which are not
significant, have been recorded in business equity. Foreign currency
transaction gains and losses were also not significant and are included in
other income (expenses).
REVENUE RECOGNITION AND WARRANTIES
Revenue from the sales of products and estimated provisions for warranty
costs are recorded for financial reporting purposes when the products are
shipped or the title has otherwise transferred to the customer.
8
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Notes to Combined Financial Statements
(All amounts in thousands)
--------------------------------------------------------------------------------
3. RELATED PARTY TRANSACTIONS
INTERCOMPANY ACTIVITIES
DR provides the Business with certain risk management, internal audit,
legal, tax, accounting, pension fund management, cash management and other
treasury services. In addition, as discussed below and in Note 10, the
Business' employees participate in certain DR employee benefit programs
which are sponsored and administered by DR. All direct costs relating to
these services and participation in these plans are charged to the Business
and, as described below, indirect costs are allocated using allocation
methods that management of DR and the Business believe are reasonable.
In addition to direct charges, the combined financial statements include a
corporate overhead allocation which is based upon estimated allocations of
costs incurred by DR. This charge was $3,801 for the year ended December
31, 1999 and $1,968 and $1,584 for the six months ended June 30, 1999 and
2000, respectively. Indirect cost allocations are made based upon employee
headcount, revenue and gross assets. Such allocations may not be the same
as the costs that would be incurred as a stand-alone entity.
Certain foreign subsidiaries of the Business are charged interest by DR on
notes payable to DR, which are included in payable to affiliates.
In the normal course of business, the Business engages in sales and
purchases of manufactured products with the Partners and their affiliates.
There are also various licensing, subcontracting, and servicing
arrangements among the parties pursuant to the Partnership and other
agreements. Some of the agreements have planned expiration dates while
others continue at the option of DR or the Partners. Costs and charges
under these arrangements are generally at normal and competitive market
rates.
A summary of transactions with the Partners and their affiliates for the
year ended December 31, 1999, is as follows:
Product sales $ 13,628
Product purchases 18,280
Net billings and other charges for services provided 5,635
9
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Notes to Combined Financial Statements
(All amounts in thousands)
--------------------------------------------------------------------------------
3. RELATED PARTY TRANSACTIONS, Continued
EMPLOYEE BENEFIT ADMINISTRATION
The Business' employees participate in tax-qualified defined benefit
pension plans and defined contribution savings plans sponsored and
administered by DR. DR has historically charged to the Business its pro-
rata share of administration and funding expenses incurred by DR in the
operation of these plans for the benefit of employees of the Business. The
Business has been responsible for the cost of funding pension and savings
plan benefits accrued by its employees. Welfare benefit programs are
generally self-insured and experience-rated on the basis of Business'
employees without regard to the claims experience of employees of other
affiliated companies.
4. INVENTORIES
At December 31, 1999 and June 30, 2000, the components of inventory are as
follows:
December 31, June 30,
1999 2000
-------------- ---------------
(Unaudited)
Raw materials and supplies $12,531 $15,223
Work-in-process 16,595 20,161
Inventory reserve (2,510) (2,348)
------- -------
Total $26,616 $33,036
======= =======
5. RENTAL EQUIPMENT AND RELATED REVENUES
The Business leases compressor equipment to customers under various
agreements with lease terms ranging from 1 to 60 months. These leases are
accounted for as operating leases and, accordingly, the rentals are
included in revenues as earned over the period of the lease. Unearned
lease revenue is recorded as a liability until the revenue is earned. The
cost and related accumulated depreciation of equipment leased or held for
lease or sale at December 31, 1999 was $112,823 and $71,594, respectively.
The Business had no noncancellable operating leases as of December 31,
1999.
10
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Notes to Combined Financial Statements
(All amounts in thousands)
--------------------------------------------------------------------------------
6. OTHER ASSETS
Other assets consisted of the following at December 31, 1999:
Deferred charges (a) $ 8,107
Goodwill (b) 3,248
Other 1,505
-------
$12,860
=======
(a) Deferred charges relate mainly to leased equipment contract costs which
are being amortized over the lease term of the compressor equipment and
the unamortized balance is charged to cost of goods sold when a lessee
exercises the purchase option and the related equipment is sold.
(b) Amortization of goodwill for the year ended December 31, 1999, was $160
and $80 and $718 for the six months ended June 30, 1999 and 2000,
respectively (See Note 1).
7. ACCOUNTS PAYABLE AND ACCRUALS
At December 31, 1999, accounts payable and accruals were as follows:
Accounts payable $ 5,978
Accrued:
Warranty 1,177
Income taxes 5,618
Interest (related to amended income tax returns) 1,089
Customer progress payments 8,201
Salaries and employee benefits 5,926
Deferred income 4,475
Overhaul accrual 3,152
Other 2,143
-------
$37,759
=======
8. OTHER NONCURRENT LIABILITIES
At December 31, 1999, other noncurrent liabilities were comprised of post-
retirement and other employee benefit liabilities.
