UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): December 11, 2013
USA Compression Partners, LP
(Exact Name of Registrant as Specified in Charter)
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Delaware |
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1-35779 |
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75-2771546 |
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(State or Other Jurisdiction of Incorporation) |
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(Commission File Number) |
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(I.R.S. Employer Identification No.) |
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100 Congress Avenue Suite 450 Austin, TX |
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78701 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (512) 473-2662
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 8.01. OTHER EVENTS.
On August 30, 2013, USA Compression Partners, LP (the “Partnership”) completed its acquisition of certain assets and liabilities related to the business of providing compression services to third parties engaged in the exploration, production, gathering, processing, transportation or distribution of oil and gas (the “S&R Acquisition”). This Current Report on Form 8-K includes as Exhibit 99.1 pro forma financial statements for the nine months ended September 30, 2013 reflecting the S&R Acquisition. These pro forma financial statements supplement the Partnership’s previously-filed financial statements relating to the S&R Acquisition and are being filed to satisfy the requirements of Rule 11-01 of Regulation S-X.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro Forma Financial Information.
The unaudited pro forma statement of operations for the nine months ended September 30, 2013 and the related notes thereto, which give effect to the S&R Acquisition, is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
(d) Exhibits.
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Exhibit No. |
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Document |
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99.1 |
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Unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2013 and the related notes thereto, which give effect to the S&R Acquisition. |
SIGNATURE
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.
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USA COMPRESSION PARTNERS, LP | ||
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By: |
USA Compression GP, LLC, | |
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its General Partner | |
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By: |
/s/ J. Gregory Holloway |
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J. Gregory Holloway |
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Vice President, General Counsel and Secretary |
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Dated: December 11, 2013 |
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EXHIBIT INDEX
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Exhibit No. |
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Document |
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99.1 |
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Unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2013 and the related notes thereto, which give effect to the S&R Acquisition. |
Exhibit 99.1
USA COMPRESSION PARTNERS, LP AND SUBSIDIARIES
Unaudited Pro Forma Statement of Operations
Nine Months Ended September 30, 2013
(in thousands, except unit and per unit data)
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For the Nine |
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For the period |
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Pro Forma |
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USA |
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Pro Forma |
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Pro Forma USA |
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S&R |
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Adjustments - |
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Pro Forma |
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Revenues: |
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Contract operations |
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$ |
102,964 |
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$ |
— |
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$ |
102,964 |
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$ |
23,947 |
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$ |
(512 |
)(c) |
$ |
126,399 |
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Parts and service |
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1,311 |
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— |
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1,311 |
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— |
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— |
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1,311 |
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Fabrication revenue |
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— |
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— |
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— |
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311 |
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(311 |
)(c) |
— |
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Total revenues |
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104,275 |
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— |
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104,275 |
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24,258 |
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(823 |
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127,710 |
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Costs and expenses: |
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Cost of operations, exclusive of depreciation and amortization |
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32,473 |
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— |
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32,473 |
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10,833 |
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(570 |
)(d) |
42,736 |
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Selling, general, and administrative |
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18,756 |
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— |
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18,756 |
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1,338 |
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— |
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20,094 |
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Depreciation and amortization |
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37,227 |
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— |
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37,227 |
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4,511 |
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2,764 |
(c),(e) |
44,502 |
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Loss (Gain) on sale of assets |
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53 |
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— |
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53 |
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— |
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— |
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53 |
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Cost of goods sold (fabrication revenue) |
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— |
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— |
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— |
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132 |
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(132 |
)(c) |
— |
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Total costs and expenses |
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88,509 |
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— |
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88,509 |
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16,814 |
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2,062 |
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107,385 |
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Operating income |
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15,766 |
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— |
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15,766 |
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7,444 |
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(2,885 |
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20,325 |
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Other income (expense): |
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Interest expense |
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(8,963 |
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207 |
(a) |
(8,756 |
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(53 |
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173 |
(a),(c) |
(8,636 |
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Other |
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7 |
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— |
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7 |
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60 |
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(60 |
)(c) |
7 |
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Total other expense |
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(8,956 |
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207 |
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(8,749 |
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7 |
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113 |
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(8,629 |
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Net income before income tax expense |
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6,810 |
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207 |
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7,017 |
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7,451 |
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(2,772 |
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11,696 |
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Income tax expense |
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176 |
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— |
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176 |
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— |
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— |
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176 |
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Net income |
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$ |
6,634 |
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$ |
207 |
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$ |
6,841 |
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$ |
7,451 |
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$ |
(2,772 |
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$ |
11,520 |
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Less: |
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Earnings allocated to general partner prior to initial public offering on January 18, 2013 |
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$ |
5 |
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$ |
(5 |
)(b) |
— |
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Earnings available for limited partners prior to initial public offering on January 18, 2013 |
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$ |
530 |
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$ |
(530 |
)(b) |
— |
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Net income subsequent to initial public offering on January 18, 2013 |
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$ |
6,099 |
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$ |
742 |
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$ |
6,841 |
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Net income subsequent to initial public offering allocated to: |
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General partner’s interest in net income |
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$ |
122 |
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$ |
137 |
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$ |
230 |
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Common units interest in net income |
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$ |
3,196 |
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$ |
3,587 |
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$ |
7,074 |
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Subordinated units interest in net income |
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$ |
2,781 |
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$ |
3,117 |
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$ |
4,216 |
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Weighted average common units outstanding: |
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Basic |
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16,143 |
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16,143 |
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7,425 |
(f) |
23,568 |
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Diluted |
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16,174 |
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16,174 |
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7,425 |
(f) |
23,599 |
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Weighted average subordinated units outstanding: |
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Basic and diluted |
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14,049 |
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14,049 |
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14,049 |
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Net income per common unit: |
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Basic |
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$ |
0.20 |
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$ |
0.22 |
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$ |
0.30 |
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Diluted |
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$ |
0.20 |
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$ |
0.22 |
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$ |
0.30 |
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Net income per subordinated unit: |
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Basic and diluted |
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$ |
0.20 |
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$ |
0.22 |
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$ |
0.30 |
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See accompanying notes to unaudited pro forma statement of operations.
