Universal Compression Reports Fiscal 2005 Fourth Quarter and Full Year Results

HOUSTON, May 24 /PRNewswire-FirstCall/ -- Universal Compression Holdings, Inc. , a leading provider of natural gas compression services, today reported a fiscal 2005 fourth quarter net loss of $4.5 million, or $0.14 per diluted share, including charges of $26.1 million on a pretax basis, or $0.53 per diluted share on an after-tax basis, related to debt extinguishment costs and $3.1 million on a pretax basis or $0.06 per diluted share on an after-tax basis related to an asset impairment expense on a former fabrication facility. Excluding these items, net income was $14.8 million, or $0.45 per diluted share.

The Company reported net income of $14.1 million, or $0.44 per diluted share, in the fiscal 2005 third quarter and $11.7 million, or $0.37 per diluted share, in the fiscal 2004 fourth quarter. The fiscal 2004 fourth quarter results included a charge of $0.5 million on a pretax basis, or $0.01 per diluted share on an after-tax basis, related to debt extinguishment costs. Excluding this item, fiscal 2004 fourth quarter net income was $12.0 million, or $0.38 per diluted share.

Revenue was a record $193.6 million in the fiscal 2005 fourth quarter compared to $192.7 million in the fiscal 2005 third quarter and $190.7 million in the fiscal 2004 fourth quarter. EBITDA, as adjusted (as defined below), was $56.9 million in the fiscal 2005 fourth quarter compared to $61.0 million in the fiscal 2005 third quarter and $58.0 million in the fiscal 2004 fourth quarter. EBITDA, as adjusted, for the recently completed fourth quarter included the $3.1 million fabrication facility impairment charge.

For the year ended March 31, 2005, net income was $33.6 million, or $1.04 per diluted share, including charges of $29.6 million on a pretax basis, or $0.61 per diluted share on an after-tax basis, related to debt extinguishment and asset impairment costs and a gain of $3.2 million on a pretax basis, or $0.07 per diluted share on an after-tax basis, related to the termination of interest rate swaps. Excluding these items, the Company had record net income of $51.1 million, or $1.59 per diluted share, in fiscal 2005. For the year ended March 31, 2004, net income was $30.8 million, or $0.98 per diluted share, including charges of $16.7 million on a pretax basis, or $0.34 per diluted share on an after-tax basis, related to debt extinguishment and facility consolidation costs. Excluding these items, net income was $41.3 million, or $1.32 per diluted share, in fiscal 2004.

In fiscal 2005, revenues were $763.1 million and EBITDA, as adjusted, was $232.5 million, both records for the Company. EBITDA, as adjusted, included the $3.1 million fabrication facility impairment charge. Revenues were $688.8 million and EBITDA was $223.8 million in the prior year.

"We are pleased with our improved financial performance in fiscal 2005, which included an 11% increase in revenue and a 20% increase in earnings per share before debt extinguishment, asset impairment and facility consolidation costs, and gain on termination of interest rate swaps compared to the prior fiscal year. We improved the utilization of our existing asset base while enhancing our overall market position by selectively expanding our contract compression fleet and extending our sales and service infrastructure abroad," said Stephen A. Snider, Universal's President and Chief Executive Officer. "We have a positive outlook for fiscal 2006 due to continuing strong market conditions in the United States and international markets and the continued implementation of our focused business strategy."

"In the fourth fiscal quarter we significantly lowered our ongoing interest expense and extended debt maturities by redeeming the outstanding $440 million of 8.875% senior notes with funding provided by our new credit facility," added Michael Anderson, Universal's Chief Financial Officer. "We have a strong financial position and are well positioned to pursue attractive growth opportunities in our fiscal 2006 capital expenditure program, which is expected to be funded from internally generated sources."

Guidance

For the three months ending June 30, 2005, the Company expects revenues to be $190 million to $200 million and earnings per diluted share to be $0.48 to $0.52. For the twelve months ending March 31, 2006, the Company expects revenues of $775 million to $800 million and earnings per diluted share of $2.05 to $2.20. Capital expenditures, net of sale proceeds, are expected to be $125 million to $140 million in fiscal 2006, representing a modest increase over fiscal 2005 spending.