11
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Notes to Combined Financial Statements
(All amounts in thousands)
--------------------------------------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES
The Business is involved in various litigation, claims and administrative
proceedings arising in the normal course of business. Amounts recorded for
identified contingent liabilities are estimates, which are reviewed
periodically and adjusted to reflect additional information when it becomes
available.
At December 31, 1999, the Business had commitments under non-cancelable
operating leases for sales offices, warehouses and office equipment.
Future minimum lease payments are $449 in 2000, $175 in 2001, $22 in 2002
and $11 in 2003. Rental expense for 1999 related to non-cancelable
operating leases was approximately $581.
10. INCOME TAXES
Earnings before income taxes for the year ended December 31, 1999, were
attributable to the following jurisdictions:
United States $ 6,397
Foreign 12,891
-------
Total $19,288
=======
The provision for income taxes is summarized for the year ended December
31, 1999 as follows:
Current tax expense:
United States $ -
Foreign 4,745
------
Total current 4,745
------
Deferred tax expense:
United States -
Foreign 2,034
------
Total deferred 2,034
------
Total provision for income taxes $6,779
======
12
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Notes to Combined Financial Statements
(All amounts in thousands)
--------------------------------------------------------------------------------
10. INCOME TAXES, Continued
The provision for income taxes differs from the amount of income taxes
determined by applying the applicable U.S. statutory income tax rate to
pretax income as a result of the following differences:
Statutory U.S. rate 35%
Increase (decrease) in rates resulting from:
Foreign operations 12
Partnership income allocated directly to partners (12)
---
Effective tax rate 35%
===
As of December 31, 1999, there were minimal differences between the
financial and tax basis of assets and liabilities resulting in a deferred
tax asset of $378, which is included in other assets.
11. PENSION PLANS AND OTHER POST-RETIREMENT AND EMPLOYEE BENEFITS
The Business' domestic employees participate in DR's defined benefit
pension plan, which was frozen in 1998, defined contribution plan, health
benefit plan, long-term disability and income plan and post-retirement
health benefit plan. The various plans are administered by DR. DR
accounts for the defined benefit pension plan in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 87 "Employers' Accounting
for Pensions", the post-retirement benefit plan in accordance with SFAS No.
106 "Employers' Accounting for Post-retirement Benefits Other Than
Pensions," the long-term disability and income plan in accordance with SFAS
No. 112 "Employers' Accounting for Postemployment Benefits." Actuarial
valuations are prepared for DR and the costs and related liability are
allocated to the Business based on number of employees as a percentage of
total DR employees. Separate actuarial valuations and estimates are not
prepared for employees of the Business. DR is self-insured for workers'
compensation and determines the liability based on actual claims in process
and estimated claims incurred but not reported. These costs are also
allocated to the Business based on the number of employees as a percentage
of total DR employees. Below are the approximate allocated costs charged
to expense during 1999 and the related allocated liabilities, certain of
which are included in payable to affiliates as of December 31, 1999 for the
various benefit plans.
Expense
(Income) Liability
----------- ----------
Pension Plan $(698) $1,344
Post-retirement health benefit plan 91 8,053
Long-term disability and income plan 113 145
Medical plan 853 361
Workers' compensation 604 855
13
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Notes to Combined Financial Statements
(All amounts in thousands)
--------------------------------------------------------------------------------
12. GEOGRAPHIC INFORMATION
Geographic customer sales to third parties by destination for the six
months ended June 30, 1999 and 2000 and the year ended December 31, 1999
were as follows:
June 30,
-------------------------- December 31,
1999 2000 1999
------------ ----------- --------------
(Unaudited)
Net sales:
United States $ 21,087 $18,604 $ 42,610
Foreign 80,977 26,112 111,182
-------- ------- --------
Total $102,064 $44,716 $153,792
======== ======= ========
Long-lived asset information by geographic area as of December 31, 1999 and
June 30, 2000, was as follows:
December 31, June 30,
1999 2000
--------------- ------------
(Unaudited)
Property, plant and equipment:
United States $32,207 $33,690
Foreign 13,585 16,109
------- -------
Total $45,792 $49,799
======= =======
For the year ended December 31, 1999, sales to two significant customers
accounted for 23% and 16% of sales to third parties.
13. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes for the year ended December 31, 1999 was $2,001.
14. INTERIM FINANCIAL INFORMATION (UNAUDITED)
All information as of June 30, 2000 and for the six months ended June 30,
1999 and 2000 is unaudited but in the opinion of management reflects all
adjustments of a normal recurring nature which are necessary for a fair
presentation of (1) the financial position as of June 30, 2000 and (2)
results of operations and cash flows for the six months ended June 30, 1999
and 2000. Results for the six months are not necessarily indicative of the
results which will be realized for the year ending December 31, 2000.