USA COMPRESSION PARTNERS, LP AND SUBSIDIARIES
Notes to Unaudited Pro Forma Statement of Operations
1. General
USA Compression Partners, LP (the “Partnership”) is a publicly traded Delaware limited partnership formed to own and operate the business conducted by its subsidiaries. The common units representing limited partner interests in the Partnership (the “Common units”) are listed on the New York Stock Exchange (“NYSE”) under the symbol “USAC.” USA Compression GP, LLC, the general partner of the Partnership (“General Partner”), is owned by USA Compression Holdings, LLC (“USA Compression Holdings”). Unless the context requires otherwise, references to “we,” “us,” “our,” or “the Partnership” are intended to mean the business and operations of USA Compression Partners, LP and its consolidated subsidiaries.
The Partnership, through its operating subsidiaries, primarily provides natural gas compression services under term contracts with customers in the oil and gas industry, using natural gas compressor packages that it designs, engineers, owns, operates and maintains.
On August 30, 2013, the Partnership completed the acquisition of assets and certain liabilities related to the business of providing compression services to third parties engaged in the exploration, production, gathering, processing, transportation or distribution of oil and gas (the “S&R Acquisition”) in exchange for 7,425,261 Common Units, which were valued at $181.9 million at the time of issuance. The S&R Acquisition was consummated pursuant to the Contribution Agreement dated August 12, 2013 (the “Contribution Agreement”) with S&R Compression, LLC, (“S&R”) and Argonaut Private Equity, L.L.C. (“Argonaut”). The S&R Acquisition had an effective date of June 30, 2013. In connection with the S&R Acquisition, the Partnership acquired 982 compression units with total horsepower of approximately 138,000.
2. Basis of Presentation
The historical financial information is derived from the historical consolidated financial statements of the Partnership and the historical financial statements of S&R. The unaudited pro forma condensed combined statement of operations was prepared assuming the S&R Acquisition occurred on January 1, 2012. The adjustments provided in Note 3 below reflect that the S&R Acquisition was financed entirely with Common Units.
The pro forma adjustments are based on currently available information and certain estimates and assumptions by management. If the S&R Acquisition had been in effect for the periods indicated, the results may have been substantially different. For example, the Partnership may have operated the assets differently than S&R, realized service revenue may have been different and costs of operating the compression assets may have been different. This unaudited pro forma condensed combined statement of operations is provided for illustrative purposes only and may not provide an indication of results in the future. The unaudited pro forma statement of operations should be read in conjunction with the Partnership’s historical
consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012 and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013.
The pro forma adjustments for the nine months ended September 30, 2013 have been prepared as if the transactions described below had taken place as of January 1, 2012.
The pro forma statement of operations reflects the following transactions:
· the closing of the Partnership’s initial public offering on January 18, 2013; and
· the acquisition of compression assets owned by S&R in the S&R Acquisition in exchange for 7,425,261 Common Units, which were valued at $181.9 million at the time of issuance.
The unaudited pro forma statement of operations is not necessarily indicative of the results that actually would have occurred if the transactions described above had occurred on the date indicated.
3. Pro Forma Adjustments and Assumptions
The following adjustments were made in the preparation of the condensed combined statement of operations:
(a) Reflects the reduction of interest expense for the following adjustments during the period:
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Nine Months Ended |
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September 30, |
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2013 |
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Predecessor interest expense |
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$ |
8,963 |
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Less: interest reduction from lower revolver balance based upon the use of proceeds from the initial public offering on January 18, 2013 |
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(207 |
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Pro forma interest expense - IPO adjustment |
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$ |
8,756 |
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Less: interest reduction from lower revolver balance based upon the use of proceeds from the GP contribution and purchase price adjustment related to the S&R Acquisition |
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(120 |
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Pro forma interest expense - IPO adjustment and S&R adjustment |
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$ |
8,636 |
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(b) Reflects the conversion of the adjusted net partners’ capital of $344.1 million from partners’ capital to common and subordinated limited partner equity of the partnership and the general partner’s interest in the Partnership. The conversion is allocated as follows:
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I. |
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$255.2 million for 15,048,588 common units; |
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II. |
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$258.6 million for 14,048,588 subordinated units; and |
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III. |
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$10.9 million for a 2.0% general partner interest. |
(c) Elimination of revenues and expenses related to compression assets not acquired by the Partnership from S&R as part of the S&R Acquisition. Amounts were derived from the historical records and corporate allocations prepared by S&R.
(d) Initial fluids start-up costs were expensed as incurred in the S&R historical income statement; the Partnership capitalizes these amounts in accordance with its accounting policy. Additionally, these costs are now reflected in the fair value and resulting accumulated depreciation of the acquired assets presented in the Partnership’s condensed consolidated Balance Sheet as of September 30, 2013 included in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013. Therefore, an adjustment has been made to remove $0.6 million of initial fluids start-up spending for the nine months ended September 30, 2013.
(e) Depreciation and amortization was estimated using the straight-line method and reflects the incremental depreciation and amortization expense due to adding the compression assets and intangible assets at fair value.
(f) Reflects the Common Units issued as consideration for the assets acquired by the Partnership from S&R as part of the S&R Acquisition.