Conference Call

Universal will host a conference call today, May 24, 2005 at 10:00 am Central Time, 11:00 am Eastern Time, to discuss the quarter's results and other corporate matters. The conference call will be broadcast live over the Internet to provide interested persons the opportunity to listen. The call will also be archived for approximately 90 days to provide an opportunity to those unable to listen to the live broadcast. Both the live broadcast and replay of the archived version are free of charge to the user.

Persons wishing to listen to the conference call live may do so by logging onto http://www.universalcompression.com/ (click "Investor Home" in the "Investor Relations" section) or http://phx.corporate-/ ir.net/phoenix.zhtml?p=irol-eventDetails&c=121184&eventID=1064010 at least 15 minutes prior to the start of the call. The replay of the call will be available at the website http://www.universalcompression.com/ .

EBITDA, as adjusted, is defined as net income plus income taxes, interest expense (including debt extinguishment costs and excluding gain on termination of interest rate swaps), operating lease expense, depreciation and amortization, foreign currency gains or losses, excluding non-recurring items (including facility consolidation costs), and extraordinary gains or losses.

Universal Compression, headquartered in Houston, Texas, is a leading natural gas compression services company, providing a full range of contract compression, sales, operations, maintenance and fabrication services to the domestic and international natural gas industry.

Statements about Universal's outlook and all other statements in this release other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside Universal's control, which could cause actual results to differ materially from such statements. While Universal believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are the demand for Universal's products and services and worldwide economic and political conditions. These and other risk factors are discussed in Universal's filings with the Securities and Exchange Commission, copies of which are available to the public. Universal expressly disclaims any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events, or otherwise.