14
<PAGE>
DRESSER-RAND COMPRESSION SERVICES
RENTAL AND PACKAGING DIVISION
(A Division of Dresser-Rand Company)
Notes to Combined Financial Statements
(All amounts in thousands)
--------------------------------------------------------------------------------
15. SUBSEQUENT EVENT
In August 2000, Ingersoll-Rand sold substantially all of the net assets and
certain subsidiaries of the Business to Hanover Compressor Company.
15
<PAGE>
ATTACHMENT B
HANOVER COMPRESSOR COMPANY
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
On August 31, 2000, Hanover Compressor Company (the "Company") acquired the
compression services division of Dresser-Rand Company from Ingersoll-Rand
Company in a transaction accounted for as a purchase. The Pro Forma Combined
Condensed Financial Statements give effect to the purchase of the compressor
services division ("CSD-DR").
The accompanying pro forma combined condensed balance sheet as of June 30, 2000
has been prepared as if the acquisition which occurred after June 30, 2000 was
consummated as of that date. The accompanying pro forma combined condensed
statements of operations for the year ended December 31, 1999 and for the six
months ended June 30, 2000 present the pro forma results of operations of the
Company as if the acquisition had occurred on January 1, 1999. The accompanying
pro forma combined condensed financial statements 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 with the Company's Quarterly Report on Form 10-Q for the six months
ended June 30, 2000.
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------- -----------------------------
HCC CSD - DR Adjustments Combined
----------- -------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,746 1,122 95,000 (k) 14,868
(95,000) (h)
Accounts receivable, net 127,993 22,715 150,708
Inventory 101,252 33,036 (5,019) (b) 129,269
Costs and estimated earnings in excess of
billings on uncompleted contracts 24,157 - 1,540 (b) 25,697
Prepaid taxes and other current assets 30,728 1,382 - 32,110
------- ------- -------- ---------
Total current assets 297,876 58,255 (3,479) 352,652
------- ------- -------- ---------
Property, plant and equipment, net 524,326 49,799 (49,799) (c) 644,826
120,500 (c)
Intangible and other assets 139,742 71,840 (63,781) (c) 163,617
15,816 (c)
Due from affiliates - 146,939 (146,939) (c) -
------- ------- -------- ---------
$ 961,944 326,833 (127,682) 1,161,095
======= ======= ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 16,909 - 16,909
Accounts payable, trade and accrued liabilities 62,862 28,730 (13,395) (c) 79,397
1,200 (h)
Advance billings 13,891 3,665 (3,665) (b) 13,891
Billings on uncompleted contracts in excess of
costs and estimated earnings 5,173 - 366 (b) 5,539
------- ------- -------- ---------
Total current liabilities 98,835 32,395 (15,494) 115,736
------- ------- -------- ---------
Long-term debt 71,545 - 95,000 (k) 166,545
Due to affiliates 19,635 (19,635) (c) -
Deferred income taxes 76,732 6,500 (c) 83,232
Other obligations 114,219 7,962 (7,962) (c) 114,219
------- ------- -------- ---------
Total liabilities 361,331 59,992 58,409 479,732
------- ------- -------- ---------
Company obligated mandatorily redeemable convertible
preferred securities 86,250 - - 86,250
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value; 200 million shares authorized;
62,773,539 historical shares issued and outstanding
(65,693,220 pro forma shares issued and outstanding) 63 - 3 (h) 66
Additional paid-in capital 391,974 266,841 (266,841) (d) 472,721
80,747 (h)
Notes receivable - employee stockholders (1,949) - (1,949)
Accumulated other comprehensive income (476) - (476)
Retained earnings 125,377 - 125,377
Treasury stock 66,144 shares at cost (626) - - (626)
------- ------- -------- ---------
Total stockholders' equity 514,363 266,841 (186,091) 595,113
------- ------- -------- ---------
$ 961,944 326,833 (127,682) 1,161,095
======= ======= ======== =========
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------- -------------------------------
HCC CSD-DR Adjustments Combined
---------- --------- ------------ ----------------
<S> <C> <C> <C> <C>
Revenues $ 203,888 $ 47,160 (5,023) (b) 246,025
------- ------ ------ -------
Expenses:
Operating 99,631 42,449 (5,730) (b) 132,949
(2,555) (e)
(846) (a)
Selling, general and administrative 20,014 5,755 (718) (e) 25,051
Depreciation and amortization 22,651 3,273 (e) 26,464
862 (a)
(322) (f)
Lease Payment 18,136 - 18,136
Interest expense 2,635 478 3,085 (g) 6,198
Distributions on mandatorily redeemable
convertible preferred securities 3,183 - - 3,183
------- ------ ------ -------
166,250 48,682 (2,951) 211,981
------- ------ ------ -------
Income before income taxes 37,638 (1,522) (2,072) 34,044
Provision for income taxes 13,700 200 (1,508) (i) 12,392
------- ------ ------ -------
Net income $ 23,938 $ (1,722) (564) 21,652
