News Release
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Aug 13,2013
USA Compression Announces $187 million Acquisition of Compression Assets from S&R Compression; George B. Kaiser Affiliate, Argonaut Private Equity, to Become Significant Investor in USAC
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Located primarily in
“We are also excited about our partnership with the Kaiser affiliate,”
continued Mr. Long. “George Kaiser’s confidence in the business
prospects of
H.G. “Buddy” Kleemeier, President and CEO of
Both the Kaiser affiliate and
USAC will also begin a commercial relationship with the S&R Compression
fabrication business, which will continue to be owned and operated by
the Kaiser affiliate. Transaction Consideration and Timing
The acquisition of assets will be financed through the issuance of USAC
common units, currently estimated to be 7.4 million units. In addition,
USAC will purchase, for cash at closing, certain additional compression
units added to the fleet since the Revised Full Year 2013 Outlook
With the announced acquisition,
Conference Call Information
In addition, the Partnership has today announced second quarter 2013
results. Management will discuss the acquisition, in addition to the
second quarter earnings, during the investor conference call starting at
ABOUT
FORWARD-LOOKING STATEMENTS Statements in this press release may be forward-looking statements as defined under federal law. 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 the control of the Partnership, and a variety of risks that could cause results to differ materially from those expected by management of the Partnership. The Partnership undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.
EBITDA, a measure not defined under U.S. generally accepted counting principles (“GAAP”), is defined by USAC as net income attributable to USAC’s unitholders before interest and debt expense, income taxes, and depreciation and amortization. Adjusted EBITDA, which also is a non-GAAP measure, is defined by USAC as net income before interest expense, income taxes, depreciation expense. Management of USAC views Adjusted EBITDA as one of their primary management tools to assess (i) the financial performance of USAC assets without regard to the impact of financing methods, capital structure or historical cost basis of those assets (ii) the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities, (iii) the ability of USAC assets to generate cash sufficient to make debt payments and to make distributions and (iv) operating performance as compared to those of other companies in the industry without regard to the impact of financing methods and capital structure. Distributable cash flow (“DCF”), which is a financial measure included in this presentation, is another measure not defined under GAAP. USAC defines DCF as net income (loss) plus non-cash interest expense, depreciation and amortization expense, impairment of compression equipment charges, and non-cash SG&A costs, less maintenance capital expenditures. Adjusted DCF, which is also a non-GAAP measure, is defined by USAC as DCF before transaction expenses related to the acquisition of the S&R Compression rental fleet. USAC believes Adjusted DCF is an important measure of operating performance because it allows management, investors and others to compare basic cash flows they generate (prior to the establishment of any retained cash reserves by their general partner) to the cash distributions they expect to pay their unitholders. Using Adjusted DCF, management can quickly compute the coverage ratio of estimated cash flows to planned cash distributions. USAC’s Adjusted EBITDA, DCF and Adjusted DCF may not be comparable to similarly titled measures of another company because other entities may not calculate these measures in the same manner. This press release references forward-looking estimates of Adjusted EBITDA, Adjusted DCF and DCF, including Adjusted EBITDA, Adjusted DCF and DCF projected to be generated by the acquisition of the S&R Compression rental fleet. A reconciliation of estimated Adjusted EBITDA, Adjusted DCF and DCF to GAAP net income is not provided because GAAP net income generated by the S&R Compression rental fleet for the applicable periods is not accessible. USAC has not yet completed the necessary valuation of the various assets to be acquired, a determination of the useful lives of those assets for accounting purposes, the determination of the final GAAP purchase price of the assets (which will be based on the closing date value of the common units issued as consideration) or of an allocation of the purchase price among the various assets. Accordingly, the amount of depreciation and amortization that will be included in the additional net income generated as a result of the acquisition of the S&R Compression rental fleet is not accessible or estimable at this time. The amount of such additional resulting depreciation and amortization could be significant, such that the amount of additional net income would vary substantially from the amount of projected Adjusted EBITDA, Adjusted DCF and DCF. A reconciliation of estimated Adjusted EBITDA, Adjusted DCF and DCF to GAAP net cash provided by operating activities is not provided because GAAP net cash provided by operating activities is not accessible on a forward-looking basis. The items necessary to estimate GAAP net cash provided by operating activities that are not included in net income, in particular the change in operating assets and liabilities amounts, are not accessible or estimable at this time. USAC does not anticipate the changes in operating assets and liabilities amounts to be material, but changes in accounts receivable, accounts payable, accrued liabilities and deferred revenue could be significant, such that the amount of net cash provided by operating activities would vary substantially from the amount of projected Adjusted EBITDA, Adjusted DCF and DCF. USAC believes that investors benefit from having access to the same financial measured used by USAC management. Further, USAC believes that these measures are useful to investors because they are one of the bases for comparing USAC’s operating performance with that of other companies with similar operations, although USAC’s measures may not be directly comparable to similar measures used by other companies.
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