UNIVERSAL COMPRESSION HOLDINGS, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Three Months Ended Twelve Months Ended March 31, Dec. 31, March 31, March 31, 2005 2004 2004 2005 2004 Revenues: Domestic contract compression $76,918 $75,170 $70,968 $296,239 $280,951 International contract compression 28,739 27,810 21,397 102,167 82,589 Fabrication 48,037 50,823 62,655 213,994 183,685 Aftermarket services 39,942 38,873 35,690 150,670 141,561 Total revenue 193,636 192,676 190,710 763,070 688,786 Costs and expenses: Domestic contract compression - direct costs 29,240 27,071 25,746 109,374 102,408 International contract compression - direct costs 6,967 6,427 4,440 23,719 18,430 Fabrication - direct costs 44,996 48,605 56,148 198,709 167,797 Aftermarket services - direct costs 33,281 30,917 27,588 121,014 110,670 Depreciation and amortization 24,390 23,611 22,246 93,797 85,650 Selling, general and administrative 20,072 19,224 18,165 75,756 67,516 Interest expense 14,396 16,821 17,599 64,188 73,475 Foreign currency (gain) loss 103 (238) 102 389 (529) Other (income) expense (897) (589) 642 (1,125) (1,883) Debt extinguishment costs 26,068 --- 505 26,543 14,903 Facility consolidation costs --- --- --- --- 1,821 Gain on termination of interest rate swaps --- --- --- (3,197) --- Asset impairment costs 3,080 --- --- 3,080 --- Total costs and expenses 201,696 171,849 173,181 712,247 640,258 Income (loss) before income taxes (8,060) 20,827 17,529 50,823 48,528 Income tax expense (benefit) (3,570) 6,702 5,804 17,213 17,741 Net income (loss) $(4,490) $14,125 $11,725 $33,610 $30,787 Weighted average common and common equivalent shares outstanding: Basic 31,580 31,406 30,998 31,392 30,848 Diluted 31,580 32,082 31,769 32,224 31,283 Earnings per share: Basic $(0.14) $0.45 $0.38 $1.07 $1.00 Diluted $(0.14) $0.44 $0.37 $1.04 $0.98 UNIVERSAL COMPRESSION HOLDINGS, INC. UNAUDITED SUPPLEMENTAL INFORMATION (In thousands) Three Months Ended Twelve Months Ended March 31, December 31, March 31, March 31, 2005 2004 2004 2005 2004 Revenues: Domestic contract compression $76,918 $75,170 $70,968 $296,239 $280,951 International contract compression 28,739 27,810 21,397 102,167 82,589 Fabrication 48,037 50,823 62,655 213,994 183,685 Aftermarket services 39,942 38,873 35,690 150,670 141,561 Total $193,636 $192,676 $190,710 $763,070 $688,786 Gross Profit: Domestic contract compression $47,678 $48,099 $45,222 $186,865 $178,543 International contract compression 21,772 21,383 16,957 78,448 64,159 Fabrication 3,041 2,218 6,507 15,285 15,888 Aftermarket services 6,661 7,956 8,102 29,656 30,891 Total $79,152 $79,656 $76,788 $310,254 $289,481 Selling, General and Administrative $20,072 $19,224 $18,165 $75,756 $67,516 % of Revenue 10% 10% 10% 10% 10% EBITDA, as adjusted (A) $56,897 $61,021 $57,981 $232,543 $223,848 % of Revenue 29% 32% 30% 30% 32% Capital Expenditures $38,284 $45,797 $18,105 $143,665 $86,557 Proceeds from Sale of PP&E 6,003 13,408 8,133 24,070 40,468 Net Capital Expenditures $32,281 $32,389 $9,972 $119,595 $46,089 Profit Margin: Domestic contract compression 62% 64% 64% 63% 64% International contract compression 76% 77% 79% 77% 78% Fabrication 6% 4% 10% 7% 9% Aftermarket services 17% 20% 23% 20% 22% Total 41% 41% 40% 41% 42% Reconciliation of GAAP to Non-GAAP Financial Information: Net income (loss) $(4,490) $14,125 $11,725 $33,610 $30,787 Income tax expense (benefit) (3,570) 6,702 5,804 17,213 17,741 Depreciation and amortization 24,390 23,611 22,246 93,797 85,650 Interest expense 14,396 16,821 17,599 64,188 73,475 Foreign currency (gain) loss 103 (238) 102 389 (529) Facility consolidation costs --- --- --- --- 1,821 Debt extinguishment costs 26,068 --- 505 26,543 14,903 Gain on termination of interest rate swap --- --- --- (3,197) --- EBITDA, as adjusted (A) $56,897 $61,021 $57,981 $232,543 $223,848 March 31, December 31, March 31, 2005 2004 2004 Debt $858,096 $847,057 $884,442 Shareholders' Equity $861,672 $856,334 $799,235 Total Debt to Capitalization 49.9% 49.7% 52.5% (A) Management believes disclosure of EBITDA, as adjusted, a non-GAAP measure, provides useful information to investors because, when viewed with our GAAP results and accompanying reconciliations, it provides a more complete understanding of our performance than GAAP results alone. Management uses EBITDA, as adjusted, as a supplemental measure to review current period operating performance, a comparability measure, a performance measure for period to period comparisons and a valuation measure. UNIVERSAL COMPRESSION HOLDINGS, INC. UNAUDITED SUPPLEMENTAL INFORMATION (Horsepower in thousands) Three Months Ended Twelve Months Ended March 31, Dec. 31, March 31, March 31, 2005 2004 2004 2005 2004 Total Horsepower Available (at period end): Domestic contract compression 1,925 1,908 1,904 1,925 1,904 International contract compression 544 518 417 544 417 Total 2,469 2,426 2,321 2,469 2,321 Average Contracted Horsepower: Domestic contract compression 1,717 1,696 1,630 1,675 1,646 International contract compression 484 442 372 430 360 Total 2,201 2,138 2,002 2,105 2,006 Horsepower Utilization: Spot (at period end) 90.4% 89.9% 86.1% 90.4% 86.1% Average 90.0% 89.8% 86.4% 88.8% 85.8% Fabrication Backlog (in millions) $69 $83 $88 $69 $88