======= ====== ====== =======
Weighted average common
equivalent shares outstanding:
Basic 58,504 2,919 (j) 61,423
Diluted 63,689 2,919 (j) 66,608
Earnings per common share
Basic $ 0.41 $ 0.35
Diluted $ 0.38 $ 0.32
</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 CSD-DR Adjustments Combined
--------- ------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues $ 317,028 $ 167,633 (8,527) (b) 476,134
------- ------- ------ -------
Expenses:
Operating 151,169 132,909 (4,863) (e) 269,943
(7,667) (b)
(1,605) (a)
Selling, general and administrative 33,782 13,483 (160) (e) 47,105
Depreciation and amortization 37,337 - 5,023 (e) 44,823
1,832 (a)
631 (f)
Lease Payment 22,090 - - 22,090
Interest expense 8,786 1,953 5,172 (g) 15,911
Distributions on mandatorily redeemable
convertible preferred securities 278 - - 278
------- ------- ------ -------
253,442 148,345 (1,637) 400,150
------- ------- ------ -------
Income before income taxes 63,586 19,288 (6,890) 75,984
Provision for income taxes 23,145 6,779 (2,266) (i) 27,658
------- ------- ------ -------
Net income $ 40,441 $ 12,509 (4,624) 48,326
======= ======= ====== =======
Weighted average common
equivalent shares outstanding:
Basic 57,048 2,919 (j) 59,967
Diluted 61,054 2,919 (j) 63,973
Earnings per common share
Basic $ 0.71 $ 0.80
Diluted $ 0.66 $ 0.76
</TABLE>
<PAGE>
Notes To Unaudited Pro Forma Combined Condensed Financial Statements
The accompanying unaudited pro forma combined condensed financial statements
(the "Pro Forma Financial Statements") 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 six months ended June 30, 2000.
The Pro Forma Financial Statements are based on certain assumptions and
preliminary estimates that are subject to change. The Pro Forma Financial
Statements do not purport to be indicative of the results which would actually
have been obtained had the acquisition been completed on the dates indicated or
which may be obtained in the future.
The pro forma adjustments which have been made to the accompanying Pro Forma
Financial Statements are described below:
a) Reflects the additional depreciation resulting from the increase of
CSD-DR's property, plant and equipment to fair value, net of the
change in CSD-DR'S historical operating and depreciation expense
to conform with the Company's accounting policies for capitalization
of fixed assets, estimated depreciable lives and salvage values.
b) Reflects the change in CSD-DR'S historical revenue and operating
expenses to conform with the Company's accounting policy to recognize
revenue from compressor fabrication utilizing the percentage-of-
completion method.
c) Reflects the estimated purchase price allocation of the business
acquired based upon estimated fair values of assets acquired and
liabilities assumed. Pursuant to the purchase agreement with
Ingersoll-Rand Company, certain assets and liabilities of CSD-DR
were not acquired or assumed by the Company.
Following these adjustments, the assets acquired and liabilities
assumed based on their estimated fair values are as follows (in
thousands):
Cash $ 1,122
Accounts Receivable 22,715
Inventory 28,017
Other Current Assets 2,922
Property, plant and equipment 120,500
Goodwill 15,816
Other Assets 8,059
Accounts payable, trade and
other current liabilities (15,701)
Deferred income taxes (6,500)
--------
176,950
d) Reflects the elimination of the equity of the business acquired.
e) Reflects reclassification of depreciation expense to conform with the
Company's financial statement presentation.
f) Reflects the amortization of goodwill and other intangibles due to
the recognition of goodwill from the acquisition, net of the
historical goodwill amortization recorded by CSD-DR. Goodwill is
amortized over a 20 year period on a straight-line basis.
g) Reflects the change in interest expense resulting from debt incurred of
$95 million in connection with the financing of the acquisition at an
interest rate of 7.5%, as if it had occurred January 1, 1999, net of
the elimination of the acquired business' allocated interest expense.
h) The Company acquired CSD-DR for $95 million in cash and approximately
2.9 million shares of restricted Company common stock. The estimated
fair value of the stock issued is $80.75 million, based on the quoted
market price for the Company's common stock reduced by a discount due
to the restrictions on the stock's marketability. The discount applied
was based on an appraisal obtained from an investment bank. Including
$1.2 million of estimated transaction costs, the total purchase price
was approximately $177 million.
i) Reflects the income tax impact related to the operations of the
business acquired and the income tax effect of each of the above pro
forma adjustments.
j) 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.
k) Reflects the financing of the purchase price of the acquisition from
the Company's credit facility.
